“It’s not what you don’t know that gets you in to trouble,
It’s what you know for sure that just ain’t so” Mark Twain.
The word on the street is that there is a recession coming and so house prices are sure to fall.
The words recession and house price falls are often used interchangeably as if the correlation between them is certain.
Much of the reporting on these issues goes a long way to compounding this error.
The data is worth looking at as it clearly shows that it really is quite rare for recessions to negatively impact on house prices.
The 1980’s was a prolonged recessionary period which also saw extraordinary high interest rates.
And yet there was only one year during this time:
1987, that saw a retreat in house prices and that by a mere 1%.
The only time property is mispriced is when the credit supply is turned off as happened with the collapse of the banking system during the great recession of 2007
Interest rates are a concern but they cannot be risen to a level that will bankrupt the heavily indebted countries of the EU. This would potentially collapse the Euro. The EU will stop at nothing to protect the common currency.
The price we will pay for this is the higher cost of goods and services albeit with relatively minor adjustments in interest rates which have a long way to rise before they get near what might be considered normal in the historical context.
.
.
