Rampant house price optimism lives on

February 26, 2016

Men push a float representing a foreclosed home during the "Main Street to Wall Street" rally in New York, April 29, 2010. The AFL-CIO and other labor and community groups gathered to protest against Wall St. Banks.   REUTERS/Mike Segar   (UNITED STATES - Tags: BUSINESS CIVIL UNREST POLITICS) - RTR2DA27

Groupthink on prospects for continuous uninterrupted U.S. house price rises, along with financial engineering run amok, caused the last global financial crisis.

Nearly 10 years on, the latest Reuters surveys of economists and property market experts across the U.S., Canada, UK and even China, suggest rampant optimism lives on.

Sure, interest rates are at or near record lows in the UK, Canada and the U.S., which is the main elixir driving annual house price increases at rates well above wages and broader consumer inflation.

Of the more than 70 economists surveyed across these economies, not one forecast a fall in average prices this year.

House price rises

Even Canada, which unlike the U.S. and the UK, did not experience any significant correction in prices following the onset of the financial crisis in 2007-08, found only two people expecting price declines in 2017 and just four in 2018.

According to them, the cost of housing doesn’t appear far out of line, either.

Housing affordability

A reluctance to predict trouble doesn’t necessarily mean that most believe, as they appeared to do a decade ago, that house prices only rise.

But an almost total lack of dissent, even with the cloak of anonymity to protect individual views, suggests that when interest rates eventually do rise again, there may be a few nasty surprises.

Unless, of course, you believe that interest rates will never rise again.

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