Global housing markets

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House prices are on the rise again around the world

America is still—just—in the category of countries where the housing market remains in recovery. House prices there increased by 4.7% in the 12 months to July, according to the Case-Shiller national index. Prices have now risen by 25% from their 2011 trough, but still remain 7% from their 2007 peak. The Economist measures national affordability by comparing prices to the long-run average of their relationship with rents and income. On this basis, we reckon house prices in America are broadly at their fair value.

Not for long, perhaps. Activity is buoyant: sales of existing homes increased by 6.2% on the previous year. With 30-year fixed-rate mortgages at record lows, the effect of an interest-rate rise on the housing market is expected to be minimal. 

What is more, construction is lagging. The National Association of Realtors, a trade body, has found that new house-building is failing to keep pace with job creation in many cities. For every 12 jobs created builders have historically gained construction permits for ten new homes. Between 2012 and 2014 that number fell to 4.8 permits. Some cities are sizzling again as a result: prices in San Francisco increased by 10% in the year to July, and are up by 75% since 2009.

DYI Comments:  So far the U.S. economy has been dancing on the head of pin from going into recession.  When the next recession arrives real estate will take a bump to the downside, however it would be highly unlikely to be smashed starting at such a low level to rents.

OH Canada - OH Canada....Take a look at Canada and Hong Kong both are 89% above rental income.  For those of you who don't know Canada due to ultra low interest rates and until recently high oil prices(and other natural resources) creating a debt bubble that fostered a housing mania.



If oil prices drop as low as A. Gary Shilling is predicting, at the $10 to $20 per barrel level, and if it stays there longer than a year Canada would go into a flat out depression as their housing mania goes bust along with the massive debt built up in the private sector.  I only mention this for Shilling has a stellar track record so his views cannot be rejected out of hand.

DYI