Caruana (the governor of the Bank of Spain) repeated the European central bank’s claim that Spanish house prices are between 24 and 35 percent overvalued.
I think that as governor Caruana has to err on the side of caution so if he says 24-35%, maybe it could be interpreted as 35% and the rest…
Basically if prices in some areas (on the costa del sol for example) have already fallen significantly (20% by my reckoning) then when you say that prices should fall significantly again you are saying the market is going to crash. While Caruana is conservative with his % estimates he is bold enough to insinuate that the market will crash so that when the sh!t hits the fan he can retain some credibility.
There were a few commentators speculating about interest rate cuts at the start of the month.
Well since then european bond prices have plunged showing that rates are only going in one direction -UP!
& indeed this is the growing consensus among ECB bankers.
Prof. Shiller at Davos today said that the housing market bubble didn’t need higher rates to burst. It seems that everything is falling into place and his projection that the bubble would last a max. of 12 months seems highly authoritative.
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