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Gravity Has Caught Up With Stupidity

A report from ABC News in Australia. “The boom time is over and we’re now officially experiencing the ‘house price fall we had to have’ according to Deloitte Access Economics. ‘Our house prices here in Australia had streaked past anything sensible by way of valuation,’ said Deloitte partner Chris Richardson. ‘Now, finally gravity has caught up with that stupidity and prices are falling. In Sydney and Melbourne, housing prices are falling by over $1,000 a week.'”

“Mr Richardson names three particular factors putting downward pressure on prices. Banks are raising interest rates: ‘Even though the Reserve Bank has done nothing.’ Banks have become cautious: ‘You’ve seen the banks being more careful with the loans they’re giving. Those loans are slower and smaller than they used to be.’ Less money from overseas: ‘Foreign buyers are a bit more cautious.'”

From Domain News. “Almost 9 per cent of mortgage holders are now underwater with their home loans, as falling house prices push them into negative equity, new research has shown. These homeowners have seen their mortgages barely budge as their homes decline in value, leaving them with a loan bigger than the value of their property.”

“The problem is concentrated among affordable homes, with properties owned by home owners with negative equity worth $522,000 on average. Homeowners in Western Australia are most likely to be in the red, with more than one in six mortgage holders owing more than the value of their home.”

“Mozo housing expert Steve Jovcevski agreed recent purchasers were the ones feeling the brunt of the negative equity. ‘It’s disproportionally hurting first-home buyers who can least afford it,’ he said.”

“Roy Morgan industry communications director Norman Morris suggested the data didn’t capture the full extent of the problem, as house price falls have only just begun to be felt. ‘By all indications it’s looking to get worse,’ he said. ‘If home-loan rates rise, the problem would be likely to worsen as repayments would increase and house prices decline, with the potential to lower equity even further.'”

“Jovcevski said owner-occupiers with negative equity were at the mercy of the banks and ‘whatever terms the banks dictate to them,’ adding the situation could have a broader effect on the economy. ‘Negative equity is a mindset,’ he said, ‘when people realise when their property is worth less than what they paid for it, consumer spending goes out the window.'”

The Sydney Morning Herald. “The parlous state of Sydney’s housing market, where the most recent auction clearance rate is at a decade low of between 38-40 per cent, has led the listed real estate agency McGrath to report a $1.9 million loss for the September quarter. McGrath said auction clearance rates and the number of properties taken to auction were well below the previous year. An increase in stock levels combined with lower buyer activity meant houses were taking longer to sell and prices were down across the sector.”

“Last weekend Sydney clearance rates slumped to a low of 44.5 per cent. In Melbourne the rate was about 48 per cent. Domain senior research analyst Nicola Powell said the cautious mood among sellers and buyers appeared to be deepening, and clearance rates were reaching a new low.”

“‘It’s highly likely last weekend’s clearance rate will be revised lower, which means it could reach somewhere in the realm of 38-40 per cent,’ Ms Powell said. ‘The slowing nature of the auction market suggests the downturn has yet to hit a peak with further price softening ahead.'”

“Winston Sammut, managing director of Folkestone Maxim Asset Management, said the weaker results, ‘reflect the changing role of real estate agencies.’ ‘It’s the demise of the real estate agency business as we knew it,’ Mr Sammut said.”

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This Post Has 24 Comments

  1. ‘Jovcevski agreed recent purchasers were the ones feeling the brunt of the negative equity. ‘It’s disproportionally hurting first-home buyers who can least afford it’

    So now all that “helping first time buyers get on the ladder” sounds kinda dumb.

    ‘It’s highly likely last weekend’s clearance rate will be revised lower, which means it could reach somewhere in the realm of 38-40 per cent’

    This is a cheerleader saying this.

  2. ‘In Sydney and Melbourne, housing prices are falling by over $1,000 a week’

    I bet there’s some interesting conversations going on around the dinner tables these days.

      1. They have full recourse mortgages!?

        As I heard in a song once:
        “…and it feels
        Like I got kicked
        In the nuts
        …”

    2. I bet there’s some interesting conversations going on around the dinner tables these days.

      Pass the cat food, daddy.

  3. ‘Negative equity is a mindset…when people realise when their property is worth less than what they paid for it, consumer spending goes out the window…It’s the demise of the real estate agency business as we knew it’

    But they saved all that loot they were raking in, right? Don’t tell me they thought it would never end!

    2. So the wealth effect was just a mirage? And now that it is dematerializing, we find out that the illusion of wealth actually impoverished many people even as it told them they were prospering?

      Oh, and wise technocrats decided to build an entire economy around this?

  4. ‘Now, finally gravity has caught up with that stupidity and prices are falling. In Sydney and Melbourne, housing prices are falling by over $1,000 a week.’”

    Stupid should hurt. Mega-stupid should hurt badly.

  6. https://www.youtube.com/watch?v=kK62tfoCmuQ

    What goes up must come down
    Spinnin’ wheel got to go ’round
    Talkin’ ’bout your troubles it’s a cryin’ sin
    Ride a painted pony let the spinnin’ wheel spin

    You got no money and you got no home
    Spinnin’ wheel all alone
    Talkin’ ’bout your troubles and you, you never learn
    Ride a painted pony let the spinnin’ wheel turn

  8. …auction clearance rate is at a decade low of between 38-40 per cent, has led the listed real estate agency McGrath to report a $1.9 million loss…

    The guys at McGrath could solve that problem instantly. Tell the sellers to lower their reserve price to what will clear. Reality is better accepted early.

  9. Oil traders keep paring the price down. A few weeks ago Swami Dan was crowing about his dream come true of $80 to $100, now it’s in the 60s. Wha happen?

    1. Considering domestic producers are profitable at $7 a barrel, oil is a lot closer to $10/barrel than $100.

      Swami is feasting at the moment.

  10. You guys Never have any housing info about Japan. As far as the Far East is concerned, It’s always – China, China, China, and more China. Would you, please, include some info about Japan.
    In spite of everything, I still love you guys, and read you ALL, most every day.

    Ten plus years now. Yeesh, whoda thunk. I apologize to Neil, popcorn was indeed the order of the day. Hats off to you. I can’t believe how wrong I was about, well, everything. I’m now a reformed capitalist, I guess. We’re in an oligarchy, eh/

  12. Jim Paulsen: ‘Full-on panic’ is the buying opportunity; market hasn’t seen ‘ultimate bottom’
    – Wall Street veteran Jim Paulsen doesn’t think the market is necessarily done heading lower.
    – For one, he thinks valuations are high. Plus, there hasn’t been any real fear in the recent sell-offs.
    – “I’d like to see a full on panic, which is to me a little better entry point,” he says. “We’re going to have to go down there again and shake people up a little more before we see this ultimate bottom.”
    Michelle Fox | @MFoxCNBC
    Published 11 Hours Ago
    …

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