Daz,
I hope your book has this many good metaphors!
Chris
I hope your book has this many good metaphors!
Chris
Article: End of the boom?
- Thread starter mja
- Start date
hehehehe...
Also a lot of the talk lately is divided between 1# people cant afford homes and 2# People are in housing stress through high repayments.So if negative gearing was abolished and prices did drop. Not only will housing stress continue, many would now be stuck with negative equity. just like many in sydneys western suburbs.
Wouldn't lower prices (or higher wages) relieve housing stress and affordability?
This is all academic, no govt is seriously going to do this.
I don't know how wealthy he is, but his involvement with a bank would suggest he has practical experience in the areas that the bank invests, namely property and business. But obviously this may not be enough to believe what he says.
It'll help first home buyers, sure (though the higher rents will eat into their savings rate, if they have any). But ultimately first home buyers are a very small slice of the buying population. The vast majority are people who trade up. In order to trade up, you have to 1) be able to sell at a profit and 2) expect your new house to also go up.
Why would you buy a new, more expensive house if houses are falling in price? In fact, buying when growth is below the long term trend is a great idea, but most people don't understand this. That's why people pile in at the peak of the market, when the market is hottest.
At the same time, trading up usually involves selling your existing home and using those profits as a deposit for their next home. If a lot of people end up in a negative equity situation (basically most people who bought in the last 2-3 years), people won't be able to upgrade. If they sell, it'll be at a loss and people don't do that unless it's out of desperation.
FHB, you can't keep thinking about these things as isolated events. You have to think about how actual home buyers and home owners THINK. The property market is made of many moving parts all linked together. I learned a lot when I bought my PPOR last year, things about owner occupiers that I didn't undersetand before despite having owned IPs for 8 years.
Alex
So tell me why all economists aren't billionaires. Eslake has a lot of academic knowledge, I'm sure. Dazz would kick the crap out of him in terms of investing. Why isn't Eslake running a hedge fund?
What does involvement with a bank mean? I work for a bank. I an 'involved' daily with traders who trade billions of dollars every day. Does this mean I know anything about the market? No, because I'm not a trader.
Alex
Yes, as long as you still have equity falling prices will help you upgrade, but as you say many people don't understand this. In a boom the price of the upgrade is accelerating faster than your entry level property, generally.
I didn't realise I was doing this, can you point to examples of my isolated views?
I actually pointed out in a number of posts that there are flow on effects to changes, didn't I?
Correct Dazz.
We knew a lady in our apartment building in LA who finally received a PhD late last year. She was working on it when we first met her.
She had to fly to London for the ceremony and all. Very intelligent, articulate woman.
Her study was on Middle-Eastern medicine. (she's from Egyptian heritage and wears it like a badge).
Her job was as a journalist, but is now a stay-at-home mum, paying rent and no assets, while the IT husband pulls in a nice earner. She was one to avoid.
Meanwhile, the guy living 2 apartments up from us never finished high school, sold his hardware business and retired at 50. Plays the "shocks and scares" for something to do these days, and chases young women (and young men too we suspect). Very intelligent, but very private and modest. I used to speak to him a lot.
Interestingly, he never wanted to own a house; preferring these days to have everything done for him and have no property headaches, living in a 'resort' style complex. I guess he enjoyed sitting around the pool observing all the Paris Hilton types and "Toms Cruises" as well.
As stated this would only help the people about to buy in the next 6 to 12 months. It has the potential to financially ruin thousands more who are already struggling with repayments( As the media keep reminding us).
Imagine these people also had to put up with a massive drop in there house values.
Just as rising prices created a virtuous cycle, falling prices created a vicious cycle. Falling prices may mean people are in -ve equity territory. If they also bought right at the financial redline (as I'm sure many FHBs did in the last 2-3 years), ANY financial shock (rising interest rates, loss of job, etc) will push them over the edge. They can't clear the mortgage by selling. This also means they can't sell and upgrade, so the next level up can't sell at a profit and upgrade, either.
Alex
Yes, but those who bought over the past 2-3 years would be a minority, if prices dropped 10%, wouldn't the majority still have equity and their repayments would be less (ie, interest rates would most likely be going down in this scenario). Even those with negative equity wouldn't lose their house unless they stopped making repayments. Housing stress (size of repayments) isn't made worse by dropping prices on their own. If those dropping prices flowed on to slowing economic growth and higher unemployment, then yes housing stress would increase as household incomes dropped.
says who? most people i know involved in real estate - agents, property managers etc - don't have any experience "owing" real estate.
and i clearly recall two recent example of some hip, hot and happening young guns taking down two major international banks with "their knowledge" in trading ... just cause you work for a bank, and went to uni to study economics to shuffle around stats, don't mean anything.
i'm with daz - give me the greek guy from down the road who's "done it" any day.
Yep, fair enough.
No Topcropper, goat sh1te is much smaller than cow dung, so i guess Dazz cares very little.
interest rates- where 2 from here
Hi
I hope interest rates doesn't go to 16 - 18 % as they did in the 80s.
If this happens it will sort us out. Would make living on a tight budget interesting.
What's your guess?
Cheers
geoff
Hi
I hope interest rates doesn't go to 16 - 18 % as they did in the 80s.
If this happens it will sort us out. Would make living on a tight budget interesting.
What's your guess?
Cheers
geoff
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