Party Crasher

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What's going on?

Not to burst your bubble, new homeowners, but home prices around the world are flashing the same warning signs they did in the lead-up to the 2008 financial crisis…

What does this mean?

Nowadays, home isn’t just where the heart is: it’s where our old jobs, new puppies, and frivolous lockdown purchases are too. That’s encouraged homeowners to move to bigger and better places, and – thanks to a combination of record-low interest rates, pandemic savings, tax incentives, and government stimulus programs – there’s been no reason not to.

No surprises, then, that the global housing market is now in a bubble. According to a new report from Bloomberg Economics, New Zealand, Canada, and Sweden rank as the world’s frothiest, closely followed by the US and the UK. That’s based on how high certain indicators – like the ratio of house prices to rent or locals’ salaries – are, even compared to where they were before the 2008 financial crisis.

Why should I care?

For markets: Leave banks outta this.
The report points out that we might see the market drop off steadily rather than in one fell swoop. But neither would be good news for banks, whose mortgage-lending heavily exposes them to the real estate market. And they could do without the extra headache: the sector’s stocks fell earlier this week after JPMorgan said it’s anticipating a bigger-than-expected drop in trading revenue this quarter, suggesting that the trading boom – in stocks and bonds, at least – is starting to tail off.

The bigger picture: Crypto is… inevitable.
Cryptocurrency trading, meanwhile, is still going strong. That might be why investment bank Goldman Sachs recently unveiled a dedicated cryptocurrency trading team, and why it’s now expanding its crypto offering from bitcoin products to ether products. That might be smart: a new survey suggests hedge funds will hold 7% of their total assets in crypto within five years, and investment banks count plenty of them as their clients (tweet this).

Originally posted as part of the Finimize daily email.

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