Friday, March 11, 2005

Real estate bubble adds more suds

Reports notes similarities between housing and Internet boom days

A word of caution: economic fundamentals associated with the housing bubble debate are "eerily similar" to the dot-com bubble in the late 1990s, say analysts at financial advisory giant Merrill Lynch.

In an economic commentary, "Housing Bubble Getting More Bubbly," the company compares the ratio of household equity ownership relative to GDP in the opening months of 2000 with the ratio of household real estate assets to GDP in the last few years, which now is skyrocketing toward 140 percent.

The lesson, they say, is to be wary when anything begins to approach or exceed 140 percent of GDP.

"We get nervous when we see things move parabolically north because no asset class at any time ever failed to mean-revert after such an upside move," the report notes.

Looking back to the ratio of household equity ownership and GDP just before the Internet bust, the statistics show that number falling sharply in early 2000.

Read more Inman News at Citywide Services

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