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April 5, 2008

Biggest bubble country? Not us, IMF says

The International Monetary Fund's latest study of worldwide housing markets has an interesting argument about prices:
The countries that experienced the largest unexplained increases in house prices were Ireland, the Netherlands, and the United Kingdom—by the end of the decade, house prices in these countries were about 30 percent higher than justified by fundamentals. A group of other countries, including France, Australia, and Spain, have house price gaps of about 20 percent. Based on this measure, the United States is among the middle-ranked countries in terms of vulnerability to a housing correction, partly reflecting the fact that U.S. house prices have already declined ...

The report covers a lot of ground, including the impact of changes in mortgage financing that made it easy for anyone to get a loan for just about any amount they wanted. Mortgage debt equaled about 75 percent of the United States' gross domestic product -- a key measure of economic activity -- in 2006, according to the IMF. In 1990, it was about 45 percent.

Posted by Jamie Smith Hopkins at 6:19 PM | | Comments (0)
        

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About Jamie Smith Hopkins
Jamie Smith Hopkins, a Baltimore Sun reporter since 1999, writes about the regional economy. Her reporting on the housing market has won national and local awards. Hopkins is a Columbia native and has lived in Maryland all her life, save for 10 months spent covering schools in Ames, Iowa.
She trained to become a wonk by spending large chunks of time as a geek and an insufferable know-it-all.
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