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A Global View of the Housing Bubble

Posted By Barry Ritholtz On November 14, 2011 @ 11:00 am In Real Estate | Comments Disabled

Interesting chart from (of all places) McKinsey, circa October 2009:

“From 2000 through 2007, a remarkable run-up in global home prices occurred (see chart). But that trend has reversed abruptly. In 2008, the value of US residential real estate fell 10 percent; the global average fared only somewhat better, declining by almost 4 percent. We estimate that falling home prices erased more than $3.4 trillion of household wealth in 2008.”

The chart below reads to me as having regular cycles, oscillating within a range. But something happened in the early 2000s to have that range explode upwards.

(Please note the title is from McKinsey, I have long stated this was a credit bubble –not a housing bubble)

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[1]
Source: McKinsey Quarterly [2]

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Question: How did Europe and Asia and Canada all have a simultaneous housing boom as big if not bigger than that of the US?

Were the Australians compelled to follow the CRA? Did Barney Frank influence the Belgians? Were the US GSEs effecting policy in the UK?

Or might some other factors — like ultra-low rates, excess leverage, demand for junk AAA-rated paper, misaligned incentives, and/or derivatives have been at play?

Discuss…


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[1] Image: http://www.ritholtz.com/blog/wp-content/uploads/2011/11/Sept09_CF1.jpg

[2] McKinsey Quarterly: http://www.mckinseyquarterly.com/newsletters/chartfocus/2009_10.htm

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