Taking A Look At The Global Housing Market
(The housing market is undoubtedly slowing down and cooling off from its hot run for the past five years.)
Besides the surplus of un-bought homes on the market, we are also seeing a decrease in price gains pretty much across the nation.
One interesting fact in all of this is that other countries around the globe seem to be fairing very well. Most are seeing an increase in home values in many of the nations around the world.
The housing markets of Australia and Britain have recently been used as an example for the United State’s housing market because they too experienced a downturn in recent times. Although no two situations are ever the same it is interesting to look at the situations of other countries to get a feel for our own.
A September 7, 2006 article from The Economist, “Checking the thermostat,” discusses how property prices are cooling fast in America but rising up in other parts of the world.
“Houses are not just places to live in; they are increasingly important to whole economies, which is why The Economist started publishing global house-price indicators in 2002. This has allowed us to track the biggest global property-price boom in history. The latest gloomy news from America may suggest that the world is on the brink of its biggest ever house-price bust. However, our latest quarterly update suggests that, outside America, prices are perking up.”
In ten of the major countries surveyed, they saw home prices rise in the double digits. The U.S., Spain, Hong Kong and South Africa were the only countries that did not see price increases, which signal a healthy market. European housing markets seem to be doing the best overall, and the U.S. among the worst.
“America's housing market has certainly caught a chill. According to the Office of Federal Housing Enterprise Oversight (OFHEO), the average price of a house rose by only 1.2% in the second quarter, the smallest gain since 1999. The past year has seen the sharpest slowdown in the rate of growth since the series started in 1975. Even so, average prices are still up by 10.1% on a year ago. This is much stronger than the series published by the National Association of Realtors (NAR), which showed a rise of only 0.9% in the year to July.”
The reason why many analysts and economists look to Britain and Australia for clues to the fate of America’s market is because they recently experienced a “crash” in their markets last year, but things are already starting to look up.
But we cannot put all of our eggs in one basket and assume that things are going to be the same for the U.S. as it was for these two other countries.
“The housing boom has been responsible for a bigger chunk of growth in America than it was in Britain. America's saving rate has plunged, and consumer spending surged as homeowners borrowed with gusto against their capital gains. Britain's saving rate fell more modestly, so when prices flattened, the impact on consumer spending was smaller than it is likely to be in America. The risk is that a flattening of house prices in America could prove much more painful it has been so far in Britain or Australia.”
Although no one knows exactly what is going to happen we can only hope that are market will level-out and come to a soft landing.
