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House prices and the media....

House prices and the media....

Old Jul 11th 2008, 3:25 pm
  #31  
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Default Re: House prices and the media....

The fall in UK prices is part of the big picture that has gripped the nation ever since sub-prime and the credit crisis. The situation in WA is not so bad - the economy is going well. Remember that it's only recently (last 4 weeks if that) that economic slowdown in Australia has shown in the figures and its only in the last few weeks that people are saying that the RBA might have overdone it with interest rate rises.

It was reported that the US and UK were far more exposed to the credit crunch. If Australia is, then it's more indirect which of course might amount to the same thing eventually.
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Old Jul 11th 2008, 4:04 pm
  #32  
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Default Re: House prices and the media....

Originally Posted by BadgeIsBack View Post
The fall in UK prices is part of the big picture that has gripped the nation ever since sub-prime and the credit crisis. The situation in WA is not so bad - the economy is going well. Remember that it's only recently (last 4 weeks if that) that economic slowdown in Australia has shown in the figures and its only in the last few weeks that people are saying that the RBA might have overdone it with interest rate rises.

It was reported that the US and UK were far more exposed to the credit crunch. If Australia is, then it's more indirect which of course might amount to the same thing eventually.
imo the RBA lost the plot before Christmas. That's when the banks started raising rates independently to cover their own increased costs in securing funding. They now take it in turns to bring a new rate rise to market a week or so after the RBA decision. There is also no guarantee that if the RBA lowers rates this will be passed on to customers.

Without wanting to go on about it, commercial paper issuance worldwide this year has been just $510.3 billion, compared to $2.2 trillion last year and $2.6 trillion in 2006. It was these complex financial instruments which "created" the money that was lent out by banks all over the world - including Australia, and it simply isn't there any more.

So what there is left, now costs more - hence the bank rate rises. The RBA can help a little with liquidity through its repo activities (where the banks exchange bundled Residential Backed Mortgage Securities on a rolling basis for treasury notes) but until the private markets open up again everyone will be treading water.

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Old Jul 11th 2008, 4:09 pm
  #33  
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Default Re: House prices and the media....

Originally Posted by mbike View Post
It was these complex financial instruments which "created" the money that was lent out by banks all over the world - including Australia, and it simply isn't there any more.
Well that is why one analyst said that the whole thing was such a scam that it signalled almost a complete meltdown of the US system as we've known it in generations...(his article was only talking about the US partly because some of focused on govt intervention etc).
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Old Jul 11th 2008, 4:34 pm
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Default Re: House prices and the media....

Originally Posted by BadgeIsBack View Post
Well that is why one analyst said that the whole thing was such a scam that it signalled almost a complete meltdown of the US system as we've known it in generations...(his article was only talking about the US partly because some of focused on govt intervention etc).
The scary thing is that globalisation has exported that system all around the anglo-saxon world. Fractional reserve banking and an over-reliance on alchemical money creation is now the norm almost everywhere. If you are old enough to remember life in the 70's and very early 80's, you'll remember there simply wasn't as much credit going around. But it was credit where credit was due. That's kind of back where we're heading, if we can avoid a global meltdown on the way...
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Old Jul 11th 2008, 7:29 pm
  #35  
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Default Re: House prices and the media....

Originally Posted by mbike View Post
imo the RBA lost the plot before Christmas. That's when the banks started raising rates independently to cover their own increased costs in securing funding. They now take it in turns to bring a new rate rise to market a week or so after the RBA decision. There is also no guarantee that if the RBA lowers rates this will be passed on to customers.

Without wanting to go on about it, commercial paper issuance worldwide this year has been just $510.3 billion, compared to $2.2 trillion last year and $2.6 trillion in 2006. It was these complex financial instruments which "created" the money that was lent out by banks all over the world - including Australia, and it simply isn't there any more.

So what there is left, now costs more - hence the bank rate rises. The RBA can help a little with liquidity through its repo activities (where the banks exchange bundled Residential Backed Mortgage Securities on a rolling basis for treasury notes) but until the private markets open up again everyone will be treading water.

mbike
commercial paper is corporate loans, credit cards etc. nothing to do with residential. that slows the economy no impact on mortgage rates.

what is the annual real estate tax in Aus and insurance? in %s
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Old Jul 11th 2008, 9:36 pm
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Default Re: House prices and the media....

So many different views on the WA economy, house prices employment hard
to get to the bottom of it? One BE Say fantastic booming resources mining
etc next BE say its F----d house prices dropping Slowdown in Construction
is there two Perths ? Or is the WA Government filling heads with rubbish
I feel sorry for anyone heading to WA seems like a lottery and an expensive
one at that
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Old Jul 11th 2008, 11:13 pm
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Default Re: House prices and the media....

Originally Posted by NKSK version 2 View Post
Something which has been mentioned before but was reinforced today.

On the front page of The West Australian today there is a news item stating that the average Perth house price has fallen 6% in 6 months. I can't even find the article on their website.

I don't think that there's any doubt - expressed by the bulls or the bears - that this is a signficant drop in prices.

And yet in the UK, where houses prices have droppped 6.1% over the last 12 months - i.e. at half the rate of WA - the media acts as if it is the end of the world. "Biggest drop in two decades""etc etc

Discuss.
The big newspapers in Australia are vested interests because thy also operate housesearch websites, which generate huge advertising revenue. House price fall stories would have their clients up in arms. While UK newspapers can be very negative, Australian newspapers are biased in the opposite direction. I prefer the more positive slant of Australian papers, but prefer the depth of the British broadsheets. I still read online the Guardian and Independent instead of the SMH and Australian simply because they are better newsapers.
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Old Jul 11th 2008, 11:24 pm
  #38  
 
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Default Re: House prices and the media....

Originally Posted by BadgeIsBack View Post
The fall in UK prices is part of the big picture that has gripped the nation ever since sub-prime and the credit crisis. The situation in WA is not so bad - the economy is going well. Remember that it's only recently (last 4 weeks if that) that economic slowdown in Australia has shown in the figures and its only in the last few weeks that people are saying that the RBA might have overdone it with interest rate rises.

It was reported that the US and UK were far more exposed to the credit crunch. If Australia is, then it's more indirect which of course might amount to the same thing eventually.
It does feel very similar here though to how the UK felt 8 months ago. My feeling is that Australia is on the cusp. Affordability is the worst in the world - it can only go on for so long. We're renting a house at about 50% what the interest alone would be. Nuts!
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Old Jul 12th 2008, 2:17 am
  #39  
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Default Re: House prices and the media....

Originally Posted by mbike View Post
The scary thing is that globalisation has exported that system all around the anglo-saxon world. Fractional reserve banking and an over-reliance on alchemical money creation is now the norm almost everywhere. If you are old enough to remember life in the 70's and very early 80's, you'll remember there simply wasn't as much credit going around. But it was credit where credit was due. That's kind of back where we're heading, if we can avoid a global meltdown on the way...
So - does that mean that houses prices in the UK, Australia and the US will return to more affordable levels vis a vis income?
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Old Jul 12th 2008, 2:18 am
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Default Re: House prices and the media....

Originally Posted by ShozInOz View Post
The big newspapers in Australia are vested interests because thy also operate housesearch websites, which generate huge advertising revenue. House price fall stories would have their clients up in arms. While UK newspapers can be very negative, Australian newspapers are biased in the opposite direction. I prefer the more positive slant of Australian papers, but prefer the depth of the British broadsheets. I still read online the Guardian and Independent instead of the SMH and Australian simply because they are better newsapers.
Yes - agreed. I read The Australian most days but always get that - Jesus is that it - kind of feeling.
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Old Jul 12th 2008, 3:17 am
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Default Re: House prices and the media....

Originally Posted by lastere View Post
commercial paper is corporate loans, credit cards etc. nothing to do with residential. that slows the economy no impact on mortgage rates.

what is the annual real estate tax in Aus and insurance? in %s
Not quite true. The majority of Australian ABCP issuance has been in mortgage or RMBS. Certainly there has been some credit card (1%) auto loan (4.7%) and commercial-backed securities (2%), but the vast majority has been based on Residential mortgages (45%) and Residential Mortgage backed securities (RMBS) (17%) together representing over $45 billion in outstanding ABCP. Because they have been unable to roll this paper over or issue any more, there has been a net draining of at least $45 billion from the credit funding markets - from which mortgage funding is drawn. This is the so-called credit contraction that has shaken confidence in the markets.

I am not sure what the relevance of annual real estate tax and insurance is to the discussion as this doesn't help the banks produce funding.
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Old Jul 12th 2008, 3:24 am
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Default Re: House prices and the media....

Originally Posted by mbike View Post
Not quite true. The majority of Australian ABCP issuance has been in mortgage or RMBS. Certainly there has been some credit card (1%) auto loan (4.7%) and commercial-backed securities (2%), but the vast majority has been based on Residential mortgages (45%) and Residential Mortgage backed securities (RMBS) (17%) together representing over $45 billion in outstanding ABCP. Because they have been unable to roll this paper over or issue any more, there has been a net draining of at least $45 billion from the credit funding markets - from which mortgage funding is drawn. This is the so-called credit contraction that has shaken confidence in the markets.

I am not sure what the relevance of annual real estate tax and insurance is to the discussion as this doesn't help the banks produce funding.
the overhead costs are crucial in determining the current 'flippers' to put their 'investments' back on the market. otherwise ppl will just hold on bc nobody wants to take a haircut. it's what happened in the US.

so how much is it? on average
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Old Jul 12th 2008, 3:25 am
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Default Re: House prices and the media....

Originally Posted by NKSK version 2 View Post
So - does that mean that houses prices in the UK, Australia and the US will return to more affordable levels vis a vis income?
If you recall the last paragraph of the West article you mentioned in the original post it says:

"According to Ross Williamson, director of Angelo Estates Pty Ltd, the development company selling lots at Bayview Estate, 600sqm blocks priced at $195000 were not selling, but a dozen lots had sold since the price was dropped to $126000 on June 27th
"We thought the market was dead, but it's not, it's at a different level" he said. "Buyers are keen to purchase, but only at the right price"
Reading between the lines he is suggesting that it is now a buyers market, rather than a sellers. Quite what the "right price" is for purchasers remains to be seen but with more houses returning to the rental sector as sellers give up on realising paper gains, vacancy rates will ease, enabling potential purchasers to bide their time before jumping in. The pent-up demand that some economists are talking about is based on those people (usually Gen Y) who, due to income or circumstance have been denied access to the housing markets. I very much doubt they would jump in until they were certain the market had bottomed. Housing just doesn't seem that attractive at the moment.
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Old Jul 12th 2008, 3:39 am
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Default Re: House prices and the media....

Originally Posted by lastere View Post
the overhead costs are crucial in determining the current 'flippers' to put their 'investments' back on the market. otherwise ppl will just hold on bc nobody wants to take a haircut. it's what happened in the US.

so how much is it? on average
I'm not certain where you'd find that info, maybe on Somersoft? You're right about loss aversion among sellers. It can lead to stagnant markets - an RE agents worst nightmare (as they depend on volumes). Maybe this is why Rob Druitt is now asking sellers to adjust their expectations, rather than suggesting buyers get more imaginative with funding options?
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Old Jul 12th 2008, 3:55 am
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Default Re: House prices and the media....

Originally Posted by mbike View Post
If you recall the last paragraph of the West article you mentioned in the original post it says:



Reading between the lines he is suggesting that it is now a buyers market, rather than a sellers. Quite what the "right price" is for purchasers remains to be seen but with more houses returning to the rental sector as sellers give up on realising paper gains, vacancy rates will ease, enabling potential purchasers to bide their time before jumping in. The pent-up demand that some economists are talking about is based on those people (usually Gen Y) who, due to income or circumstance have been denied access to the housing markets. I very much doubt they would jump in until they were certain the market had bottomed. Housing just doesn't seem that attractive at the moment.

It's interesting that the Bayview lots mentioned in the paragraph became the "right price" (i.e. the "different level") after a 35% contraction.
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