SPAIN: Burning down the house

Perhaps the Talking Heads originally predicted the fate of global housing markets once upon a time, but we’ll leave that up to you. Spain has BIG problems on its hands, including the cost of borrowing (10-Year bond yield just hit 7%), stagnant growth and a high unemployment rate that’s fast approaching 25%.

 

SPAIN: Burning down the house - spanish housing prices

 

But perhaps one of the more overlooked concerns about Spain is – wait for it – its housing market. Yes, similar to the United States in 2007-2008, Spain has a rapidly deteriorating housing market. Another leg down in Spanish home prices sees very likely. Hedgeye Director of Research Daryl Jones lays out why Spain is following the lead of the US:

 

Spain actually had two bubble periods with the first beginning in 1985.  From 1985 – 1991 home prices basically tripled, from 1992 – 1996 they basically remained flat, and from 1996 – 2008 prices more than doubled.   So far, from the peak, Spanish home prices are in aggregate only off about 20%.” 

 

As recently as February 2012, Spanish housing transactions were down 30% year over year. If you think that isn’t slowing growth, then we don’t know what else to say. The pressure on Spain is already here and it’s about to get a lot worse as we move into the summer.

 

 


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