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This Hyper-Inflated Farcical Game Of Monopoly Is Now Getting Its Comeuppance

A report from the Sydney Morning Herald in Australia. “The median value of a house in Sydney dropped last year by 10 per cent or a touch over $100,000 over the past year. In Melbourne, house values are down by 9.1 per cent or $75,000. Both cities saw values drop by more than 4 per cent through the past three months, so there was an acceleration in the decline through the tail end of 2018. Sydney’s 11.1 per cent fall since its peak is the biggest correction since at least 1980.”

“Those further along the price correction cycle offer some telling insights. Since mid-2014, Perth values have fallen 15.6 per cent while in Darwin they have tumbled by 24.5 per cent.”

From the Daily Telegraph. “Homebuyers have been getting the best property deals in Sydney regions with a high supply of new apartments. A one-bedroom apartment on Devlin St in Ryde was recently snapped up for $680,000, $115,000 below the 2014 price.

“In nearby Gladesville, a two-bedroom unit at 4-6 Harvard St was snapped up for $340,000 in December — $225,000 below the 2013 price.”

“‘Not many people can buy so serious sellers are finding they have to keep cutting their prices,’ said CoreLogic’s Cameron Kusher. ‘Buyers can see there is a downturn, so there is no impetus to jump into the market … there could be a feeling that if they wait prices will be even lower.'”

From ABC News. “‘This is the worst fall we’ve seen since the GFC, which was a short and sharp correction, down about 5 per cent from peak to trough,’ CoreLogic’s head of research Tim Lawless told ABC News.”

“Mr Lawless said the current housing downturn would be worse that experienced that during the global financial crisis because the Federal Government now has very little ammunition to stimulate the economy.”

“‘We started to see interest rates coming down back in 2008, and a lot of stimulus came into the market in the form of the first home owner grant boost, cash handouts, infrastructure stimulus, and so forth,’ he said. ‘I don’t think we’re going to see a lifeline thrown to the marketplace this time in that form.”

“To keep the economy afloat, the Reserve Bank (RBA) aggressively slashed interest rates from 7.25 to 3 per cent in the eight months between August 2008 and April 2009. But there is not much room for the RBA to cut rates now as they have been kept on hold at a record low 1.5 per cent for 28 months.'”

“‘In addition, we’re heading towards a federal election where we could see some taxation policies being changed, which could have a further negative effect on the market,’ Mr Lawless said.”

The Herald Sun. “The Melbourne housing market finished 2018 with its largest quarterly decline on record — and experts say the downturn could ‘become bigger’ this year. CoreLogic research analyst Cameron Kusher said prices had been falling faster in Victoria’s capital than in Sydney, meaning Melbourne’s downturn could soon eclipse its northern rival’s.”

“‘Affordability is now very stretched,’ he said. ‘Someone on a median income will now have to spend 17 times their income to buy a house. Banks are being very cautious about (high) debt-to-income levels, so (financing) has become challenging.'”

From Paul Wallis. “If you were looking for a great way of creating a load of garbage out of thin air, the Australian housing market is a great place to start. This hyperinflated farcical game of Monopoly is now getting its comeuppance.

“The Australian housing market, like so many lop-sided economic holidays for the upper end of the market, started with cheap money. Housing prices boomed, loans were easy to get, including the now infamous ‘no attempt to conduct proper lending practices’ starting in the US and now copied worldwide.”

“The housing market will resist downward pressure as much as it can, but the buyers just aren’t there anymore. From hysterical auctions doing $100,000 per bid per 10 seconds to a ragtag few buyers who may not even bid has happened in a year or so.”

“The stupidity is proven, many times over. The results are hitting the fan in real money, not paper values. It’s a matter of opinion what happens next, but the message is clear: If you want a workable housing market, don’t do it like this.”






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This Post Has 41 Comments

  1. ‘A one-bedroom apartment on Devlin St in Ryde was recently snapped up for $680,000, $115,000 below the 2014 price. In nearby Gladesville, a two-bedroom unit at 4-6 Harvard St was snapped up for $340,000 in December — $225,000 below the 2013 price’

    You read that right: more than 4 or 5 years of mania washed away in a year, with no bottom in sight.

    2. Back to 2012 prices in a year. Amazing. So much for the people who talk about housing being sticky in a downturn, an escalator up but stair steps down, etc.

      1. I’ll still believe it when I see it in the U.S. But maybe with the free-market Republicans we have in control, who would never even think about using market intervention to slow down a correction, this time really will go much faster.

  2. “Someone on a median income will now have to spend 17 times their income to buy a house”

    Insanity. How could anyone think that’s sustainable?

    1. ‘“Someone on a median income will now have to spend 17 times their income to buy a house”

      Insanity. How could anyone think that’s sustainable? ‘

      Wow. A Bay Area home that sells for 2M is almost exactly at that level. Median Bay Area family income is 118,400. That would be 16.89 times.

      1. “In$anity. How could anyone think that’s $us$tainable? ”

        Mr. B@nker$: “do you $ee that dotted$ line?, plea$e give me yer $ignature$, my future$ is dependant upon it!

          1. Until the zombie corporations and marginal borrowers start defaulting on their loans. That’s what’s going to accelerate the collapse of our financial house of cards and the so-faux “recovery” built on Ben & Janet’s counterfeiting spree.

  3. More from this whiny little dog at the Sydney Morning Herald:

    ‘At a time of high household debt and tightening of lending standards by regulators, with perhaps more to come when the banking royal commission reports next month, such declines can be argued to be an overall positive.’

    ‘Then there’s the benefits that accrue to those wanting to enter the housing market. After being consistently priced out of the market there’s now more of a chance for younger Australians to buy a home.’

    ‘But those benefits could be swept away if the market doesn’t find some sort of base.’

    Go pound sand Shane Wright.

    1. Shane Wright

      “…well-documented link between the wealth-effect of rising prices and spillovers into broader spending”

      When housing is too expensive, people have less money to spend on other things Shane. You must think that debt and poverty are “prosperity”.

  4. “Mr Lawless said the current housing downturn would be worse that experienced that during the global financial crisis because the Federal Government now has very little ammunition to stimulate the economy.”

    The same policymakers that enabled the speculative excesses since 2009 are now going to come up with a remedy? I don’t think so.

    “This sucker is going down.” — George W. Bush

  6. ‘Both cities saw values drop by more than 4 per cent through the past three months, so there was an acceleration in the decline through the tail end of 2018’

    So where are those “we’ve almost bottomed out” people? Probably drowning the blues with the Vancouver and Toronto crowd.

  8. (yawn) The beat goes on …

    “Veterans Pay High Price as Lenders Push Cash-Out Home Loans”

    (snip)

    “Lenders, who can charge thousands of dollars in fees, are encouraging veterans to extract as much as 100 percent of their home equity. Many of the borrowers have poor credit and low incomes, and they could soon find themselves deep underwater.”

    https://www.bloomberg.com/news/articles/2018-12-28/veterans-pay-high-price-as-lenders-push-cash-out-home-loans?srnd=premium

    1. This is what jumped out at me:

      “Cash-outs accounted for 86 percent of VA refinancing in September, up from only about 30 percent two years earlier, according to an analysis of federal data from the American Enterprise Institute…”

      Isn’t this what happened last time? Folks cashed out, the bubble popped, and they just walked away?

    2. Wow, Tank$ Mr. Banker$, ea$y.est edit yet!

      “Lender$, who can charge thousand$ of dollar$ in fee$, are encouraging veteran$ to extract as much as 100 percent of their home equity. Many of the borrower$ have poor credit and low income$, and they could soon find them$elves deep underwater.”

    3. I spent eight years in the military. The level of financial irresponsibility and mismanagement among among the enlisted troops in all four services is mind-boggling, with the wives a particular horror show while hubby is deployed. If you want to see the biggest scoundrels and rip-off artists around any military base, look for the car dealer with the biggest American flag flying over his lot.

      1. I drove by Ft Benning about 10 years ago on a vacation. I was amazed at the vast number of signs advertising “title loans”. Must be a major racket industry there.

  11. Just like here in the last, and possibly next downturn. Just substitute American cities for the Australian cities in the article with possible exception of the cash out refi’s. Helocs however have been on the rise in recent years.

    Can be just as toxic and lead to under water conditions when value drops. Then easier to send in keys than make payments. Just history going and repeating itself again

    1. Just history going and repeating itself again

      Until the wheels come off. Then it will be something special.

  13. ‘Buyers can see there is a downturn, so there is no impetus to jump into the market … there could be a feeling that if they wait prices will be even lower.’

    Why can’t Americans who want to own a home catch on to this simple principle of standing back until prices get realistic?

    2. Why can’t Americans who want to own a home catch on to this simple principle of standing back until prices get realistic?

      Some tried in 2009 and got pwned/foamed by the Fed.

  14. Las Vegas city-data RE cheerleaders conclude that the last mess has been completely cleaned up, no empty houses to see here:
    “ddrhazy
    You think some lost paperwork is going to stop a bank foreclosing on a delinquent mortgage indefinitely? Those properties might’ve been the last ones to get repossessed but a bank is not going to walk away from a 6 figure asset because of paperwork.”

    Then this response:
    Crabtree
    “I work for a national law firm who has an office here in Las Vegas and all we do is litigate HOA foreclosure lawsuits. Over the past few years we have had around 2000 lawsuits and I can only imagine how many cases other law firms in town have. My firm represents the banks and I can tell you with certainty, the bank will do everything in its power to take control of the property. These cases have been going on for years and there are still thousands of cases pending.”

    Then crabtree goes on to describe HOA shenanigans and who ends up with the bargains (guess – it’s not the hoi polloi).

    Vegas Home values started dropping, p.10

  15. Hi Ben.
    No need to worry about a crash here in Vancouver. The Real Estate professionals here in YVR assure us this is just a pause on the way to increased demand and lower supply going forward. It’s diffrent here. A great opportunity for an affordable house.
    Six weeks to get a real estate license….Crayons optional on the test but no backward letters. What could go wrong?

  16. Why can’t American$ who want to own a home catch on to this $imple principle of standing back until price$ get reali$tic?

    Ari$totle: “YOU can.knot DIRECTLY … Pur$ue Happine$$!”

  17. As an American who lived through the US mortgage crisis and watched the fascade burn down, I was absolutely shocked by the state of the housing market when I moved to Sydney last year.

    The housing stock is terrible, frankly. No insulation, no heating, no AC, small lot, ugly and generic brick built 30 years ago but costs more than a million dollars. I had to laugh but most people I talked to were convinced that is was not a bubble and that it was supply and demand. Good luck with that.

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