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Collapse of The Global Housing Market

Macroeconomists have a saying: "When the U.S. gets a cold, the rest of the world gets pneumonia".global housing bubble burst

Collapse of the Global Housing Market

If you're trying to sell a home today, you're probably not happy. According to the latest research from the National Association of Realtors, the median sales price of existing single-family homes, condominiums, townhouses and co-ops stood at $164,700 in January. That may not seem like a bad number, but it's down from December and the same as it was in January one year earlier. Home values continue to stall here in the United States, with housing prices falling a rather depressing 15.5 percent from 2008 through 2009.

If it's true that misery does love company, then the United States does have plenty of guests at this particular pity party. Unfortunately, no other country has seen home prices fall by quite as much during the same time, though some have come close.

In Britain, for example, housing prices from 2008 through 2009 fell by 12.2 percent. Things were nearly as bad in South Africa, where housing prices fell by 12 percent during the same time. Joining South Africa, Britain and the United States in the double-digit-decline club was Spain, where housing prices dropped 10.8 percent.

Things were marginally better in France, 8.1 percent drop, and Canada, 6 percent. And they looked downright rosy in Germany, with a drop of 5.5 percent, and Japan, 5.2 percent.

And if you really had to sell a house during this time, it would have been best to own one in either Australia or China. That's because the drop in housing values in both of these countries was negligible, at least relative to the way prices fell in other countries. In Australia, housing prices fell just 1.5 percent from 2008 through 2009. In China, the drop was even smaller during the same period, 1.2 percent.

The sad truth is that in the United States, too many consumers relied solely on housing values to build their wealth. They figured that if they purchased a home for $250,000, it would be worth at least $300,000 three years later.

For a while, that actually worked. But the way U.S. housing prices rose during the housing boom that finally ended in mid-2006 was unsustainable. Housing is not supposed to be a get-rich-quick investment vehicle. It's supposed to be an investment that grows slowly but consistently over a long period of time.

Americans are finally understanding this again. If you want to make money off your house, you have to commit to living in it for at least seven years, if not more. The days of buying a house and selling it for a 40 percent profit two years later are gone.

And that's not only the case in the United States: It's the way things are across the globe.

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