Bolha Imobiliário Redux

My good friend, Ricardo Della Santina Torres, comments in his blog today (see the post on Tradingcafe here) that he sees the Brazilian real estate market at an inflection point. The rapid rises of the last two years may be over. He doesn't see evidence of a bursting of the bubble and I agree, there does not appear to be one, yet.

However, I am, and have always been, more pessimistic than Ricardo about the Brazilian real estate market, as I indicated in this post. I believe the easy financing policies of the last two years will come back to bite the economy.  The government actions that Ricardo comments on will stiffen financing requirements, a good thing in an overheated economy. Any negative trend in employment due to a slowing down of key sectors of the economy could drive Brazilians to default on their mortgages.

So, in my view, the statistic to watch is rate of credit defaults, inadimplência. That's where the bubble warning signs will come.