Tuesday, September 25, 2007

Housing Market sentiment drops in Norway

40% think home prices will fall The days of rapidly rising housing prices may be over, at least for now.

Four out of 10 Norwegians questioned think housing prices will fall during the next year. That compares to just one in 20 who believed the same a year ago.

The startling turnaround in housing price outlook is revealed in a survey conducted by research firm Sentio for Fokus Bank.

Norwegian Broadcasting (NRK) reported Monday that the survey also indicates that there are more Norwegians who believe their homes will be worth less a year from now, than there are those who believe their homes will increase in value.

Frank Jullum, chief economist at Fokus Bank, called the survey "very bad news" for homeowners hoping to sell.

"Both sellers and buyers expect that prices will come down," Jullum said. "That means we'll probably go through a period where prices either remain stable, or fall."

Housing prices have skyrocketed in Norway during the past several years, and the country's economy remains strong. The prices, though, especially those for small flats, have risen too high, Jullum believes.

He didn't rule out a price decline of as much as 10 to 20 percent.

I live in Norway and I can tell you, house prices here are HIGH. About on par with San Francisco housing prices when their market was still hot. Wages are generally higher here than in the U.S., but not enough to justify those kind of prices.

Easy money was not an American phenomenon, creative lending went world wide and spawned similar housing bubbles in many other countries.

It's true, a year ago everybody here was sure the party would never end and Norwegians were liberating equity from their homes at similar rates to Americans, buying cars, boats, RVs and vacations.

This in a country where cars and boats, or any other form of transport for that matter costs nearly three times what it does in the US. Everybody has to have a luxury SUV don’t ya know…

The party is over, but many here will refuse to see, and hold on for the price their neighbor sold for last year. It's already happening. Stock is increasing, sales are slowing but prices are still somewhat sticky. It's a pattern that started to play out last year in the US and you can see a clear pattern of it repeating here.

Will Norwegians learn a lesson from the US housing market? Probably not. They would never compare themselves to Americans. That would be beneath them.


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