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FOOD FOR THOUGHT: In 2005, OECD predicted no housing bubble in the US
In a report published in 2005, the OECD predicted no housing bubble in the United States.|
In their report, they suggested that the “fundamental” price-to-rent ratio in the United States was above its actual level until 2000, the benchmark year.
Since then, the series have moved together and the gap between them has been negligible. On this measure, there does not appear to be much of a case for overvaluation, at least at the national level.
Their research also concluded that there was overvaluation in australia, the United Kingdom, Ireland, Netherlands, Norway and Spain. The actual price-to-rent ratios in these countries were noticeably above their “fundamental” levels in 2004, suggesting overvaluation.
However, the OECD said that the extent to which these prices look to be fairly valued depends in good part on longer-term interest rates, which exert a dominant influence on mortgage interest rates, remaining at or close to their current low levels.
Their report can be found in: