Worldwide Housing Price Stagnation Worries Economists
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What is the main topic discussed in this episode?
Here's your Money Briefing. I'm J.R.
Is global housing price stagnation slowing world economic growth?
Whelan at The Wall Street Journal in New York. A slowdown in global housing prices and residential real estate investment has economists sounding the alarm bells.
Residential investment feeds into gross domestic product growth or GDP growth, which is essentially economic growth. And so that has been kind of contributing to the slowdown in world economic growth.
That's Wall Street Journal economics reporter Sarah Cheney. She'll explain how consumers are affected and whether economists see similarities to the lead-up to the financial crisis. That's next.
How does declining residential real estate investment affect GDP?
Home prices in the world's biggest cities are stagnating, and some economists are concerned that could have ripple effects on the global economy. Wall Street Journal reporter Sarah Cheney is on the line with us to explain. So, Sarah, is this a case of the global economic slowdown catching up with the housing market?
What we have seen is that there has been a broader global economic slowdown over the past couple of years, and that has sort of kept a lid on housing demand and home price gains across many nations. And then there are some other factors like heightened uncertainty and geopolitical concerns, think U.S.-China trade war, Brexit, that have been weighing on homebuyer sentiment.
Now, what is the significance specifically of the decline in residential real estate investment?
So residential real estate investment has declined for four straight quarters, which is the longest stretch of decline since the financial crisis.
What factors have caused synchronized slowdowns in major city housing markets?
And that's important because residential investment feeds into gross domestic product growth or GDP growth, which is essentially economic growth. And so that has been kind of contributing to the slowdown in world economic growth.
And so the concern here is that there's a direct link between that investment and economic growth.
And then there's also this connection between home price growth and how consumers are feeling. So if I'm a homeowner and I see that the value of my home is growing slower or even declining, then I might feel less well off and spend less.
Are current housing market conditions signalling a repeat of the 2008 crisis?
And then that also feeds into economic growth.
Now, in some big cities, including New York and London, what's going on now follows a steep run-up in investment.
How are policymakers and lenders responding to housing market risks today?
Since the last financial crisis about a decade ago, we've been in this period of really low interest rates. And so a lot of wealthy investors would swoop in and buy properties in cities like London, Vancouver, Tokyo. And so housing prices in those cities became synchronized. Now that we're in this period of, you know, a global slowdown and a lot of these cities have been enacting property market regulations, we've seen that those housing markets have slowed in line with one another.
Now, economists see these declines as significant, but they're not exactly flashing signs of imminent danger yet, right?
There are some different metrics that you can look at, one being household debt to GDP ratios. And basically what's going on there is not seeing the same sort of signs of out-of-control credit growth that we saw before the last financial crisis. Also, policymakers kind of have become more alert to the risks of housing bubbles and since the last financial crisis and banks have made it more difficult to access mortgages. So all of those factors kind of point to, hey, we're not exactly where we were 10 years ago.
All right. That's Wall Street Journal reporter Sarah Cheney with us from our Washington bureau. Sarah, thanks for coming on the show.
Yes. Thanks so much for having me.
And that's your Money Briefing. I'm J.R. Whalen in New York for The Wall Street Journal.
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Chapters
6 chapters
1
What is the main topic discussed in this episode?
0:05–0:07
2
Is global housing price stagnation slowing world economic growth?
0:07–0:50
3
How does declining residential real estate investment affect GDP?
0:50–1:54
4
What factors have caused synchronized slowdowns in major city housing markets?
1:54–2:36
5
Are current housing market conditions signalling a repeat of the 2008 crisis?
2:36–2:48
6
How are policymakers and lenders responding to housing market risks today?
2:48–4:22
Speakers
2 identifiedMore from WSJ Your Money Briefing
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