Global Housing Boom Out Of Steam?

In what could be ominous for red-hot housing markets in the US, the Sydney, Australia home prices are expected to drop on higher interest rates. Louis Christopher, head of research at Australian Property Monitors said, "We would see up to an 8 per cent fall in Sydney for the year (2005) if we have another rate hike within three months of the last rate rise."

This comes on the heels of the 2004 price declines. Economist.com reports,"Average house prices in Sydney.. fell by 5.4% in the second quarter. Other sources suggest a steeper decline. The Commonwealth Bank of Australia reckons that house prices nationwide fell at an annual rate of 13% in the first half of 2004."

The Economist article has a wealth of data to back up the assertion. "In other words, houses are more overvalued today than at previous peaks, from which prices typically fell sharply in real terms.(T)wo-thirds (by economic weight) of the world that we track now has a potential housing bubble."