House-price chart of the day
This is my new favorite toy: a fabulous interactive house-price charting tool from the Economist.
After playing around with this chart for a while, it seems to me that the US housing bubble was really not that big by international standards. So why was its bursting so harmful? Partly because of the sheer size of the US market — but more importantly because the US saw a much greater deterioration in underwriting standards than most other countries, and therefore faced a much larger wave of defaults.
It seems to me that different bubbles are associated with different degrees of harm. A stock-market bubble is bad, a housing bubble where the buyers can afford their homes is worse (because it’s still leveraged), and a housing bubble where the buyers can’t afford their homes is the worst of all. In the US, of course, we had the latter type.