Housing Bubbles: Japan Vs. US

Americans who are feeling the extreme pain of a burst housing bubble are finding it hard to regain lost optimism and, more concretely, are facing the realities of lost wealth, less availability of credit, and less mobility given struggles related to selling a house that is “upside down”—with the mortgage greater than the value of the house. As painful as America’s burst housing bubble has been, Japan’s bubble was even larger (see chart) and its bursting in 1990 led to over two decades of economic weakness and persistent deflation.