Want a house at a 60% reduction? Just wait...

[KG8]

That's right, overpriced RE in the US is now going at auction for up to 60% below prices fetched at the peak of the boom, and those holding the deeds are happy to let them go.

For the last few years I have sat back in amazment as aussies mortgaged their futures for overpriced homes in the greatest RE bubble our nation has ever seen. Well I hope they love those homes they bought, cause in a year or two the new neighbours moving in may well be paying a whole lot less than those who bought in the last 5 years have. Our bubble will pop soon too and all the bubble talk about how were different here wont change that one iota. The fundaments touted here, high immigration, shortage of supply, blah blah blah, they were all used in the US to justify the insane price rises there. And the triggers? Bad loans? Yep, we had em all here too.

http://www.businessweek.com/magazine...tm?chan=search


Discounted Homes, Going, Going…
....
Buying a home at auction is not for the faint of heart. Bidding is fast and furious, and you must endure the gentle jibes of the auctioneer. ("Sir, you're quick on the draw, but you're not much for stamina.") At the Mar. 16 auction, several houses came back for sale a short while after being sold when the buyer changed his mind or couldn't get financing. For folks used to bubble pricing, there were some surprisingly deep discounts. A four-bedroom house in Palm Springs that had previously sold for $1.2 million went for $625,000. A two-bedroom cottage in Los Angeles' trendy Silver Lake neighborhood that had traded hands two years ago for $887,000 got picked up for $285,000.
Note to would-be buyers: Bank-owned properties are likely to need work. One three-bedroom Spanish-style house in Los Angeles visited before the Mar. 16 auction looked as if it had been owned by a flipper who didn't finish tiling the kitchen and bath. It fetched $375,000, less than 60% of its previous sale price.

[Dujon]

I feel sorry for those who might be caught up in the current interest rate rises and who are now feeling the financial affects of such on their life style... Sort of.

I don't feel sorry for the financial institutions who over the years have relaxed their lending policies. Nor do I feel sorry for those people who borrowed money under those policies and who didn't have a good look at their current situation and the possibility of cost increases or over estimated future earnings, including the possibility/probability of producing children into the mix. Madness on both sides.

Then there is the credit; not short term personal loans where details are (or should be) analysed and weighed before a decision is made, but the ubiquitous plastic card. It is not a new phenomenon by any means, but it's just as sad. It also seems to be worse.

This comes from the heart. I used to be the manger of customer services in a credit card department of a bank. I used to have staff break down and cry after fielding 'phone calls from desperate customers - many of them were abusive (often crude) calls from people who had been backed into a financial corner from which they had little chance of escaping.

Stupid bank policies - yes; stupid customers - yes; Me? I'm glad that I am no longer working there. I left the organisation in the late '80s but I still have weird dreams about working there.


P.S.

No, I don't have a credit card.

[fringe_dweller]

bollocks, the US doesnt have a housing shortage, we do, we may have stagnation but not the ridiculous correction you suggest. Also we have a little thing called a resources boom Its rents that drive prices, and believe me, rents are still going up here. i think SA grew by 16 000 people recently, first time in years its grown in pop. Skilled Immigrants from say the UK sell their old council flat for a million pounds, a 500k au house is peanuts to them.

[Stephen65]

The sub-prime market in the USA is much larger in percentage terms than the equivalent here which is the non-conforming loans market. Even with the rises in interest rates very few Australian borrowers are defaulting on their loans. In this booming economy unemployment forcing people to sell is not an issue, the people who are caught are those who are way overcommitted on loans and can't afford to pay them even with jobs.

No doubt some people paid too much for their houses recently, particularly in outer areas that have lower capital growth potential, but the picture you paint is not realistic.

We bought our first house in 2000 after about a year of the boom, I had friends who refused to buy because they thought it was a bubble then and were waiting for the correction. They waited and waited, and ended up buying in 2004 after prices had climbed even further.

I wouldn't say rush out and buy a house right now, but I don't see any reason why the market will collapse, subprime borrowing is not an issue in Australia, interest rates are still moderate, the economy is booming forcing average wages up and immigration is at the highest its ever been. Plus new building starts are at an all time low.

[JimmyH155]

I know I am a bit thick and stupid, but can anybody give me a realistic explanation as to why there is a supposed housing shortage when our population is not supposed to be growing much - if at all . That's Grouch 1
Up here in Brissie they are busy destroying nice flat farm land and covering it with houses. Houses should only be built on hill sides that are unsuitable for farming. So there are more and more of us, with less and less farm land...sort of doesn't add up That's Grouch 2
I read somewhere that the housing shortage is a result of so many families splitting up, that each divided family now needs TWO houses .

[OneOfOne (Trevor)]

Fortunately, I own my house (other than a small investment loan that is currently worth less than the loan balance, hopefully the stock market comes up again). While I feel very sorry for people, especially the young, who have loans to service but I remember back in the 80's riding out interest rates of 18%+. I cannot imagine what would happen if rates went back to this sort of level. Unfortunately, young people today want their first home to have heating, air conditioning, two cars, big screen TV etc. and they don't seem to build in any protection from rate rises....when the rates go up, they hit the wall.

[fringe_dweller]

exactly, Stephen65

JimmyH15, 'Queensland is projected to experience the largest increase in population between 2004 and 2051, increasing by 3.0 million people (77%) to reach 6.9 million people, resulting in Queensland replacing Victoria as Australia's second most populous state in 2041.'

http://www.abs.gov.au/Ausstats/abs@....3?OpenDocument

OneofOne, yep official interest rates are only around 8 or 9% still, credit cards dont count, they are definitely to be avoided these days, I have always read 10% interest rates are the norm overall in our history, so now its just normal

[JimmyH155]

That's why cant wait to get out of the place. Give me an old shipping container on 2 acres and I'll be happy. More people, packed in like sardines so close you can hear the neighbour flushing the dunny. Call that living?

[astroron (Ron)]

Originally Posted by JimmyH155

That's why cant wait to get out of the place. Give me an old shipping container on 2 acres and I'll be happy. More people, packed in like sardines so close you can hear the neighbour flushing the dunny. Call that living?

Jimmy I agree with you
I live on two acres I went down to stay with a friend at Alma Park for a wedding, he lives in a $400,000 house and his neighbour is only 10 mt away
they started winging because we where talking on the patio after the reception
I am glad I live in country with my nearest neighbour over 100mts away
Ron

[fringe_dweller]

well thats another reason why there is a housing shortage, the absolute point blank baulking refusal to live in built up urban environs by australians, the quarter acre block (covered in a building to within an inch of its life tho) great australian dream will be the death of us, as us urban taxpayers cover the cost of expanded sprawl in infrastructure, thanks treechangers there cant be another country in the world that its citizens all subscribe to this view 100%? - and thanks for ruining the country side with your just so nicely peacefully spaced enough to ruin the nightsky for people who travel to the within easy reach countryside for dark skies good onya

[astroron (Ron)]

Originally Posted by fringe_dweller

well thats another reason why there is a housing shortage, the absolute point blank baulking refusal to live in built up urban environs by australians, the quarter acre block (covered in a building to within an inch of its life tho) great australian dream will be the death of us, as us urban taxpayers cover the cost of expanded sprawl in infrastructure, thanks treechangers there cant be another country in the world that its citizens all subscribe to this view 100%? - and thanks for ruining the country side with your just so nicely peacefully spaced enough to ruin the nightsky for people who travel to the within easy reach countryside for dark skies good onya

What a load of rubbish
I use very little electricity, I am very environmentally conscious and live at least 10kms from the nearest small town and all people who live around here are on 2-30Acres and are not a part of the urban sprawl.
As people who attend the monthly Cambroon Astronomy nights will tell you I run a small private observatory, (which is recognized by the ASA) and do my best to educate the local populace on the benefit of dark sky's
Ron

[fringe_dweller]

which bit is a load of rubbish? all of it, i dont think so, I have seen it with my own eyes over a period of years

i am talking of tree/sea/changers as a movement, the phenonomen, the species treechangus not individuals

I am sick of the intolerable and interminable smugness of the treechangus aka the dark sky treechanger mafia

i know them in real life, and they are some of the smugest self satisfied people i have ever met

[fringe_dweller]

btw its a free country - i dont have to like anything

[astroron (Ron)]

This bit is definatly a load of rubbish.
and thanks for ruining the country side with your just so nicely peacefully spaced enough to ruin the nightsky for people who travel to the within easy reach countryside for dark skies good onya

[JimmyH155]

What are you talking about Fringe Dweller? What is a treechanger/treechangus? Some sort of gobbledegook new fangled language???

[fringe_dweller]

well no its not rubbish, not from my perspective and experience anyway - I'm sure you are not the typical dark sky mafia Ron, but you did join in this debate of you own volition, so i'm not going to pull any punches just coz you dont fit the mold, with the active encouragement of dark sky deprived city dwellers to share with you in your bounty, you are to be praised - its the selfish ones i dont like

it makes perfect sense to me that the easy within reach of the city country side is the first to be developed, with sealed roads making good access, and consequently the same roads become busier and busier at all times of the day and night, so even a roadside site is put of the question due to too many headlights ruining it

of course it is evryone right to do this, but do they have to crow about it every chance possible?

[fringe_dweller]

JimmyH155, treechangus australis is the correct latin name i believe, from my roadrunnerus digesturus looney tunes 'what is that light doing there?' book

[JimmyH155]

Have you been on the red cordial or something?

[fringe_dweller]

yep, ribena actually anymore questions while i'm here?

[KG8]

We are going to follow the US model down, Resource Boom or not. The boom is a temporary phenomina that began with China's massive expansion and will end in due course.

Here was the Reserve bank governor's opinion on the future, no doubt self-censored for general consumption. It was a real warning that most ignored, as they were busy having carnal knowledge with the equity fairy under the capital gains tree. But the equity fairy has now tired with their attentions, and they are going to wake up alone, and naked.

RBA head warns home gearing borrowers
By Glenda Korporaal
August 17, 2006 12:00am
Article from: http://www.news.com.au/images/source...australian.gif</IMG>
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THE nation's heavily geared homebuyers could be hit hard by any shock to the economy, Reserve Bank governor Ian Macfarlane has warned.
Mr Macfarlane said the big change in Australian household borrowing had been among the over-40s, who were going into debt again rather than paying off their home loans. "The biggest single contribution to the increase in debt is actually people in the 40-50 and 50-60 age groups," he told The Australian last week.
"In earlier generations, they would run down their debt to zero. Now they are not.
"They are going back and having a second and third helping to get a better house or additional properties."

Mr Macfarlane said it was not his role as Reserve Bank governor to tell people not to go into debt.
"They are free agents. They can make a decision to have a bigger balance sheet."
But he warned that the high household debt levels meant Australians might react differently to a major economic shock than they had in the past.
"The household sector will go into its shell much more than it has done in the past."
Mr Macfarlane has in the past warned about excessive borrowing for investment properties. But he said it was "hard to take a really moralistic view of people in the older age group who want to upgrade their home".
It was also "hard to complain about young people taking on a lot of debt if they feel it is the only way they can get home ownership".
Figures released this week show housing affordability at record lows, with an average of 27.9 per cent of household income now being used to meet mortgage repayments.
Mr Macfarlane said the higher levels of household debt did not mean that mortgage lending was riskier for the banking system.
In fact, the outgoing governor said, the banking system was less risky today than it had been in the past because banks had been able to use securitised mortgages and credit derivatives to transfer their risks.

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The last paragraph states plainly that we have followed the US model. But here we call them low-doc loans, not subprime.