Saturday, March 8, 2014

USA: REAL ESTATE BUBBLE AT THE EDGE OF THE EXPLOSION?

One of the main dangers of extremely loose monetary policy in recent years is that ' free money ' provided by central bankers is used to artificially increase the price of all kinds of assets. In other words , central bankers do not actually qu'alimenter bubbles that will inevitably burst. It is sufficient to convince them of the extent of the danger , to rethink the implications of the technology bubble in the second half of the 90s and the housing bubble in the middle of the last decade.

However, detecting a bubble is also extremely difficult. There is thus clearly in the current climate, several elements suggest a bubble : home prices increase by 10 % per month in London, sees his Twitter during double from its IPO of 100 million euros for paintings by Francis Bacon, spectacular success of Bitcoin ... None of these developments seems to have any lasting nature. And even if they were to turn into bubbles, it would not be there bubbles could derail the global economy when they explode . This kind of bubble can develop only in the major asset classes, the usual suspects in this case being the U.S. housing market and U.S. equities.

House prices in the U.S. rise again quickly. Since early 2012, house prices in the U.S. rose by almost 20 % on average. However, the only price increase does not necessarily mean that a bubble is being formed . The current rise in house prices is in fact due to the severe correction in 2007-2008 . Overall, the U.S. home prices remain far from their peaks in 2006. More importantly , relative to household disposable income , house prices are almost the lowest in 30 years. As always, it is quite possible that some exaggeration in house prices is growing again in some areas. But overall, the U.S. housing market remains far from the bubble. Several more years of sustained higher prices could certainly bring the real estate market bubble , but this is clearly not the case at the moment.

Investing in real estate in the United States remains one of the most profitable and promising investments . We can invest in direct property purchases or buying shares of investment funds . Invest abroad , however, remains a complex task that must be carried out by professionals to avoid pitfalls and to take advantage of many economic and tax benefits.

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