Why are 4brs/family homes dropping the most

[Max Carnage]

Yes the above fundamentals are very much in favour of a boom.

Isn't price the most basic fundamental of any investment? Sydney prices are still extremely high relative to the ability of Sydneysiders to pay for them. And also extremely high relative to their earnings.

That doesn't seem "very much in favour of a boom" to me, even in the best of times. Instead of the best of times, we're entering the worst recession in living history*. At the same time, the credit rug has been pulled from under the housing market. The irrational exuberance has fled the scene of the crime. The deflation rooster is coming home to roost...

Heh, I'm all out of silly phrases.


* People over 85 are practically, if not literally, dead, hey?

 

[Rockstar]

Isn't price the most basic fundamental of any investment?

Most home buyers aren't investors Max. They just need a place to live in. The way things are heading it may soon be more affordable to buy than to rent. Whether people can borrow the money will be the interesting part in my view. If credit continues to tighten I can't see much CG ahead. I am attempting to observe it all objectively at the moment mate. It's not the time to be too opinionated. Especially when one is merely learning like myself.

 

[lizzie]

as a complete banking insider novice - banks need to lend to survive, and will do anything in their power to do so. so, why would they hold back credit if a borrower complies with all the lending requirements?

i can see the lending requirements tightening to get back to pre lo doc days - ie, at least 10-20% deposit, full documentation etc - but otherwise i can't see the problem.

lack liquidiity might drag things out a little longer - but if the lending criteria is tighter then there would be a smaller pool of people in a position to borrow in the first place.

it would be interesting to know the actual number of home owners (whether they be ips or ppors) who actually still owe in their properties (say 60% of home owners) and of that percentage, how many would be forced into a position to sell if they lost their job, ie, they have a large mortgage, (perhaps say 50% of that 60%). and of that percentage, how many are likely to lose their jobs if unemployment goes up the anticipated 4%?

i think you'll find the end figure will be exceptionally small - a quick calc and i came in with around 90,000 homes australiawide would be put up for desparate sale - or around 1% of all homes in australia.

will 1% in forced sales compell the other 99% to immediately sell into the same market?

 

[urchin]

i think you'll find the end figure will be exceptionally small - a quick calc and i came in with around 90,000 homes australiawide would be put up for desparate sale - or around 1% of all homes in australia.

will 1% in forced sales compell the other 99% to immediately sell into the same market?

erm... no. but it would cause the market value of their homes to drop dramatically.

 

[lizzie]

erm... no. but it would cause the market value of their homes to drop dramatically.

which - if they don't sell into the dropped market - how exactly will this affect them?

as will all things - this economic crisis will pass, and then the values will rise again, so as long as they don't have to sell i can't see a problem.

 

[Shadow]

Isn't price the most basic fundamental of any investment? Sydney prices are still extremely high relative to the ability of Sydneysiders to pay for them. And also extremely high relative to their earnings.

Perhaps that was the case previously, but now that prices are 15% lower in real terms, plus 40% lower in AUD vs USD terms, and mortgage rates are plummeting (rates will probably be halved from the peak of the interest rate cycle), things just got a lot more affordable, right? Especially for those cashed up foreign investors we keep bringing in. Like me.