In 2007, when the housing bubble in the United States began to explode, many thought it would not reach Europe. However, the contagion was not long in coming.
Now, after more than ten years, it seems that nobody remembers what happened.
«This time is different»
I’m not sorry. This time is not different. It is worse.
After spending a decade growing on cheap money, and in some countries (especially European ones) for free, bubbles reappear.
The difference is that if previously the bubble was basically on the assets linked to real estate, this time the monetary policies of the central banks that have helped so much to return to growth have created, together with the animal spirit of the investors, three big bubbles.
Real estate market
The only good thing is that this time, the bubbles are not so uniform in all countries. That is, the stock market is clearly overvalued in some countries and sectors, the same goes for debt and real estate.
The latter, real estate, have experienced large price rises in large cities around the world as a result of the very low interest rates offered by fixed income due to the monetary policies of central banks.
On the other hand, in the areas where the economy has been growing most strongly, and where incidentally are the companies that have experienced higher growth of their market capitalization, the prices of homes are also skyrocketing.
But what will happen when the interest rates return to normal, and therefore return to be attractive for the investor?
What will happen when the technology companies of California and Seattle can not continue to grow as the market imagines?
What will happen when job creation stagnates?
In the United States, the Federal Reserve has already begun normalizing interest rates.
And, it seems, the consequences were not long in coming.
As you can see in the following graphs, the construction sector has fallen about 30% in recent months. Falls that did not register from the period 2006/2009.