Great news! US housebuilding back to previous lows
The US housing recovery is gathering steam, and bullish economists are hopeful it will give a handy boost to growth, at a time when the US faces more austerity than most of Europe, thanks to the tax hikes agreed in the fiscal cliff compromise.
Credit Suisse has produced a nice chart showing just how big the recovery in housebuilding has been: private housing starts are now running at a higher rate than at the trough of previous recessions all the way back to 1960.
Source: Credit Suisse
Tracking luxury
Investors in luxury goods producers tend to spend a lot of time following what’s going on in China, for good reason. China’s legions of corrupt officials have a penchant for bling (as well as luxury cars and gambling), and plenty of ability to garner the cash needed for fancy western watches and handbags. Lately they’ve been cutting back, as the slowing economy and rising scrutiny from bloggers and the public makes open diplays of wealth less acceptable.
It might be easier simply to focus on what is going on in the US. Are households finding their share portfolios rising faster than their house prices? Shares are easier to cash in to fund that oh-so-desirable Cartier watch, although most people would have to sell their house to afford a £1.2m handbag. Read more
More on transatlantic property bubbles
John Authers, my predecessor as Short View writer and co-author of this blog, published some interesting graphs this week about London property, as he worries about a bubble.
I don’t often disagree with him, but on property I think he’s missing a trick. He pointed out that Miami’s housing bubble was far worse than London’s, but that London’s price rise is now approaching where Miami was:
But these prices (rebased to January 2000) were in local currency terms. And London’s property market is so important to the country, and its buyers so international, that it makes more sense to compare these prices in constant-currency terms.
That’s easily done by converting London prices to dollars and then rebasing:
So from an international perspective the boom in London prices was every bit as big as in Miami; they just peaked slightly later. The bust was of the same magnitude, and even more extreme, since it took place through the collapse of sterling rather than the somewhat less rapid fall in property prices. Read more
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James Mackintosh is the Financial Times' Investment Editor, writing and presenting the daily Short View column and video. In 16 years at the FT his posts have included comment editor, motor industry editor and hedge funds correspondent, as well as spells in the Parliamentary lobby and Paris. He was the first reporter hired for FT.com, joining two weeks before it launched.
John Authers is the Financial Times' Senior Investment Columnist, writing the Saturday Long View and a regular Monday column. In a 22-year career at the FT, his previous posts have included global head of the Lex column, investment editor, US markets editor, Mexico City bureau chief and US banking correspondent. His latest book is The Fearful Rise of Markets. 
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