During the majority of the last decade European and U.S. home prices followed similar trends booming when credit was easy and the housing mania ran hot and crashing hard once the party was over.This relationship should have provided pretty solid evidence that an epic bubble was shaping up back in the early aughts but instead property prices simultaneously booming across nearly all industrialized nations was largely attributed to supposedly rational supply and demand factors.
Today, we can see that while property trends in the U.S. and continental Europe are still tracking fairly similarly, the primary function driving both markets is likely credit availability and the willingness on the part of home buyers to take on debt in a weak economic climate.
How this relationship shapes up for the future will be particularly interesting as Europe has now clearly taken a turn for the worse economically.
Although the leading and lagging trend of price discovery is a bit of a judgment call, the European data is currently signaling that prices slumped pretty notably during the last month.
