Hat tip to the Prakash Loungani blog site for providing those graphs on the global housing market. The good news is that we have a clear upward trend on housing which is increasing wealth for many around the world. This was one of the objectives of monetary policy. The bad news is that we have created the seeds for the next bubble. Isn't this what macro-prudential policies are supposed to stop?
One of the best simple measures of valuation is the price of housing versus rent. Is the cost of owning more or less than the cost of "leasing"? The US numbers suggests that housing is fairly priced, but if you move to other developed countries the story looks like a problem. Europe looks to be overvalued except for the countries that have suffered most form the sovereign debt crisis. In Europe you have slow growth almost deflation, overvalued housing and an unclear set of policies. This is not an engine for global recovery.
No comments:
Post a Comment