Monday, November 15, 2004

Goldman Sachs estimates US, UK, and Australia housing stock 10-29% overvalued

From November issue of The Atlantic:


"Goldman's research looks in depth at housing prices in the United States, the UK, and Australia, and estimates that prices are, respectively, 10, 15, and 29 percent higher than they ought to be based on market fundamentals. In America prices headed upward in the mid-1990s—with good reason, because housing was undervalued in the middle of the decade. Lower mortgage rates were the main driver, with each percentage-point decrease in interest rates producing about a five percent increase in housing value. When the bubble pops, the result will most likely hurt homeowners and help renters, since rents usually fall in a softer housing market. "


Report: "House Prices: A Threat to Global Recovery or Part of the Necessary Rebalancing?" Mike Buchanan and Themistoklis Fiotakis, Goldman Sachs [This study is unavailable online.]

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