Prediction Today: Does The Next Crisis in US and Europe comes from Real Estate?

The real estate markets of Europe and the United States have sown the seeds of a looming crisis in the financial sector, with ongoing financial instability further exacerbating the situation.

The real estate markets of Europe and the United States have sown the seeds of a looming crisis in the financial sector, with ongoing financial instability further exacerbating the situation. One of the root causes of this impending crisis is the significant shrinkage in cash flow that was inflated during the COVID-19 pandemic, which is causing major volatility in the financial markets. Recently, Swiss financial institutions Credit Suisse and UBS have updated their shareholders of the merger and business activities. The collapse of Silicon Valley Bank (SVB) in the US and the rescue and merger of Credit Suisse are considered one of the causes of the upheaval in the European and US financial systems.

Today Prediction: Does The Next Crisis in US and Europe comes from Real Estate?

Governments and businesses have taken emergency response measures to stabilize the situation, but the underlying issues in the European and US real estate markets persist, and financial instability continues to persist. The contraction in money supply is another major contributing factor, with expanded money supply (M2) declining sharply. The US Federal Reserve has reported negative M2 growth, continuing from December of 2022 until February of this year, which is having a significant impact on the economy.

The decline in M2 has resulted in a flight of savings from the bank, causing concern for many average banks. Investors who benefited from excess liquidity were particularly hard hit, which was the underlying cause of SVB's bankruptcy and Credit Suisse's collapse. This led to an extensive decline in US bank loans, amongst other negative impacts on the real economy, with the focus now shifting to risks within the real estate industry in the US and Europe.

Today Prediction: Does The Next Crisis in US and Europe comes from Real Estate?

According to data from the European Central Bank (ECB), the net asset value of real estate investment funds has doubled in the past ten years, with concerns surrounding the cash scenario due to the glooming real estate market. The ECB stated that there are already clear signs of fragility. In the US, real estate loans primarily derive from small and medium-sized banks, with many citing the current crisis as caused by monetary tightening, similarly to the Savings and Loan Association (S&L) crises of the 1980s and early 1990s.

The current situation in Europe and the United States is one of concern, one that requires a coordinated approach to mitigate. It is essential to take proactive measures to stimulate the economy and avoid the potential for crisis in the financial sector.