Saturday, March 19, 2011

More real estate crisis?

House prices, although having gone through quite an adjustment, have not fallen as they were expected to, if they were to correct for the crazy bubble of the early noughties.
This article is about the UK, but I have little doubt that similar situations exist in most developed countries in the world. A bit scary. Only good news are for those who are waiting patiently for house prices to fall even more...
it is dangerous to dismiss historical norms as irrelevant. The long-term average house price to salary ratio is something in the region of three and a half to four times. Today, depending on whom you listen to, it is around five and a half to six times.
That's the kind of disparity that can only be resolved by one of two things: rising real incomes or falling real house prices.
[...] The Bank of England hasn't raised rates for 25 months, but when it does, says the charity, it could push those assuming that low rates are forever into a "spiral of debt and repossession". 

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