U.S. Mortgage Crisis Goes Global

April 15, 2008 06:00 AM
by findingDulcinea Staff
Markets in real estate–heavy countries such as Ireland and Spain are reeling from a slow-down after nearly a decade of steady growth.

30-Second Summary

Overvalued properties, delinquent buyers and a glut of new homes have placed stress on economies that have become increasingly dependent on real estate and construction.

In a recent study, the International Monetary Fund has placed much of the blame for the wider crisis on the slowdown of the American economy, estimating it will grow by only 0.5 percent this year and 0.6 in the next.

Blame for the global slowdown has also been placed on inflated property prices, led by the Netherlands, Ireland and England, whose prices average 30 percent above explainable levels.

The IMF also reported that the broader impact of the American housing crisis could cost the world economy about $945 billion.

“The crisis is spreading beyond the US subprime market — namely to the prime residential and commercial real estate markets, consumer credit, and the low- to high grade corporate credit markets,” stated the IMF in its report.

As the housing crisis expands, some countries have witnessed the effects in other sectors, including construction and home furnishings, with global brands, such as Ikea, seeing decreasing consumer sales.

This crisis has also meant higher unemployment in some countries, stemming from a decrease in construction jobs. Unemployment in Spain is expected to reach 11 percent next year.

Headline Links: A crisis spreads

Background: Many sources of blame

Reactions: Solutions emerge as crisis continues

Opinion & Analysis: Related industries affected

Reference: The makings of a crisis


Most Recent Beyond The Headlines