The real estate markets in many West European countries are cooling down. The process has begun prior to the most recent financial crisis on the both sides of the Atlantic due to accumulation of bad mortgage loans. The crisis itself, however, may aggravate the situation, especially in some very exposed countries where household debts are unusually high. This negative trend comes in bad time for many European economies. Some of them were just leaving prolonged periods of stagnation. Without major external factor for growth, the recent real estate cooling may create a vicious circle of economic problems and put an end to the brief recovery.

Some real estate markets in Western Europe are either frozen or in decline. Especially badly hurt is the market of new residences. In France, the slump is double-digit since January. In Spain the situation isn't much better. These countries, together with the Netherlands, the United Kingdom, Norway, and Ireland, are considered among the most exposed to bad credits. Developers' companies that received permits for building new residential projects are reselling them in unusually high speed. Many blame for this the recent financial crisis occurring on both sides of the Atlantic. In fact, however, the most recent real estate cool down began before the financial crisis. Which doesn't mean the crisis itself won't aggravate the situation in the moths to come.

The real estate slump in many European countries comes in bad economic times. Most key European economies up to very recently were struggling to overcome the economic stagnation that followed the introduction of the Euro and the political and security risks linked directly or indirectly with the consequences of the 9/11. Many EU experts, including in the Central Bank and in the European Commission expected that the continental economy will outperform the United States this year, and probably during the next two years. With the impact of the recent financial crisis it seems that these optimistic forecasts will be significantly downgraded. And that during the current economic cycle Europe won't be able to start decreasing the GDP and productivity gaps that separate it from the United States.

Having no new major internal stimuli for growth and for overcoming fast the recent cool down, Europe needs some important external incentives. Unfortunately the United States, the economy that is heavily interdependent with Europe, is also experiencing some troubles, although surprisingly milder given most pessimistic forecasts. China and India, two champions of economic growth, aren't so heavily interdependent with Europe, and their growing demand will only partially cushion the crisis in Europe, not provide for more growth. Japan is appearing also in between two crises. The Eastern Europe is growing well, but the volume of its economy isn't enough to outweigh the problems in the western part of the continent.

Which leads to the general conclusion that parts of Western Europe is on the verge of real estate market corrections, a term that some prefer over stagnation, recession, or depression. No matter which term we use, the reality that stands behind it is that after years of unprecedented growth in many residential markets, the time has come to make a pause before the residences become again sufficiently affordable for the buyers. The first-buyers' attitudes, which are good precursors for the whether, now are waiting for better times.

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