Beware the U.S. housing bubble
Globe & Mail - Don Vialoux
January 1, 2005
According to Don Vialoux, a market analyst, given how highly leveraged U.S. consumers are financially, "anything that reduces the value of their real estate assets will have a dramatic effect on their spending habits and the U.S. economy" - this probably applies to Canadians and Canada as well.
Beware the U.S. housing bubble, warned Don Vialoux, an independent technical analyst, in a recent comment on his http://www.dvtechtalk.com website. He noted that U.S. housing prices jumped 18.5 per cent annualized in the third quarter of 2004 from the second, which pushed the rate of appreciation to a 25-year high. The "magnitude of the recent increase in home prices is typical of a market that has entered the bubble phase," Mr. Vialoux said, adding that an investment bubble is okay until it breaks. "Investors in high-tech stocks experienced a great ride from 1997 to early 2000, but when the bubble in high-tech stocks broke in late 2000, the ride became a great train wreck," he noted.
He also noted that U.S. consumers are highly leveraged financially and "anything that reduces the value of their real estate assets will have a dramatic effect on their spending habits and the U.S. economy."
Mr. Vialoux said "chances are high that this topic will be one of the more important issues to consider when investing in the U.S. real estate and equity markets in 2005." Angela Barn