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This lecture delves into the concept of a real estate bubble, where the price of a property undergoes an abrupt and unjustified increase followed by a sharp decline. It explores the conditions that lead to a bubble, such as buyers observing price hikes and speculations turning into excessive participation. The lecture also discusses the confirmation of expectations through rising prices, the financial evaluations during a bubble, and the impact of accommodating financing on sustaining price growth. It analyzes historical data on property prices in the US and Switzerland, highlighting the risks associated with excessive optimism and the challenges of distinguishing between justified and unjustified price increases.