Wednesday, Oct 04, 2006

US house prices: you thought we had a problem?

No Monkey Business: US house prices: you thought we had a problem?

An interesting perspective from America. It's relevant because if helps us understand our situation but also because a US price crash could pose just as much risk to the UK economy as does our own housing market. It comes from a speech back In February by Robert Schiller, author of the book 'Irrational Exuberance' about the stockmarket bubble at the end of the 90's. He contrasted the bubble correction in stocks with the new irrational exuberance in the US housing market.
Professor Schiller, who uses long data histories to speculate on theoretical explanations of investor and asset class behaviour, found he needed to create his own historical index of real house prices. This is the same use I make of the Nationwide index (in items on my blog - search for 'No Monkey Business' on this site for Forum entries). US prices showed no real growth from 1950 to 1997 and have jumped 50% since then. Schiller points to easier access to land that suppressed real growth before, easier access to credit that sparked the boom and wildly unrealistic expectations that then fed it.
It's America's lack of experience of big price cycles and those unbelieveably crass expectations that leave you thinking they can't avoid a crash.

Posted by stuart fowler @ 01:02 PM (431 views)
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2 Comments

1. Geed said...

Figure 6 is facinating.

Thursday, October 5, 2006 02:11AM Report Comment
 

2. miniftse said...

Is this post by the same Stuart Fowler that authored the following article?

http://www.nomonkeybusiness.org/articles/ft_money_illusions.pdf

Thursday, October 5, 2006 01:29PM Report Comment
 

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