Dallas Fed, Report: Threat of Global Housing Slide Looms Amid Rising Rates

“Housing froth has reemerged since 2020, with signs of a pandemic housing boom extending beyond the U.S. to other, mostly advanced, economies. While house-price growth has recently begun to moderate—or, in some countries, to decline—the risk of a deep global housing slide persists.”

“Specifically, the perils detected in the U.S. and German housing markets pose a vulnerability to the global outlook because of the size of those nations’ economies and significant cross-border financial spillovers.”

“The comparative gap between the U.S. price-to-rent ratio and its estimated fundamental ratio signals exuberance in the early 2000s as well as during the pandemic. The correction needed to bring the U.S. in line with its fundamentals—a 19.5 percent decline—is less sizeable than at the peak of the previous boom but larger than that for Germany.”

“There is evidence that the U.S. price-to-rent ratio began to fall in third quarter 2022 as prices moderated more so than rents, unlike what the German data show for the same quarter.”