The Economist has been sour on the US real estate market for going on four years, now.
Eventually, they got it right, finally predicting a slowing of the market when it started to happen (perserverance pays off).
I have two issues with the Economist (and those who think like they do).
Pretty much, appraiser/blogger extraordinaire Jonathan J Miller says exactly what I feel, so I’ll leave it to him to put it best:
My beef with the Economist, is their love affair with the rental market and its relationship to owner occupied housing. The rental equivalent of owner occupancy, because it is less than the cost of housing, portends certain doom from their view point. This has always struck me as overly simplistic. For many reasons, an investment property is rarely of the same quality or caliber as an owner occupied property and reflects different motivations and buyers. This is the same flawed rationale that includes the rental equivalent of housing in our CPI stats rather than using actual sales stats to represent the housing market. Rental markets have not behaved like the owner occupied markets have during this recent housing boom.
I think its more directly related to affordability. Low mortgage rates have been the key driver of this boom and any other factors are minor in comparison.
More information: To The The Economist, The Housing Outlook Bears All – By Jonathan J Miller, Matrix