News about the housing market leads many Americans to think that no one was spared in the downturn. That is not so. While 20% of mortgages are underwater, 80% are not. Many homes bought in 2005 and 2006 have lost a third or more of their value, but houses bought in 2000 are mostly more valuable today.
S&P recently issued its global housing report. Most of the analysis should be no surprise. The home market in Europe is disastrous in almost all countries. Unemployment levels, well into the double digits in many nations, will do that. Home values in the BRIC nations are mostly higher, as their economies continued largely to expand through the recession.
S&P reports that:
[A]t the brighter end of the spectrum, Sao Paulo, Brazil experienced the world’s second strongest house-price rises (after Delhi, India) last year, with an increase of 19.8%, according to the Global Property Guide.
Those numbers should remind residents of Nevada and parts of California of the period between 2000 and 2005.
S&P also reports that the Chinese residential home market has begun to sputter as a slowing economy there and an end to easy credit have undermined its advances.
Some analysts will look at the report and say that the home market in Brazil will have to fall. It has grown too fast to be sustainable, they will say. All that means is that no economic market can go up forever, which is not much of an observation. The same people will argue that European home values will recover, at least to some extent, because that is what happens when a recession, even a very long and deep one, finally ends.
The most important point the S&P report makes, at least for Americans, is that the housing market problem here may be severe, but only for a relatively small fraction of homeowners who were unfortunate enough, or stupid enough, to buy at the top.
Douglas A. McIntyre
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