Comparing the US and Japanese Housing Bubbles

I have been looking for a graphic that accurately compared the Japanese and US housing bubbles for some time.  Usually when you see this sort of thing, it compares US housing prices to Japanese land prices – as shown below in a chart clipped from the Economist.

Comparison of US housing and Japanese land prices. Source: The Economist
Comparison of US housing and Japanese land prices. Source: The Economist

Thanks to Jonness for posting a chart that showed Japanese housing prices, I was able to create a comparative view of the Japanese and US housing bubbles, zero-based to 1984 and 2000, respectively.

US and Japan housing bubbles

I thought the two cycles seem remarkably similar in terms of the duration of the boom and the symmetry of the up/down sides.  As to whether or not the US bubble will unwind over a long and painful period like Japan’s, I’m going to leave that to the commentors.

Update: There have been a couple of comments asking about the impact of inflation on the two markets. I did some quick digging around on Econstats and came up with historical CPI figures for the US and Japan. At eight years into the comparative bubble periods, inflation in the US is running about 10 points ahead of Japan, with an index value of 124.6 vs Japan’s 114.6.

Inflation in US and Japan

As you can see below, this results in a less pronounced “bubble” in the US relative to Japan, and the national level indices track each other almost perfectly

US and Japan housing bubbles (inflation-adjusted)

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  1. 1
    vboring says:

    It should be mentioned that Japan doesn’t have “no recourse” loans like most of the US. Nor do their corporations so easily embrace layoffs.

    Both factors suggest greater foreclosure rates and faster falling prices in the US.

    Missing from the charts is inflation adjustment – a pretty important factor considering that the US CPI is above 5% at the moment and Japan’s has been below 1% for decades.

  2. 2


    I’d add too that Japan has more family members living together and America is repugnant toward co-habitation with family.

    That fact created more American subprime borrowers fleeing mom and dad, I hope the parents didn’t clean out their rooms too fast.

    And speaking of subprime loans, Japan’s prices were much higher [as bad as Seattle’s are/were] and totally out of reach for Japan’s lunchbox Joe….likely mitigating the unit counts on the foreclosure butcher block, in comparison.

  3. 3
    Sniglet says:

    I just don’t see how the US real-estate bust can turn out any more favourably than what happened in Japan. As vboring mentioned, the economic situation in the US became even MORE unballanced during the bubble years than it had in Japan in the 1980s.

    If Japanese metra areas can experience 80% real-estate price declines, then there is no reason we can’t see a similar phenomena in the US. I also don’t think this is a real-estate only phenomena. Japan saw an 80% decline in stock prices and we are almost certainly going to see something similar in the US. The duration of Japan’s bust is also interesting. The buy-and-hold theory of investing (for real-estate or stocks) certainly hasn’t done well for Japanese investors over the last 26 years, and I very much doubt it will benefit US investors in the coming decades either.

    Already we can see that someone who kept putting $1000 into US stock indexes every month starting in 1998 would have made absolutely no return. US T-bills, by contrast, have outperformed stocks by a HUGE margin, and that is with a whole decade of performance to average out the tops and bottoms.

    Of course, as everyone on SeattleBubble knows, I have long been a big believer in coming MASSIVE asset price declines.

  4. 4
    Kevin Lisota says:

    Hmm… I actually lived in Japan during part of that time. While an interesting comparison to the current US situation, I wonder if it is a valid comparison. Japan is FAR more urban than the US and housing prices were much, much more expensive compared to income. I seem to recall 90-year mortgages to alleviate the high prices. I’d love to see a comparison of home ownership percentage in each place. I always had the sense that home ownership was much higher in the US, in comparison to lots of urban apartment dwellers in big Japanese cities.

  5. 5
    jon says:

    Japan has a negative annual growth rate of 0.139%. The US has a positive growth rate of .89% and we are expected to gain 30 million between 2010 and 2020. If there is population growth then the cost of new houses forms a floor under the price, except in areas of local population decline. Japan has no such floor.

    You also should consider inflation in the two graphs. Japanese inflation was essentially zero, so that won’t change that graph much, but the peak in US graph will come down some.

  6. 6
    Scotsman says:

    Everyone who thinks the market will turn around in a year or so should take a closer look at Japan. Although the data Tim has put up doesn’t show it, prices were still falling in Japan 15+ years after the peak. So far, our government is pursuing the same bailout strategy the Japanese followed, and will likely get the same results- a stagnant, wallowing economy that never seems to really pull ahead. Our situation is additionally depressed by the huge amounts of debt held by both the government and consumers, and the promise of even more debt to come as entitlement programs head into peak payout years.

  7. 7
    deejayoh says:

    A couple of comments have mentioned inflation rates as a point of comparison. I dug up the reported rates. Interestingly, if you put them in context of the time of the housing bubbles, they are pretty much the same for the first ~6 years.

  8. 8
    deejayoh says:

    oops – ignore chart above. I based Japan to 1981, should be 1985. I will post an update in a bit

  9. 9
    vboring says:


    I think you are right that population growth rates and demographics are very relevant to long term house prices and very different for the US vs Japan comparison. Long term, the US is probably going to continue urbanizing – and more dense areas have higher land and house prices. Japan has probably not become any more urban since the 80’s.

    But, the instability factors in the US – “no recourse” loans, lots of layoffs, low personal savings rates, comparatively easy personal and corporate bankruptcy – all of these things mean that we will go through our problems very rapidly (and very painfully) compared to Japan, perhaps in as few as 5 years.

    I think long term issues like demographics may be nearly ignorable.

  10. 10
    Demersus says:

    Another thing to keep in mind is that while the US housing bubble was fueled by easy, low-standard credit, the Japanese housing bubble was fueled by the fact that their society had a very high savings rate. We don’t have a high savings rate, so we have nothing to fall back on but debt.

  11. 11


    As uncontrolled population growth adds more people to a stagnant or contracting GDP pie, the pieces will get smaller…they have to. That means wages get smaller…they have to.

    As wages collapse with uncontrolled population growth in America, so will home prices. Tweedle Dee and Tweedle Dum. Even Dr Roubini wouldn’t argue with this clear logic, albeit he’d avoid putting it in his analyses….all major media types avoid the root cause of the Economic Mess we’re in.

  12. 12
    jon says:

    “As uncontrolled population growth adds more people to a stagnant or contracting GDP pie”

    If the population consisted of passive entities that simply wait for handouts from their superiors, then yes, that would happen. But most people are always looking for the best opportunity to better their situation and work hard and often innovate. The result is that in all but occasional years the GDP grows. From time to time we have a recession, as all complex systems sometimes get tangled up and need to readjust.

    The more people there are, the more chances for specialization and the greater number of people able to innovate. In a manual labor society of constrained resources there would be a fixed size GDP pie to divide up. But in an economy that is based on using technology to leverage the available resources, there are nearly continuous jumps up in standard of living, and the more people there are the more people will be contributing to advancing technology. We currently are facing constraints in energy production, but the indications are clear that we are closing in on several possible ways to basically end dependence on fossil fuels. There are numerous areas of technology that are poised to make major impacts in our standard of living, and the GDP will rise accordingly over the coming years. These things don’t happen overnight, but it is a relentless process that will continue.

  13. 13
    Sniglet says:

    If population growth was the key to economic growth then the world’s most populous nations should be the wealthiest.

    Unfortunately, having more mouths to feed does NOT mean productivity will improve, or that economies will grow. Further, one can’t even draw a correlation between population and housing supply. Many countries have shanty towns which house large numbers of people, which doesn’t really add to the official housing supply. Further, you can always have people living in very cramped accomodations, reducing the square footage needed per person.

    I don’t think these phenomena should be just easily dismissed as 3rd world phenomena. We are already seeing tent cities spring up all across the nation, and don’t forget that there was a massive upswing in itinerant encampments during the 1930s. We could see such things happen again.

  14. 14
    David Losh says:

    The comparisons to Japan are misplaced. Japan enjoyed being the hub of foreign trade in Asia until the announcement in 1984 of the return of Hong Kong to China.
    Money in Japan was held in every form including Real Estate.
    Of course there is a romantic notion that Japan has an economy built on a manufacturing base along with agriculture. It is a fine idea that the island is self sustaining.
    It is however an island. Trade no longer needs to be conducted there. Negotiation directly with China are held in Beijing, Singapore, and Shanghai.
    It’s been my opinion that Japan was a friend of the United States in Asia. As the need for that friendship faded so did the relevance of Japan’s economy to the global market place.

  15. 15
    aman says:

    I’ve lived in Japan and actually looked to buying an apartment at one point, There are a few things fundamentally different I think from the U.S housing market.

    Homes are generally a depreciating asset in Japan. The land might appreciate in value, but generally most home buyers expect the value of their “investment” to drop over time; especially in the case of buying an apartment.

    Also, the attitude I think is very different. You don’t see people “upgrading” every few years, and I never heard of anyone flipping a property. Most people prefer to buy new construction and stay there permanently, often a home will stay in the same family for generations.

    Interest rates are very, very low, usually < 2% for a home loan.

  16. 16
    deejayoh says:

    Interest rates are very, very low, usually < 2% for a home loan.

    Aman, is that a statement that is about today, or one that is applicable to 20 years ago in Japan? I thought very low interest rates were a post-bubble phenomenon.

    And for those who are trying to compare the fundamentals of the US market to Japan, that is not my point. As much as anything, I wanted to post this as BS repellent. The US bubble was does not appear to have been as large (or larger, as some maintain) as Japan’s but from a time standpoint, the unfolding looks pretty similar, no?

  17. 17
    Matthew says:

    Is anyone actually looking at these graphs? I see people writing about how different we are from Japan yet the symmetry in how the scenario is playing out is frighteningly similar.

    I also have to agree with Software on the wages point. The increase in population in the United States is not due to an increase in the population of affluent Americans. The increase in population is mostly due to the fact that we have a land border with a 2.5 world country to our south. Sure our population is increasing, but do you honestly think the majority of the population can afford houses?

    I don’t care if you add 100 million more new immigrants to the population of the United States, that will do absolutely nothing to keep prices higher than they would otherwise be.

  18. 18
    Matthew says:

    Amen DJO, you beat me to the punch. Exactly what I was thinking. There are obvious differences between the modern day U.S. and 1990’s Japan, but yet the graphs show our bubble popping almost exactly like theirs did.

  19. 19
    jonness says:

    Very cool charts and lots of food for thought. :)

  20. 20
    Scotsman says:

    Way off topic, but interesting reading!

    Is Seattle The Detroit Of The NW?

  21. 21
    Herman says:

    Sniglet, how is rampant deflation possible? Can’t the gov’t turn on the printing presses and counteract the deflation?

    I don’t mean borrow the gov’t money – I mean actually print more of it. Create it from thin air.

  22. 22
    Sniglet says:

    Off topic, but I have published several more podcasts on the inflation/deflation debate and several other subjects:

    the Faustian pact-safety net and regulation

    Society’s bargain of accepting regulation in return for a safety net will never work.

    30 dollar oil-demand destruction will be huge

    Oil still has a LONG way to fall. The Optimistic Bear predicts $30 a barrel for crude.

    Even worse in China-emerging markets will suffer even more than USA

    The coming economic downturn will hit China, and emerging markets, MUCH worse than the USA and Europe.

    Cost of production doesn’t matter

    There is no reason that prices can’t decline FAR below the cost of production.

    Election day fizzle-just when everyone expects a rally

    Everyone seems to be expecting a post election rally, so maybe we won’t get one.

    No borrowers left

    All the government stimulus in the world won’t change the fact that no one is left who can afford to take on more debt.

  23. 23
    Sniglet says:

    Sniglet, how is rampant deflation possible? Can’t the gov’t turn on the printing presses and counteract the deflation?

    Deflation is occuring because:
    1) Most of the world’s private debt is denominated in dollars, and there is a mad rush to get dollars to pay down debt. In fact, many debtors are being FORCED to repay debt as lenders tighten standards (e.g. hedge funds are told they need more collateral to support the high leverage they currently have). Thus, many financial players are selling anything and everything in their portfolios to get dollars to pay down debt, which drives the value of the dollar up and everything else down.
    2) The US government so far hasn’t actually resorted to “printing” very much money. Instead, the government is selling tonnes of bonds (almost $1 trillion this year alone). This actually has the perverse effect of reducing the supply of money by sucking private money out of the economy. Government debt is NOT the same thing as “printing” cash, since it needs to be repayed and is balanced out by an IOU.
    3) There is hardly anyone left who wants to borrow money anymore, regardless of how low the interest rate. Consumers and companies are already in debt up to their eyeballs and simply can’t support any more borrowing. This is exactly what happened in Japan in the ’90s, when the Japanese central bank lowered interest rates to 0%, but there were few takers for the money. Who wants to borrow when asset prices are depreciating? The Tokyo house you buy today will be worth less next year so even a 0% mortgage is a losing proposition.

    I doubt very much the government will begin to flat out PRINT money on any kind of grand scale (a small amount of “printing” occurs via Federal Reserve “monetization”) since this would kill the US treasury market (i.e. no third parties would want to buy US debt if the government were truly “printing” lots of money).

    You can check out my podcasts at for more details on borrowing and deflation (you will have to look at my older podcasts for the deflation one, or do a search).

  24. 24
    buyStocks says:

    I’m curious to see where the CPI is headed, I’m guessing down.

    To counter deflation, I’m guessing fed will first decrease rates to 0%, then start madly printing money. There won’t be any choice considering the alternative (the masses won’t like watching their assets drop any further; remember sniglet, were still in the same country that just recently passed mega-bailout for some short-term relief).

  25. 25
    economist says:

    Homes are generally a depreciating asset in Japan. The land might appreciate in value, but generally most home buyers expect the value of their “investment” to drop over time; especially in the case of buying an apartment

    Er, and you think in the US they’re not? If anything, I would expect the structures to depreciate faster in the US than in Japan, because their houses are built better.

  26. 26
    TT says:

    In japan for many years there has been a negative real interest rate on government bonds and cash.

    When you expect all assets to go down, negative rates on housing is fairly reasonable.

  27. 27
    economist says:

    Expecting price deprecation on an asset is never reasonable. You always have the alternative of holding cash.

  28. 28
    Robert Wojciechowski says:

    Hey Sniglet –

    You say that
    “I doubt very much the government will begin to flat out PRINT money on any kind of grand scale (a small amount of “printing” occurs via Federal Reserve “monetization”) since this would kill the US treasury market (i.e. no third parties would want to buy US debt if the government were truly “printing” lots of money).”

    But if the US Treasury prints out money to counteract deflation why won’t people buy US debt? The USD will still buy the same amount of goods.

    And if the print out causes inflation they can issue bonds or whatever and get the money out of the system. The Fed and US Treasury can take out money or put in money into the system at will.

    I don’t even get that 700 Bill package will come out of taxpayers money. Why? This will be just debt piled on. It’s not that taxpayers suddenly will have to pay out of their pockets so much money.

  29. 29
    jason says:

    It seems that there is a good deal of discussion regarding demographics, comparring the US and Japan. It seems to me that we have a unique situation in this country that I do not think was present in Japan. We have 77 million baby boomers who will begin retiring in the next several years. It is this population who have driven the price of housing up and up over the last 30 years. As they watch their homes, stocks, and retirement investments devalued, they will loose interest in continueing their buy up trend. Some will even sell their homes to fund their retirements and move to sunny climates. I doubt many will want to move from a sunny climate to cold and rainy Seattle for retirement.

    The population in the US may be increasing, but immigrants typically do not have the funds to purchase large, expensive homes from the baby boomer population. Furthermore, the generation behind the boomers only consist of approximately 46 million people and typically do not have the funds to purchase expensive homes. Who will but the boomers homes?

    In the next 15-20 years, a dominant trend in real estate will be boomers either selling larger homes and down sizing or atleast stopping the buy up trend every several years. This will blunt the housing recovery. It seems that the current credit crisis will actually accelerate a trend that was already coming.

  30. 30
    David Losh says:

    When we talk about immigration most people assume that Mexico is where people come from. We never look at the Asian population of Canada. We just don’t talk about it.

    Let me invite you to the International District, Beacon Hill, White Center, and close to Highway 99 immediately North of 205th in South Lynnwood. Go to the Costco there any given Sunday.

    The dynamic of the Asian Community, Economy, and Lifestyle is lost on Americans.

    Of course a graph of a bubble is similar, it’s a bubble. Second which I allude to here all the time and no one seems to get is the world of black money. The shadow world of cash makes a huge difference.

    No, cash is not an option, you have to hold cash someplace. If you buy gold you have to store it. Diamonds are much easier. In my opinion the price of diamonds has been driven up by thier salability, and portability.

    When you sell diamonds they sell for less than you paid for them. That’s a part of the game. Cuturally you hide your losses, and promote your success.

    In Asia your success can come by hard work. It’s nothing to see a man or woman work all day every day in an Asian Community. You can pool resources to make sound investments. You clear debt as fast as you can. It’s business.

    So when making these comparisons to an Asian country you are only comparing the up and down of the bubble. The bubble by definition is the price going up, then coming down. In between we are looking at much different assets.

    Americans look at the losses, Asians are looking at the cash. Real Estate is a way of holding cash. In Asia Real Estate is bought, sold, and traded for cash. Cash moved out of Asia between 1984 to 1993 because no one knew what the Chinese government would do to the business of trade.

    The bubbles may be ups and downs but the purposes are much different.

  31. 31
    rainy says:

    The increase in population is mostly due to the fact that we have a land border with a 2.5 world country to our south. Sure our population is increasing, but do you honestly think the majority of the population can afford houses?

    Yes, many of the people may come from the directly to the south of the US. There are other people who come from other countries and become educated. They become part of the work force and start businesses. They in turn buy houses. The US is seeing an influx in population from all countries not just 2.5 countries to the south.

  32. 32


    I’d add too that the 100M added to our population since 1990 has been basically linear [don’t blame it all on Bush or Clinton, as it was equally both their faults] and mostly immigration….adding in the illegal aliens borrowing the subprime loans too, makes it even worse.

    The legal American citizen Baby Boomers did not cause this post 1990 population growth; it was clearly uncontrolled immigration. The need to build new homes and degrade the environment since 1990 was basically uncontrolled immigration and a concurrent shut down of our American domestic industrial base [globalization].

    Here’s some Numbersusa data in part:

    The American fertility rate fell to replacement level in 1972, making it possible for the nation to eventually reach a widely held dream for a stable population. A national government commission recommended that the nation would be best served in reaching its environmental, economic and social goals by a stabilizing population. Numerous experts and commentators predicted that each decade would see lower and lower population growth until early in the 21st century there would be no growth at all.

    Despite continuing below-replacement-level fertility, population growth continued at the level of the previous decade. The reason was that Congress had created a system of chain migration that snowballed and doubled annual legal immigration over traditional levels. Further adding to the population, Congress for the first time ever rewarded illegal aliens — about 3 million of them — with a path to citizenship. Federal immigration policy was negating the results of Americans choosing to have smaller families.

    The dream of a stabilized — or even a stabilizing — population was proven to be nothing but a fairy tale as U.S. population exploded with its biggest growth ever. The Baby Boom peak was exceeded — not by a big increase in Americans’ babies but because Congress further increased immigration to a level almost quadruple the traditional level. And federal decisions to stop enforcing most laws against illegal immigration in the interior of the country led to additional higher levels of illegal aliens in the country. Yet another cause of the boom was immigrant fertility. Although American natives maintained a below-replacement-level fertility rate, immigrant fertility was at a similar rate to the U.S. Baby Boom fertility of the 1950s….”

    The rest of the URL:

    This uncontrolled immigration tidal wave that has hit America definitely caused the Economic Crisis today and stalling its dire consequences by borrowing our grandchildrens’ money to keep a phony industrial base, “glue board home manufacturing” going has proven a complete disaster!

    Without immediate depopulation in America [and in the world too] ASAP, we’ll never get out of this mess, ever.

  33. 33
    David Losh says:

    Condoms, free condoms, let’s make condoms sexy.
    That is the only solution to over population.

  34. 34

    […] three years ago, Deejayoh posted a great comparison chart showing how the US housing bubble compared to the housing bubble Japan experienced in the late […]

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