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Thursday, January 21, 2010

Household leverage and house prices

The higher the leverage ratio a country's household has, the higher increase of house prices; and when bubble bursts, the sharper the price decline.

I am very surprised to find out Denmark (the country I am currently living in) has the highest household leverage ratio. Faint!



The stage of irrational exuberance:





Days of Reckoning:





Read the full research at SF Fed
.