Garbage Journalism - article on the "imminent property bubble bust"

[Amadio]

Amadio,

I just tried searching for houses in Santa Cruz. For 200k you get a one bathroom/2 bed shoebox unit on the site I looked at. What street are you talking about?

There are currently about 300 homes in foreclosure in SC - here is an example from November 25 of last year. A 3 bed/2.5 bath (and it's far from a shoebox) on 706 3rd St, SC sold for $235K with last valuation being $674,500.
Some optimistic buyer has now put it for sale for $939K so I'm watching to see if they get anywhere near that. If they do, then we may make a move in this market. Quite a profit even with CGT.
http://www.zillow.com/homedetails/706-3rd-St-Santa-Cruz-CA-95060/69308360_zpid/

If you search for homes at $200K the REO properties are usually not going to show up. The banks are apparently trickling them into the market as slowly as they can. If you go on some REA websites, there sometimes is a foreclosure section where you fill out personal info and they will email potential buyers the details of the distressed properties when they come up. But the best deals are being made without banks or REA.

 

[Amadio]

There is something I have just noticed in the Zillow link above.

The last sale price of the property at 706 3rd st has an asterisk by it. Because it was a foreclosure sale, the sale price is apparently not being included in Zillow's home price guides because it is deviates too far from what prices "should" be.

Doesn't this falsify all the stats? House prices are what people are willing to pay for them, and if someone was only willing to pay $235K for that house, isn't that a true price?

 

[DeanoC]

• US immigration = predominantly unskilled migrants from south of the border
• AUS immigration = skilled workers only, or people flush with cash. Very very small numbers of unskilled migrants

• 
  
  Nonsense.
  
  A large percentage of immigrants to the USA are highly skilled too. They are not all illegal immigrants from Mexico or Cuba!
  
  Another thing to remember is that many skilled immigrants to Australia are coming from countries where their currency is worth less than the Aussie dollar. They pay higher taxes initially and they receive no public benefits. Essentially, their cost of living is higher, which means their disposable income is not as high as you would expect it to be.
  
  Yes, you get some cashed up poms coming in. The vast majority though are not going to be in a position to buy for a very long time. They also tend to share housing for longer periods, so you have more people per residence. Most are coming here for a better quality of life, not because its a cheap escape!
  
  I think a large percentage of foreign investors dont live here. They invest here. The Rudd government should be hung out to dry for this. Foreign ownership is not on and it prices Australians out of the market. Did we learn nothing from Spain?
  
  

  [*]US lack of supply = fallacy. They were building at RECORD rates a few years ago, and at the same time handing out subprime mortgages like pamphlets on election day, and have non-recourse loans. We all know where that ends
  [*]AU lack of supply = truth. Construction is at an all time low COUNTRY WIDE.

  
  The shortage of homes is a myth. The government uses the number of homeless as part of the equation for gods sake. There is no shortage of homes, just a shortage of affordable homes. Go onto any property website and there is no shortage of stock. A shortage of bargains in this market, but no shortage of stock. Big difference.
  
  There is enough evidence to suggest that the shortage is not half as bad as what we are being told it is. Statistics are not always the full story. Look at how we cook employment numbers.
  
  

  [*]US land releases = they were creating whole new towns and suburbs like they were photocopies on a xerox machine.
  [*]AU land releases = virtually non-existant in most of the country.

  
  No one will dispute that in the USA there is an excess of stock. But thinking that Australia lives in some economic void despite what we are seeing in OECD countries around the world is incredibly short sighted. Credit is tougher to come by and could get worse. If the banks were that confident in residential property they would not be changing LVR's would they? They would still be pouring money into it.
  
  I dont understand why you take offense to a negative article though? Its as if you believe anyone who thinks property is not a good asset class RIGHT NOW is a moron?
  
  The media needs a mix of positive and negative articles. I am sick to death of the rubbish we see coming out of the various real estate bodies and agencies who have a vested interest in seeing property rise. Are you that short sighted that you think balance is a problem?
  
  The GFC is not over by a long shot. We have Greece, Spain and Portugal on the verge of joining Iceland which could plunge world credit markets into crisis too. The Americans have not stopped defaulting by a long shot. Look here:
  
  http://www.cnbc.com/id/35216537
  
  

  The number of Americans who owed more than their homes were worth was virtually nil when the real estate collapse began in mid-2006, but by the third quarter of 2009, an estimated 4.5 million homeowners had reached the critical threshold, with their home’s value dropping below 75 percent of the mortgage balance.
  
  They are stretched, aggrieved and restless. With figures released last week showing that the real estate market was stalling again, their numbers are now projected to climb to a peak of 5.1 million by June — about 10 percent of all Americans with mortgages.

  
  Do you think the yanks will bail out banks again when the next wave of write offs hit? The people will riot after the bonuses were paid out.
  
  There is enough reason for negativity. There is enough reason to be positive. But one side calling the other retarded does little good.

 

[Amadio]

There is enough reason for negativity. There is enough reason to be positive. But one side calling the other retarded does little good.

Yes, exactly.

 

[quoll]

You really need to wonder if journalists actually do any real research into the topic they are reporting anymore.... or if their degrees are actually worth the paper they are printed on.

The journo could be smart but just writting crap because that is what their job is, editor wants crap then crap is what they get.

Is the average reader really that dumb?

YES, we are getting brain washed into thinking less and less, thank you media.



Main stream media are getting worse.

Regards
Graeme

 

[boz]

here is another piece of garbage journalism from Michael Pascoe

More fundamentally, the core issue for Australian home owners isn't the relative "expensiveness" of a house or the size of the debt, but the ability of the owner to service that debt.
Yes, sure... and Michael knows and everyone knows what is the ability to service the debt in the future, if there is one thing volatile is how you can service the debt, while price of home is not a good indicator
The RBA is pleased to see a slight cooling in home loans and a quiet tightening of loan to valuation ratios by Australia's banks, a sign perhaps of the banks themselves either taking a hint from the authorities or seeing a potential danger themselves.

As Robertson alludes, extremists of both varieties will be wrong. The RBA thwarted the Doomsday scenario – and it will also do what it must to prevent another asset bubble. We have indeed been warned.
good to see people that put faith in RBA and they believe they'll sort all problems, when you have central banks dropping rates big time one year and rising them big time the year after is a sinthom there is something wrong, wonder why small/medium business in australia don't take on loans and investments, even if problem rised from overseas it is quite clear RBA and Australia was effected by that, I don't think Michael should exclude external factors in his crappy report

I like to see Michael that seems to know the reality and when bubbles are about to pop. reality is that the world has never been at this point ever before, with this amount of interest rate, debt. I would like him to resign weather another bubble pop and he can't see it (together with Rory, but Rory's job at least has got a shorter time span like traders do)

 

[DeanoC]

I miss your point Boz? What does the price of the home matter if people cant service the debt? If they cant service the debt, it means the price they paid for the house was too high. He has a point. Yours seems to be that the market always sets the price, regardless of its ability to actually determine its own purchasing power.

SOARING house prices, rising interest rates and a winding back of the first homeowners grant all contributed to housing affordability taking a nose-dive at the end of 2009.

http://www.news.com.au/money/proper...ore-unaffordable/story-e6frfmd0-1225833066676

Is this more gutter journalism? Lends further evidence to his point. Housing affordability is a problem in Australia.

The journo could be smart but just writting crap because that is what their job is, editor wants crap then crap is what they get.

Seriously mate? Why would it be in the interest of the newspapers to print negative press about the property market when real estate advertising contributes so heavily to their advertising coffers?

Use some common sense before you make statements like that

 

[boz]

I miss your point Boz? What does the price of the home matter if people cant service the debt? If they cant service the debt, it means the price they paid for the house was too high. He has a point. Yours seems to be that the market always sets the price, regardless of its ability to actually determine its own purchasing power.



http://www.news.com.au/money/proper...ore-unaffordable/story-e6frfmd0-1225833066676

Is this more gutter journalism? Lends further evidence to his point. Housing affordability is a problem in Australia.

It is interesting report as gives you measurable data, it reinforce my point of too much volatility and unpredictability of affordability wich is either effected by unemployment, interst rate, tax system-benefit and somewhat with rental return and even currency exchange rate. Also if you try to predict what would be home prices or affordability in one year or more in the future which one more likely would anyone estimate?
Also price is the key point when a building company will go to the bank and ask money to buy a property to develop, that is a key point if Australia want more homes build.

 

[Aaron Sice]

Also price is the key point when a building company will go to the bank and ask money to buy a property to develop, that is a key point if Australia want more homes build.

BUT BANKS AREN'T LENDING FOR NEW DEVELOPMENTS.

take that as a bearish view

"...banks don't have confidence in the Aussie market..."

or a bullish view

"...banks are restricting supply to drive up prices of existing stock by manipulating the market into a demand heavy scenario to generate equity for their books under 'external advice'..."

one would imply the bubble is behind us, one would imply the bubble is yet to come.

 

[boz]

BUT BANKS AREN'T LENDING FOR NEW DEVELOPMENTS.

take that as a bearish view

"...banks don't have confidence in the Aussie market..."

or a bullish view

"...banks are restricting supply to drive up prices of existing stock by manipulating the market into a demand heavy scenario to generate equity for their books under 'external advice'..."

one would imply the bubble is behind us, one would imply the bubble is yet to come.

I don't think banks want the home price to rise too much, they'll be happy with a constant, steady rise over the years, if prices get out of whack then they can fall down (like in US or UK).
But the problem is different: when you have a bank lending for new developement you have 2 parts that would think it is a good idea to spend money in the developement: the bank and the builder. The bank is not going to give away money if the cost of the developement is too high or if the debt the company need to take is too high. The ability of home owner in any given times to pay off debt has got little to do with those agreement. I wonder if Michael Pascoe knows anything about this stuff...

 

[Aaron Sice]

sorry - what?

developers need to show an IRR of at least 25% at present - and i personally think even that's too skint.

then they get told - everything looks great, where are your presales? developer shows 90-100% presales.

wow okay! excellent. serviceability? developer pulls out bank accounts covering holdings over the projected timeframe threefold.

great. every thing we need. be in touch in a week.

2 weeks pass.

head office calls. "we don;t fund residential developments anymore. no, sorry. goodbye."

 

[boz]

sorry - what?

developers need to show an IRR of at least 25% at present - and i personally think even that's too skint.

then they get told - everything looks great, where are your presales? developer shows 90-100% presales.

wow okay! excellent. serviceability? developer pulls out bank accounts covering holdings over the projected timeframe threefold.

great. every thing we need. be in touch in a week.

2 weeks pass.

head office calls. "we don;t fund residential developments anymore. no, sorry. goodbye."

I can see you agree with me, and the statement of Michael Pascoe:

More fundamentally, the core issue for Australian home owners isn't the relative "expensiveness" of a house or the size of the debt, but the ability of the owner to service that debt.

is out of reality, you point out that the core issue is something else

 

[Aaron Sice]

Seriously mate? Why would it be in the interest of the newspapers to print negative press about the property market when real estate advertising contributes so heavily to their advertising coffers?

Use some common sense before you make statements like that

because sensationalism sells. refer steven keen.

if it sells, thier advertisers get exposure.

1+1=2

 

[PeterC]

I see much poorer written articles in favour of property prices continuing to increase.

agreed. theres just as many outlandish articles predicting as absurd booms as the imminent busts. some people only choose to see the outlandish reports that conflict with their views (whens the last time any of the bullish posters on the forum posted any of the ridiculous 'massive boom coming' articles and scoffed at them? yet theres as many of them as there are about property busts).