China making same real estate mistakes we did - how it impacts U.S.

Housing prices in some cities doubled from just earlier this year. The housing market contributed some 20% of the national GDP in 2009. Sales of both new and old housing units are going through the roof (so to speak).

Have we just crossed over into The Twilight Zone?

Nope. But we have just crossed over into -- China!

I came across today an amazing article in the English language China Daily that I thought I would share with all of you, because the situation in China is the mirror image of what it is currently here in the U.S. However, you may note as we go on this short journey, some disturbing similarities between the housing market in present-day China and the housing market in this country a few years ago during the wild days of the housing bubble.

According to the article by You Nuo, "The real estate industry can be said to be the most successful sector in 2009." He attributes this to a huge Chinese stimulus of some $586 billion.

But the Chinese do not seem to be learning anything from the mistakes made in the U.S.

Already, in some Chinese cities, a new housing unit is "worth at least 20 times" the annual income of a working class family (though, in a Communist country, the definition of a working class family may be somewhat different from what it is here).

And why should we care if the Chinese seem intent to march blindly toward what is bound to be their own version of a real estate bust in the not too distant future?

Simply because the U.S. and Chinese economies are now heavily dependent upon one another.

As our own economy starts to slowly (we hope) recover, the last thing we need is a collapse of the giant real estate market in China, sending that country into an economic tailspin. Then again, maybe we are in The Twilight Zone after all?

Charles Feldman is a journalist, media consultant and co-author of the book, "No Time To Think-The Menace of Media Speed and the 24-hour News Cycle."
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