What Bubble?

Here in the U.S., our struggling real estate market shows few signs of a swift recovery. The list of U.S. companies clobbered by the past year's decline in real estate is lengthy. Today's earnings surprise from KB Home (NYSE: KBH  ) is a slight positive, but on the whole, homebuilders' declines have been across the board, and steep.

The softness in real estate pricing has most recently moved into the lending business. Subprime lenders, and those with exposure to subprime lending, have felt the pain most quickly and acutely. Those hurt include HSBC Holdings (NYSE: HBC  ) , Accredited Home Lenders (Nasdaq: LEND  ) , and Fremont General (NYSE: FMT  ) . There's also reason to believe that Alt-A lenders (which lend to borrowers with higher credit scores than subprime, but who lack the income or capital to be considered prime) such as IndyMac Bancorp (NYSE: NDE  ) , will be next to feel the pain as adjustable-rate mortgages reset.

On the other side of the world, you'll need to forgive the Japanese if they don't have a lot of sympathy. In Japan, they know all about real estate price declines, having experienced them for 16 straight years. But according to today's report in the Nihon Keizai, the streak has been broken: Land prices increased 0.1% in 2006. Even small victories are worth something, right?

The truth is, the overall number masks some more interesting results in certain regions. In certain parts of Tokyo, land prices increased 45% last year. Similar gains were seen in specific sections of Osaka and Nagoya, as well. Overall, the gains in the three major cities were 2.8%, a fairly healthy increase -- and not totally surprising, since these are areas with plenty of jobs and activity. But the more rural you get, the smaller the increases, with the most rural regions reporting a 2.8% decline in land prices. This is a smaller decline than seen in recent years, but it's clear that demand remains strongest in urban areas.

Contrasting Japan's 15 years of real estate woes with the current U.S. slump isn't entirely an apples-to-apples comparison. Japan's bubble was perhaps more widespread, its population growth rates are different, and Japan took a while to face up to its overall debt overhang and seriously tackle reforms.

That said, I peek at the offerings in the Tokyo real estate market every so often, and I see I can get myself into a one- or two-bedroom condo in central Tokyo at a better price than I can currently get myself into a similar unit in nearby Washington, D.C. That's almost entirely because of the cost of financing. At current exchange rates, the actual price of the real estate isn't that different, but with Japan's rates still much lower, a 30-year fixed mortgage is much more affordable. When I look at the differences, it makes me think a housing recovery in the U.S. in the next year is a whole lot of wishful thinking.

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At the time of publication, Nathan Parmelee had no financial interest in any of the companies mentioned. He does know his way around Tokyo and the Kanto area, though, and where to find some good basic eats. The Motley Fool has an ironclad disclosure policy.