Some five years after house prices peaked in the U.S., debates over the cause of the boom and bust continue. Some of the leading theories — Fed policy or sub-prime mortgages to name two of the most common — are U.S. centric with little to say about other countries. However, one part of the puzzle is the experience in other parts of the world. The Bank for International Settlements, sometimes described as the central bankers’ bank, maintains data on property prices around the world. The chart compares the U.S. experience to home prices in the UK, Spain and France. The data are quarterly; the U.S. data are the S&P/Case-Shiller National Home Price Index, the data for the other countries come from the BIS. These series use somewhat different calculating approaches and coverage varies across countries; nevetheless, one can get a sense of differing results in different countries.
Using 1996 as the base date, the U.S. boom was not the largest in terms of price gains but the U.S. was the biggest drop from the peak. Further, U.S. prices peaked first possibly suggesting that the bust in the U.S. was part of the spark that sent other prices down. If one dates the financial crisis from the fall of 2008 when Lehman Brothers failed, the stock market plunge deepened and TARP began, one could almost argue from the chart that these events sent house prices in the other countries into a tailspin. The debate over the housing boom and bust is far from over.