The European Domino

Yesterday, EuroStat, the European Union’s statistics office, released their Q3 2012 read on the 17-nation combine GDP showing a quarter-to-quarter decline of 0.1%, tipping the group squarely (though possibly temporarily due to future revisions) into recession, as economic conditions worsened and continued from the prior quarter’s -0.2% reading.

While recession for Europe is no surprise, given all the attention that has been directed to the crisis economies of Greece, Spain, Italy, and Portugal and the broader weakness elsewhere in the European Union, it should also be clear that the U.S. faces nearly identical prospects as the burdens of government overreach take their toll on macroeconomic conditions.

Further, while the U.S. generally prides itself on having more robust economic conditions than Europe, comparing the quarterly growth rates, one can easily see that for over a decade now, our economic conditions have, more or less, trended together.

So this begs the question, how long can the U.S. expect to buck the trend?

Unless you expect notable improvement in future quarters, it would appear that the European Union’s poor conditions are just another harbinger of larger global underperformance that could crush the U.S.’s tepid recovery.

IEIF France and European Property Prices: April 2011

One of the most interesting and damming bits of evidence that tipped many off to the existence of a significant real estate bubble during the early 2000s was the fact that dramatically increasing property prices were occurring in most industrialized nations.

The U.S., U.K., France, Ireland, most of continental Europe, Canada, Australia and elsewhere were all simultaneously experiencing significant property booms thereby thwarting, more or less, many of the “limited supply” and “Superstar Cities” arguments that sought to justify individual regions explosive appreciation.

Today we know that this massive boom in real estate was more a function of financialization and credit availability rather than fundamentals.

The latest data from the Institut de l'Epargne Immobilière et Foncière (IEIF), a French research and analysis firm, suggests that property prices in France and Europe increased during April rising roughly 25% above the level seen a year earlier.

IEIF France and European Property Prices: February 2011

One of the most interesting and damming bits of evidence that tipped many off to the existence of a significant real estate bubble during the early 2000s was the fact that dramatically increasing property prices were occurring in most industrialized nations.

The U.S., U.K., France, Ireland, most of continental Europe, Canada, Australia and elsewhere were all simultaneously experiencing significant property booms thereby thwarting, more or less, many of the “limited supply” and “Superstar Cities” arguments that sought to justify individual regions explosive appreciation.

Today we know that this massive boom in real estate was more a function of financialization and credit availability rather than fundamentals.

The latest data from the Institut de l'Epargne Immobilière et Foncière (IEIF), a French research and analysis firm, suggests that property prices in France and Europe increased during February rising 12.3% above the level seen a year earlier.

IEIF France and European Property Prices: September 2010

As I have noted before, one of the most interesting and damming bits of evidence that tipped many off to the existence of a significant real estate bubble during the early 2000s was the fact that dramatically increasing property prices were occurring in most industrialized nations.

The U.S., U.K., France, Ireland, most of continental Europe, Canada, Australia and elsewhere were all simultaneously experiencing significant property booms thereby thwarting, more or less, many of the “limited supply” and “Superstar Cities” arguments that sought to justify individual regions explosive appreciation.

Today we know that this massive boom in real estate was more a function of financialization and credit availability rather than fundamentals.

The latest data from the Institut de l'Epargne Immobilière et Foncière (IEIF), a French research and analysis firm, suggests that property prices in France and Europe increased notably during September increasing at an annual rate of 12.28% though still remaining far below the level seen during the peak of 2007.

IEIF France and European Property Prices: August 2010

As I have noted before, one of the most interesting and damming bits of evidence that tipped many off to the existence of a significant real estate bubble during the early 2000s was the fact that dramatically increasing property prices were occurring in most industrialized nations.

The U.S., U.K., France, Ireland, most of continental Europe, Canada, Australia and elsewhere were all simultaneously experiencing significant property booms thereby thwarting, more or less, many of the “limited supply” and “Superstar Cities” arguments that sought to justify individual regions explosive appreciation.

Today we know that this massive boom in real estate was more a function of financialization and credit availability rather than fundamentals.

The latest data from the Institut de l'Epargne Immobilière et Foncière (IEIF), a French research and analysis firm, suggests that property prices in France and Europe declined slightly during August but still remained slightly higher then levels seen a year ago.

IEIF France and European Property Prices: June 2010

As I have noted before, one of the most interesting and damming bits of evidence that tipped many off to the existence of a significant real estate bubble during the early 2000s was the fact that dramatically increasing property prices were occurring in most industrialized nations.

The U.S., U.K., France, Ireland, most of continental Europe, Canada, Australia and elsewhere were all simultaneously experiencing significant property booms thereby thwarting, more or less, many of the “limited supply” and “Superstar Cities” arguments that sought to justify individual regions explosive appreciation.

Today we know that this massive boom in real estate was more a function of financialization and credit availability rather than fundamentals.

The latest data from the Institut de l'Epargne Immobilière et Foncière (IEIF), a French research and analysis firm, suggests that property prices in France and Europe went flat in June but still remained notably higher then levels seen a year ago.

This may offer more evidence that what appeared to be a property price recovery of sorts throughout 2009 might have faltered as a result of the recent European debt crisis and may foreshadow more trouble to come.

The Boom and Bust in Euro-U.S Home Prices

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.

IEIF France and European Property Prices: May 2010

As I have noted before, one of the most interesting and damming bits of evidence that tipped many off to the existence of a significant real estate bubble during the early 2000s was the fact that dramatically increasing property prices were occurring in most industrialized nations.

The U.S., U.K., France, Ireland, most of continental Europe, Canada, Australia and elsewhere were all simultaneously experiencing significant property booms thereby thwarting, more or less, many of the “limited supply” and “Superstar Cities” arguments that sought to justify individual regions explosive appreciation.

Today we know that this massive boom in real estate was more a function of financialization and credit availability rather than fundamentals.

The latest data from the Institut de l'Epargne Immobilière et Foncière (IEIF), a French research and analysis firm, suggests that property prices in France and Europe declined sharply in May dropping roughly 16% and 12% respectively during the month but still remaining notably above the levels seen a year ago.

This significant change is what appeared to be a recovery of sorts could be the sign that credit conditions are tightening as a result of the recent European debt crisis and may foreshadow more trouble to come.

IEIF France and European Property Prices

As I have noted before, one of the most interesting and damming bits of evidence that tipped many off to the existence of a significant real estate bubble during the early 2000s was the fact that dramatically increasing property prices were occurring in most industrialized nations.

The U.S., U.K., France, Ireland, most of continental Europe, Canada, Australia and elsewhere were all simultaneously experiencing significant property booms thereby thwarting, more or less, many of the “limited supply” and “Superstar Cities” arguments that sought to justify individual regions explosive appreciation.

Today we know that this massive boom in real estate was more a function of financialization and credit availability rather than fundamentals.

One of the better outcomes of this period is that there is now much more attention being directed to property markets demanding better analysis and sponsoring a host of new and novel data for tracking individual property markets.

On that note, the Institut de l'Epargne Immobilière et Foncière (IEIF), a French research and analysis firm, has introduced a new catalog of daily and monthly property prices indices for France, Europe and the Eurozone.

As you can see from the chart, the early 2000s was an exception period of property price appreciation culminating in a “blow-off” peak in early 2007 as the leading edge of the sub-prime crisis ripped through the credit markets.

Similarly with the U.S. and U.K. markets, the France and Europe indices indicate that the initial vicious price slide hit a low in early 2009 and since have trended up.

It will be interesting to see how each region now trends as the U.S. has clearly started to weaken in recent months and the U.K. appears to be following suit.