Era of Benign Neglect of House Price Booms is Over


Min ZhuBy Min Zhu

(Versions in  عربيEspañol, 日本語中文, Français, and Русский)

House prices are inching up.  But is this a cause for much cheer?  Or are we watching the same movie again? Recall how after a decade-long boom, house prices started to fall in 2006, first in the United States and then elsewhere, contributing to the 2008-9 global financial crisis. In fact, our research indicates that boom-bust patterns in house prices preceded more than two-thirds of the recent 50 systemic banking crises. Real Estate Boom.Chart1

While a recovery in the housing market (Figure 1) is surely a welcome development, we need to guard against another unsustainable boom. Housing is an essential sector of every country’s economy and has systemic implications, which is why we at the IMF are focusing on it not only in individual countries but on a cross-country basis.

Continue reading

The U.S. Housing Market’s Road to Recovery


Jarkko TurunenBy Jarkko Turunen

(Version in Español)

A year ago, we were very concerned about lingering weakness in the U.S. housing market, which we saw as a major obstacle to the economic recovery.

But what a difference a year makes! As our latest report on the U.S. economy points out, the housing market recovery has been stronger than expected, and is providing a significant boost to private domestic demand and economic growth.

What has changed in the last 12 months? House prices have rebounded sharply and are currently about 7-12 percent above their level a year ago. Home sales increased by more than 15 percent over the same time period. Thanks to higher house prices and the positive effects of government housing finance programs, fewer homeowners are “underwater” (owe more on their mortgages than their houses are worth) or are behind on their mortgage payments, and fewer houses are entering foreclosure.

Continue reading

Follow

Get every new post delivered to your Inbox.

Join 740 other followers

%d bloggers like this: