U.S. economy. The bubble in the housing market

U.S. economy. The bubble in the housing market. Notes to the public. This article is taken from the analysis of macroeconomic analysis. The macro-economic policy. And between countries. Commission published in www.fpo.go.th. The U.S. economy is the largest economy in the world. The value of gross domestic product (GDP) in 2004 was 11.6 billion U.S. dollars, representing 28% of global GDP, so the impact on the U.S. economy. Will affect the global economy is inevitable, the U.S. economy over the past 2-3 years. Are facing the problem of housing prices. Increasing rapidly. Especially in the area of ​​southern California, Florida and the northeast of the country such as Washington, DC, housing prices increased dramatically as this. Is not sustainable in the long run. Many analysts have said. To adapt to the new equilibrium will occur in the near future. The comments are divided into two groups that are adjusted for severity (Market Crash) is a housing price decline rapidly in a short time. Meanwhile, another group that will be a gradual adaptation (Soft Landing) This study will present the facts. And situations as possible. Including the impact on Thailand. 1. The current issue of the U.S. economy. The U.S. economy now faced a new round bubble. Price of housing increased rapidly in the second quarter of 2005, housing price index increased by 13.43% per annum from the highest increase since 2000, the price of housing in California, Florida and Washington. close to the maximum 25.2%, 24.5% and 23.5% per year, respectively. Indicators that reflect the occurrence of bubbles in the housing market is one. The ratio between house prices and the return of the lease (Price-Rent Ratio) P / R ratio is similar to. Price-Earning Ratio of the Securities Exchange Commission. The two indicators used to measure the true market value (Actual value) compared with baseline value (Fundamental value) of assets if the P / R ratio is high, indicating that the market value deviations from fundamental value is. And may lead to a bubble in the housing market when the P / R ratio of the United States since 1999, found that the ratio has increased from an increase in the price indices of housing rather than rent index. In the first half of 2005 stood at 1.6 compared to 1.2 in 1999. 2. The factors that caused the housing bubble in the week. 2.1 Interest rates and inflation remained low. Interest rates remained low, encouraging people to invest in housing because the cost of borrowing is low, while inflation is low, with people expecting the central bank will not use monetary policy contraction in the near term, so there is less risk of loss. Due to the price of housing will be reduced to a minimum during the year 2001-2004, interest rates for housing loans (Mortgage rate) is low, about 4.5% per year compared to the 1999-2000 estimates. 6% per year, while house prices rose by an average of 20% per year, so when you compare costs and returns. Provided that the investment return (under the assumption that home prices are rising. In a similar rate). 2.2 Consumer confidence in the stock market after the dot-com bubble in 2000 and turned to the housing market. 2.3 Variation of the housing loan (Mortgage) that allows people to borrow money to speculate in the markets, namely (1) Interest only Mortgage is a loan but the interest is paid each period. Without having to pay the principal (2) Negative Amortization Mortgage is a loan to pay less interest each year. In the interest of the unfunded The Army, in principle indefinitely, and (3) Adjustable-Rate-Mortgage (ARMs) are loans that do not impose a fixed interest rate. For borrowers who can not afford long-term interest. Turned against the volatility of interest rates in the short term. When maturity is defined as the maximum interest rate ceiling. So that borrowers have to face all the risks. The increase of interest rates in the future. As you can see the different patterns of recovery. These are ideal loans for speculation in house prices will rise in the future. The borrower will sell for a profit before payment is due, however, if your home does not add up. Or interest rate increases exponentially. It will cause problems in the payment. And the problem may spread. The financial system and economy