Global | Booming house prices add to inflation concerns

Rapid house price rises are feeding into a broader asset price boom that’s the strongest in decades and also unusually synchronised across assets. This trend has potentially large macroeconomic effects. Recent asset booms haven’t generally been inflationary, but the current one, alongside other upward pressures on prices, adds to the need for central bank vigilance.

What you will learn:

• House prices are growing at over 10% y/y in many major economies, with real prices across the advanced economies climbing at the fastest pace since the peak of 2005.
• The housing surge is part of a broader asset boom encompassing stocks and commodities. US stocks already looked overvalued before the pandemic, but the current asset price surge is the biggest in decades and also unusually synchronised across assets.
• The asset price boom has potentially large impacts on spending. We forecast US household wealth will rise around 20% this year, a record pace, which could add about 2% to consumer spending.