Tuesday, August 12, 2008

EU countries feel housing bubble


The housing bubble and unsound mortgage prices that have plagued the United States have apparently “spread” to Europe, especially Spain and Germany. Overbuild luxury units stay on the market and fall in price in Madrid, according to Anthony Faiola, in “Economic Malaise Threatens to Undermine European Unity” on the front page of The Washington Post this morning, Aug. 12, link here.

When I stayed in Lisbon on the first night of my spring 2001 Europe trip, I saw a lot of tile-roof and colorful condo construction near my hotel about four miles east of the Lisbon harbor. The drivers said, “they’re getting a lot of money from the European Union to catch up.” I saw more on the bus trip to Fatima the next day.

I noticed luxury homes everywhere in the Basque city of San Sebastian, Spain, most of all, along the canal leading from the famous circular beach.

The increasing problems with European housing might help the US dollar recover a bit and help hold down oil prices.

Today, in a financial meeting, I asked how banks could have been so reckless five years ago with poor loans. There was a reaction that negated any personal responsibility. Your competitors do it, so you have to. Nobody saw the bubble coming. Values would go up forever.

But they never do. There are only so many blocks to build a pyramid with. Otherwise, it’s called “get something for nothing.” Then it’s immoral.

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