The IMF is on a roll. After telling us last week that the world’s financial system is in great shape, they have recently reported that “there is no compelling evidence to suggest that the rapid rise in U.S. housing prices in recent years could collapse suddenly”. Now we can all relax. To tell the truth, even after they reassured us about the financial system, I was still….um….a tiny bit worried about the US housing market. With people pulling equity out of their homes faster than new homes can be built, real estate loans on a parabolic trajectory, the housing GSEs coming under the cloud of accounting scandal, up to 25% of properties being purchased by speculators to “fliip” within a few months, and even the Kiwanis Club speculating on real estate, I just couldn’t see how it could end well.
Perhaps next week the IMF will come out with a report stating that the US dollar is a strong currency and will remain stable.
Source link: http://archive.mises.org/2513/more-good-news-from-the-imf-no-housing-bubble/
More Good News from the IMF: No Housing Bubble
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The IMF has a -to put it mildly- very bad track record of forecasting in general and forecasting the bursting of bubbles in particular. So I don’t have much faith in their assertions.
It is however true that there are other countries with a worse housing bubble than in America, not least the countries mentioned: Australia, Britain, Ireland and Spain.
Could someone kindly comment on this odd dynamic? In the Austin, TX market (a large high-tech market)housing continues to go DOWN. Skilled job growth (it appears) continues to be weak. But builders build at an Enormous clip.
Why? I beleive that almost every single housing construction worker has been relieved of his job and backfilled with undocumented folk (per newspaper reports and some on-site surveying). So builders have been able to squeeze huge cost components (insurances, higher wages, unempl. comp, benefits, vacations, sick leave, etc) out of building. Now one can buy a bowling-alley sized home (like 3,000 sq ft) for, say, $120,000. And apparently builders are still making money. However, folks like myself see the value of their own homes tumble.
I belive there is not a bubble per se on the macro level.
In many markets housing demand is high while available space is low. Interest rates are still in the record lows.
I give both sides of the real estate boom or bust story here…with lots of references.
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