There are so many places on the Internet to talk about this crisis or that crisis in America, and I keep hoping that this blog of Jerome's will provide some comparative insight into the situation here versus there. That's why I'm so sensitive to "America bashing." It's not because I really care about the bashing--it's common enough on this side of the pond, too--but because I keep hoping and hoping to find insight into the European situation to provide context or contrast. A bare statement about an American fiasco doesn't help me understand the RELATIVE problem of housing price trends around the globe.
So once again I will dig under some rocks and try to find out for myself what is going on in the European housing market, an almost impossible task given only English-language sources. Here's what I found in what is presumably an acceptable Norwegian source.
"All in all, the financial situation of the household sector has deteriorated over the last six months. The wealth position of the household sector as a whole is nevertheless satisfactory. However, high house prices and house sales continue to stimulate strong growth in debt from an already high level. A situation where debt growth is much stronger than growth in income cannot be sustained over time." http://www.norges-bank.no/front/rapport/en/fs/2003-01/3.html (This seems to be from 2003, but I'm not sure...)
So what does it mean (one asks, expecting to be accused of proposing disingenuous rhetorical questions)? Is the housing market in Norway also in a bubble? Or perhaps the problem is confined only to the Anglo-Saxon community: United States, Britain, and Australia.
Too many people now have too much to lose if the bubble deflates, and too many people will be permanently in debt or outside the housing market if it doesn't. And it's a global problem at this point.
The reason the article is focused on the US is that the numbers today were from the US; and the centrality of the US monetary policy in keeping the bubble going and the sheer weight of the US economy, means that it is the bellwether for what is to come other places. No US bashing intended. It's just the old truism that is Wall Street has a sniffle, the rest of the world catches pneumonia transcribed to real estate. Bitsofnews.com Giving you the latest bits.
That being said, there have been housing booms and busts before but unless you live in hot spots like San Francisco and that area, a housing bust rarely yields appreciable deflation. What we call a bust in the US is really a long period of stagflation.
Even in densely populated and prosperous Connecticut, you can still buy a decent sized home for $270,000. Which sure beats buying a home in Italy and Greece.
