I don't believe in a 50% drop in house prices here. We didn't have as large a bubble, and a lot of people still want to move into a bigger house.
When we started to pay off our huge trade deficit and national deficit in the 1980s, house prices did drop a lot. The result was, that some people went for bankruptcy, of course, but the main result was that many people were stuck with the house they had.
Anyway, I just ran over this chart, showing Denmark's net assets as percentage of GNP in blue:
As you can see, we had a serious debt, and the cure was:
- Increased taxes in order to reduce consumption
- Changing the symmetric tax system on debts to become assymetric, favoring savings and punishing loans
- Ultra-stable, transparent and predictable economic policies
- We found some oil
This cure may not be the right one for USA.
Here is an interesting one, it shows the P/E ratio for USA:
This chart is from a Danish report from 2004, that predicts major problems in world economy: djoef.dk
Here is one that shows nominal and real house prices for Denmark, UK, Spain and USA:
"Real house prices" means inflation adjusted.
Here is a curve that shows house prices relative to the costs of building houses, in Denmark:
My guess is, that this index is not much above 1 today. |
