Describe the concept of a 'real estate bubble'.

A real estate bubble refers to a market phenomenon where property prices experience rapid and unsustainable increases due to heightened demand and speculation. During a bubble, optimism about future price increases leads investors and buyers to make purchases at inflated values. This inflation is often driven by factors such as easy access to credit, investor enthusiasm, and a general belief that property values will continue to rise indefinitely.

As demand accelerates, prices can soar beyond intrinsic value, creating a stark disconnect between actual worth and market price. Eventually, this unsustainable increase prompts a correction, where prices fall sharply, often leading to a market crash. The illusion of continuous growth collapses as investors realize that the high prices cannot be maintained, resulting in a significant decline in property values over a relatively short period.

In contrast, the other options highlight scenarios that do not accurately reflect the nature of a real estate bubble. For example, the first option describes a stable market, which is the opposite of a bubble's volatile nature. The option discussing a decline across all regions does not capture the unique inflationary characteristics of a bubble, and the mention of a temporary spike in rental prices fails to address the broader price dynamics and market behavior associated with a bubble. Thus, the correct understanding of a real estate bubble