Housing markets around the world at extremes

There has been a tremendous focus on the US housing market, but it is not the only housing market which has moved to or is at highs. A cross sectional analysis by the OECD in their latest economic outlook provides evidence that housing markets are at peaks around the globe. In fact, the US market may seem tame by some measures. As a percentage of GDP, housing investment is not at the highest level relative to other countries and the US market is not at its peak. A number of the high growth European countries have housing investment that outstrips the US.

There may not be any hiding through diversification in global housing markets. For some foreign investors, the US may still seem like a good deal especially with the decline in the dollar. While we are not arguing that real estate is a bargain in the United States, a global perspective makes this issue less of a problem at this point. Nevertheless, the unwinding of excess in asset classes that are not as liquid as stock or bonds will take time and a rising interest rate market is not at all helpful.