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