A Global View of the Housing Bubble

Interesting chart from (of all places) McKinsey, circa October 2009:

“From 2000 through 2007, a remarkable run-up in global home prices occurred (see chart). But that trend has reversed abruptly. In 2008, the value of US residential real estate fell 10 percent; the global average fared only somewhat better, declining by almost 4 percent. We estimate that falling home prices erased more than $3.4 trillion of household wealth in 2008.”

Question: How did Europe and Asia and Canada all have a simultaneous housing boom as big if not bigger than that of the US?

Were the Australians compelled to follow the CRA? Did Barney Frank influence the Belgians? Were the US GSEs effecting policy in the UK?

Or might some other factors — like ultra-low rates, excess leverage, demand for junk AAA-rated paper, misaligned incentives, and/or derivatives have been at play?

Source: McKinsey Quarterly


The McKinsey authors added this huge understatement: “And because home prices are slow to correct, the current slide may persist for some time, which could depress global consumption.”