- ummester wrote:
. Many of the people I have it with get very sensative and upset about claims that their house may not be worth as much as they think its is though.
.
A couple of years ago a family member was mentioning their place was worth 800K, followed by the usual, "will sell up some day, sell the IP and retire up the coast."
fast forward three years
the neg was killing them they had capitalised interest losses again and again, plus took a holiday, borrowed on the capital gain etc etc. (sound familar)
on the market goes the home, no choice really. Will take best offer over $730K, way too low, but that is what agent recommends.
Four months later sold for $630K, and they moved into the 270K rental with still a debt over them
Very few people undervalue their homes…(and those that do, usually are headed for retirement homes.)
just human nature
gmh454 wrote:A couple of years ago a family member was mentioning their place was worth 800K, followed by the usual, "will sell up some day, sell the IP and retire up the coast."
fast forward three years
the neg was killing them they had capitalised interest losses again and again, plus took a holiday, borrowed on the capital gain etc etc. (sound familar)
on the market goes the home, no choice really. Will take best offer over $730K, way too low, but that is what agent recommends.
Four months later sold for $630K, and they moved into the 270K rental with still a debt over them
Very few people undervalue their homes…(and those that do, usually are headed for retirement homes.)
just human nature
Interesting story.
I don't want to lie to myself about how much I think whatever house I buy is worth and I don't want to buy something that turns out to be a rip off either – therefore buying ATM seems like too big a financial risk to me.
I have a sibling who has brought and sold many houses, from the 90s through to now. Has a few IP ATM. I have never seen this sibling come out in front.
Houses it seems to me are a very long term investment, so why hurry into a purchasing one?
Here is an excerpt of an article from Chris Martenson on the impact of the end of QE and the reversal of Japan's position as a net lender to the world to bringing that money back in. You can read the full version here http://www.chrismartenson.com/blog/global-tsunami-courtesy-fed/55822
A Disturbance in the Force The biggest risk here, aside from parts shortages and supply chain difficulties, is what happens when the flood of liquidity that has emanated from Japan over the past two decades reverses course and flows in the other direction. This is a major transition (which I expounded upon more deeply in a recent post for my enrolled members) for which both Japan and the world economy at large are wholly unprepared.
If we add the idea of the Fed's termination of QE, which has been enormously supportive of Treasury prices (and therefore low interest rates) to the idea of Japan suddenly becoming a net importer of funds instead of an exporter, we can quickly arrive at the risk of a rather unpleasant period for US Treasuries — and, by extension, many other government bonds.
<moderator: delete additional 5 paragraphs. please see link>
mattnz wrote:Step 2. Japan, China and other nations that have been funding debt not just for Australia but the rest of the world, wake up and realise that the debt funding to Western nations can’t continue. Treasury auctions will have no bidders and interest rates will skyrocket.This is backed up by the following facts:
1. The US dollar has just started taking a huge hit, with record devaluations against many currencies, including AUD and JPY. The world’s largest bond fund, PIMCO (with 1.2 trillion dollars in funds!!) has just announced that the US is a basket case and have exited their entire portfolio of US Treasuries. http://www.interest.co.nz/opinion/52880/fridays-top-10-10-nz-mint-pimco-says-us-plans-default-stealth-goodwill-anzs-national-c3. China’s property bubble is command driven rather than demand driven. There are numerous newly built ghost cities in China and 64 million empty apartments that chinese people cannot afford to buy. It is crunch time in China. They will no longer be able to continue to fund western debt. http://www.sbs.com.au/dateline/story/transcript/id/601007/n/China-s-Ghost-Cities
Latest articles backing this up….
Beijing house prices dropped 26.7% this month!!! http://en.21cbh.com/HTML/2011-4-12/4NMjM0XzIwOTg4Ng.html
PIMCO has now taken a short position in US Treasuries http://www.zerohedge.com/article/exclusive-bill-gross-now-short-us-debt-hikes-cash-73-billion-all-time-record
Ouch – that’s a sharp decline!
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
kong71286 wrote:Here are a few differences, off the top of my head.
1) The Australian economy is relatively strong, we have low unemployment, and a budget that will be in surplus (apparently) in 2013. The US economy is a basket case, unemployment is over 10% and they are TRILLIONS in debt.
2) It's interesting that the areas mentioned in the link (Florida, California, Nevada, Arizona) are all states with non-recourse loans. We don't have non-recourse loans in Australia.
This doesn't mean that house prices won't correct, or more likely, stagnate for a few years, but are we likely to see massive, US style drops in house prices? I doubt it.
BTW, some of the bearish types here have been predicting the 'bursting of the bubble' for the last three years. What's so different now compared to last year, or the year before?
And before anyone says it, no, I'm not predicting huge gains or sayng that now is a great time to buy. I just think a period of no growth is much more likely than a huge crash, regardless of what happened in some US states.
Don't get me wrong, I never stated that Australian properties are going to crash
I just stumbled upon this article and thought it was quite interesting and worth sharing
And yes, I agree with you about the Australian Economy (and dollar) being much stronger than that the US, and that Australian properties are more likely to stagnate during the next few years
Dan42 wrote:Here are a few differences, off the top of my head.
1) The Australian economy is relatively strong, we have low unemployment, and a budget that will be in surplus (apparently) in 2013. The US economy is a basket case, unemployment is over 10% and they are TRILLIONS in debt.
2) It's interesting that the areas mentioned in the link (Florida, California, Nevada, Arizona) are all states with non-recourse loans. We don't have non-recourse loans in Australia.
This doesn't mean that house prices won't correct, or more likely, stagnate for a few years, but are we likely to see massive, US style drops in house prices? I doubt it.
BTW, some of the bearish types here have been predicting the 'bursting of the bubble' for the last three years. What's so different now compared to last year, or the year before?
And before anyone says it, no, I'm not predicting huge gains or sayng that now is a great time to buy. I just think a period of no growth is much more likely than a huge crash, regardless of what happened in some US states.
think the biggy is the gumnut.
they have stopped cramming in more bums on seats as the electorate now punishes gumnuts because of perceive failing in infrastructure…Gumnuts hate to borrow, so infrastructure lags, and so we punish
Sydney must be getting close to putting up the full sign (Bob Carr even said that when he was still in office)
Next is the stimulus is wound down, that will reduce the massive premium on Bob The Builder and his merry matess, that will flow in with less money sloshing around, and reduce some building costs (actually in the Hills acreage has a lot of the builders who have been building their mansions, some for as long as 7 years are now finishing them as they are not out there gourging like Attila the Hun any more)
,and finally, we are being softened up for a TOUGH BUDGET, so people will feel poorer, have less cash, and less wealth, as they can't drawn down on the increased equity that has charatcirised so much of the last deacade…
US style crash no, slump, with no growth in the foreseeable future yes.
Dan42 wrote:BTW, some of the bearish types here have been predicting the 'bursting of the bubble' for the last three years. What's so different now compared to last year, or the year before?Sentiment.
The last time any bears worth their salt were really behind the crash being on was 2008. Rudd turned that around with the FHB boost, allowing the market to leverage up.
The condiditons of 2008 are taking sahpe again (some places like QLD and WA have bigger stock levels now) but sentiment is worse this time around.
Dan42 wrote:kong71286 wrote:Here are a few differences, off the top of my head.
1) The Australian economy is relatively strong, we have low unemployment, and a budget that will be in surplus (apparently) in 2013. The US economy is a basket case, unemployment is over 10% and they are TRILLIONS in debt.
2) It's interesting that the areas mentioned in the link (Florida, California, Nevada, Arizona) are all states with non-recourse loans. We don't have non-recourse loans in Australia.
This doesn't mean that house prices won't correct, or more likely, stagnate for a few years, but are we likely to see massive, US style drops in house prices? I doubt it.
BTW, some of the bearish types here have been predicting the 'bursting of the bubble' for the last three years. What's so different now compared to last year, or the year before?
And before anyone says it, no, I'm not predicting huge gains or sayng that now is a great time to buy. I just think a period of no growth is much more likely than a huge crash, regardless of what happened in some US states.
The US economy was strong too in 2006 before their property market collapsed. The property bubble popping was what caused their financial difficulties and created weak unemployment, a share market collapse and budget problems. It will be the same in Australia. A weak housing market will be the leading indicator of a weaker economy. Australian private debt is as bad as the US situation and will cause the same issues here in time.
The vast majority of US states have full recourse loans, including both Florida and Nevada. http://www.forecloseddreams.com/recourse_states
Other markets which have collapsed include UK, Portugal, Ireland, Japan (in 1990) which also have full recourse loans. Property markets collapse regardless of whether markets are full recourse or not.The change now is that it is widely accepted in the mainstream that property is hugely overvalued, even many by those with a vested interest in keeping the bubble together, such as Westpac and NAB.
mattnz wrote:Step 10. Australian government suddenly has a debt to GDP ratio over 60% and rising. State governments have huge deficits as they are no longer receiving their huge stamp duty money which was previously keeping them afloat.Using analysis from RP data
http://macrobusiness.com.au/2011/04/hooked-on-property/“During the 2009-10 financial year, state and local governments raked in almost $32 billion in taxes from property – the highest amount on record….
Property related taxes are the biggest cash cow for state and local governments, accounting for more than 48% of total tax revenue during 2009-10….
In what is sure to be unwelcome news for state and local governments, the 2010-11 financial year looks set to see a drop in property related taxation revenues. Between May 2010 and February 2011 capital city dwelling values have fallen by -1.6% and sales volumes during 2010 were their lowest on an annual basis since 1996. For the remainder of the financial year sales volumes are unlikely to record a significant rebound and value growth looks unlikely to return.
As a result of these current soft conditions we expect that state and local governments will experience a budgetary hole at the end of this financial year due to fewer transactions within the sector which accounts for their greatest source of taxation revenue.
Over the past decade, Australia’s state and local governments have rode on the back of skyrocketing property prices. The revenues received have funded all kinds of expenditure – from public servants’ salaries to health care, schools and infrastructure.
The story is similar at the federal level, where tax collections have surged on the back of growing property values and rising debt levels, which have boosted consumer spending, employment and the economy more generally.
Should Australia’s housing market encounter a significant correction, rather than the price stagnation and falling volumes experienced currently, then government finances will likely take a hammering as consumer spending dries-up, unemployment rises, tax collections haemorrhage, and welfare payments rise. And the impact will be a whole lot worse should Australia’s other economic pillar – mining – experience a sharp contraction of demand and falling commodity prices.”
It is no coincidence that the two massive peaks in Australian private debt to GDP levels coincide with the depressions of the 1890s and 1930s.
http://cdn.debtdeflation.com/blogs/wp-content/uploads/2011/04/041011_2142_ThisTimeHad11.png
Note how much greater the bubble is this time than the 2 previous depressions. Australian house prices are fueled by this massive debt undertaking.
Mortgage debt to GDP is much greater in Australia than in USA
http://cdn.debtdeflation.com/blogs/wp-content/uploads/2011/04/033111_2301_ThisTimeHad15.pngmattnz wrote:It is no coincidence that the two massive peaks in Australian private debt to GDP levels coincide with the depressions of the 1890s and 1930s.Exaclty – people need to look further back into history to see what is going on ATM.
Melbourne house prices dropped 6% in the last quarter.
http://www.news.com.au/money/property/melbourne-home-property-prices-plunge/story-e6frfmd0-1226040207600excerpt
After peaking at $601,000 late last year, the median price has fallen to $565,000 – down $36,000.
The 6 per cent slump is the biggest quarterly drop in more than two years and one of the biggest the Real Estate Insititute of Victoria has recorded since the height of the global financial crisis.And, if you look at the historical drops or slumps over the last 100 or more years, there is always a 'double dip'. We've had our GFC, recovered somewhat, and now we go into the traditional 2nd dip down. Regardless, if your investment strategy is to buy & hold, then a drop like Melbourne has had is temporary and NOT necessarily the beginnings of an Australian housing crash. Just part of the ebb and flow of the investment sector – whether it be property, shares or pine plantations.
It's great to have your reassurance ALF1
Thanks CYC! Way too much pessimism going on in this post. Remember the Y2K bug – the end of the financial world as we knew it. The reality – just a bunch of people who will take any opportunity to stand on a box and preach their doom & gloom.
Do you know it takes approx 80 more muscles to smile than it does to frown…………mmmmm.ALF1 wrote:Thanks CYC! Way too much pessimism going on in this post. Remember the Y2K bug – the end of the financial world as we knew it. The reality – just a bunch of people who will take any opportunity to stand on a box and preach their doom & gloom.Y2K was as more about the IT industry cashing in on fear than it was about gloomers. A lot of money was made with the Y2K bug and it has pushed IT wages into semi bubble territory. Half the reason the housing bubbles grew was because western governments didn't want the IT bubbles to disperse and generate recession.
Unpopped bubbles represent more gloom than the oppurtunity for new growth does. It all depends how you look at it.
ALF1 wrote:Do you know it takes approx 80 more muscles to smile than it does to frown…………mmmmm.That is absolute garbage.
http://anatomynotes.blogspot.com/2006/01/muscles-to-smile-muscles-to-frown.html
12 to smile and 11 to frown – depending on what type of smile and frown it is.
Oh, as for Melbourne's double dip – yes it is always possible that prices will stabilize and slowly correct rather than crash.
That said, when unsustainable financial growth dips twice, in just about every other commododity or stock that I know of, a crash follows. Australia may be different but it is the least likely outcome.
Diamonds are something that grew unsustainably in value for a while and never corrected. They never corrected because supply was controlled to prevent correction. Outcome was a massive increase in diamond smuggling. Housing is not a commododity that can be controlled like diamonds. If supply is restricted to the same degree as diamonds, people will just leave Australia.
Ireland is a place that is currently trying to contain the fallout from it's housing bubble and the young Irish are leaving in droves. They don't want to be part of a future where more is owed than can possibly be paid off in a lifetime.
This conversation reminds me of this American video.
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