Home Prices Froth & Bubble

'Although a bubble in home prices for the nation as a whole does not appear likely, there do appear to be, at a minimum, signs of froth in some local markets where home prices seem to have risen to unsustainable levels.' This is a quote from US Federal Reserve Chairman Alan Greenspan's testimony yesterday to the Joint Economic Committee of Congress on the U.S. economic outlook. You can read the full text at http://www.federalreserve.gov/boarddocs/testimony/2005/200506092/default.htm

A local release yesterday from Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors, sets a similar tone with the headline 'House prices: overvalued, over-owned and set for stagnation'. He quotes figures which show at a national level the situation is more extreme here than in the US. In the US it takes 350 weeks of average wages to buy an average house; in Australia the equivalent figure is 500 weeks. You can read the full copy at http://www.ampcapital.com.au/K2DOCS/2F080BAA-E05A-48BF-86DF-D75E645303B3/OINo16HousePriceStagnation.pdf?DIRECT

This week FinDem has added a Factsheet on housing to the site. In it we explore the long term trends in Australian house prices and provide a fundamental profile of housing in Australia. You can download it at http://www.findem.com.au/factsheets/housingfactsheet.pdf

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