Monday, May 26, 2003

Is the British housing bubble about to burst? Back in April the General decided to begin following housing prices in the US and UK as a leading deflation indicator in these dynamic economies. The UK boom has been far hotter than that in the US, and the Financial Times now reports falling housing prices for the second consecutive month. Per the usual, nobody can agree as to what this means. Notably, the author didn't think to incorporate the IMF report which got the General thinking in the first place. Falling housing prices with widespread (even if mild) deflation means positive real interest rates cutting into consumer spending. This could be about a lot more than simply local property markets.

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