House prices
Hey Sypkan - had a feeling you might be similar. The degree is not worthless, the research skills given can be formidable, but it's a question of being able to bring that to bear. I am lucky that in the face of it's results, I gritted my teeth, and went on and learn what is essentially another degree, though informal, wherever I could find it from those who were successful.
Those skills bear fruit, but like my old Uni said, it is equally important to "Know Thyself". I'll shout you a wave any day.
And Rob that was a really beautiful post up at the start - I do not disagree with your choosing to value the Arts (my great uncle once said something very similar to me, and he was a learned man). Is there anything better than being front row, looking into the actor's eyes as they deliver their lines on stage? It's epic. For many though, it leaves the graduate with a more undetermined future (jobs counsellors saying "try teaching" doesn't help) than other graduates, unless public service is hiring. Throw that into the mix with the economic conditions out there and it will be a lot like the 1990s.
Relevant to housing, here's the 90 day bank bill
https://www2.asx.com.au/markets/trade-our-derivatives-market/derivatives...
and here's the chart pack, note the correlation between the cash rate and the 90 day bill yield
https://www.rba.gov.au/chart-pack/interest-rates.html
nearly fell off my chair looking at the 90 day bill this morning.
Definitely been tightening my belt for some time as are many others who experienced the 90's, little unnerving seeing it all slowly eventuating. Thanks for the charts, they really give a clearer understanding of whats unfolding. For anyone relatively new to what terms are being shown and discussed by those with more familiarity. Always been a fan of the line graph. Velocity and crew who have a much greater understanding and analysis on how the markets work and play out are great to learn from from some of their knowledge expressed in this thread.
https://www.rba.gov.au/statistics/cash-rate/
The cash rate is an interest rate set by a central bank, determining the rate of interest paid on overnight loans between banks. Generally, banks borrow and process transfers between each other overnight which are the funds lended to meet their daily cash needs.
The cash rate also serves as a benchmark rate for everything from mortgages and savings accounts to the exchange rate, making it an important tool for managing national monetary policy.
Yes how’s the 2024 no rise coming along!!! RBA should be shot for making these kinda statements as it’s these statements that fuel the ridiculous housing price bubble.
Watched Gov. Lowe on 7:30 report last night. He's a bit of a weird dude. Crazy eyes. Couldn't help get the vibe he's going to enjoy any financial carnage that may come. Took zero accountability for his 'no rate rise until 2024' statements that he repeated over and over last couple of years, aside from saying that they were always conditional statements. Fact they were still making those claims back in December last year is wild.
Dx3 wrote:Watched Gov. Lowe on 7:30 report last night. He's a bit of a weird dude. Crazy eyes. Couldn't help get the vibe he's going to enjoy any financial carnage that may come. Took zero accountability for his 'no rate rise until 2024' statements that he repeated over and over last couple of years, aside from saying that they were always conditional statements. Fact they were still making those claims back in December last year is wild.
Apparently we all forgot to read the fine print disclaimers in his statements!!
I have no idea what you guys talk about but I can understand saying one thing and not coming through.
Was the “No rate rise till 2024” a promise or hyperbole. Either way, how could you state something you uncertain you can deliver on - and not get reprimanded?
To be fair, there's a lot outside his control that he can only react to - and it's been way too little, way too late imo. If the Fed does a Volcker and goes off hunting inflation (read: oil, that's what folks are saying now in the financial press; also read the Jay Powell interview I posted in one of these threads: it's been telegraphed already), in my opinion, then he cannot let too big a gap exist between Aussie rates and the US rates (historically, we should have a premium to theirs to attract capital). Anyway, Fed decision tonight, more prognosticators suggesting 0.75%, after hot US CPI print on Friday. Cat meet pidgeons. Going to leave that 'd' in pidgeons as I've always spelt it that way Mr Spellcheck.
Minimum wage increased by 5.2% in Oz. Now every opposing lever is being pulled at once. Fascinating times.
They say every time ‘This time it’s different’. You can’t get more different than what we’re doing atm I reckon.
Rightly or wrongly, some folk likely made house purchases thinking they'd have 2-3 years to build a buffer based on the 'no rate rise until 2024' statement that was repeated. Not just said once but repeated, fine print disclaimers aside. He even acknowledges they likely did. So that time period taken away (hopefully they at least fixed in low rates while they could!), plus the rising cost of everything else = more immediate stress.
I found his comments re: inflation interesting, in that he's confident it'll come down, but more so due to the rise we've seen not being sustained. So not that prices will come down, but they'll just level off which in essence means inflation drops. So the $2.20 petrol, $10 lettuce remains, it just doesn't go much higher was how I took that, do I have that right?
VJ, you seem pretty clued in on this stuff, is that your take on how inflation comes down? The high prices we've got remain, they just stop rising much more than the 2-3% target range.
The RBA announced the “no interest rate rises till 2024” back on page 11 of this thread.
Worth a read to see how opinions have held up to time. It was March 2021!
Hi Dx3, I'm a trained historian not an economist so take this with a pinch of salt, and anticipation a real economist will come in the conversation and school me downthread.
There are some here who point out that there are supply causes to the inflation - supply interruptions etc - and that is true. If chains repair themselves, that should see more supply online and the inflation subside. Other stuff seems irreparable at the moment, like semiconductors or that Ukranian neon gas stuff to make said semiconductors.
I'd point out there's also been a titanic amount of money printing. If inflation has a monetary cause (I believe it does), then that may continue. To stop that, Paul Volcker proved it was successful to raise the interest rate higher than the level of inflation in 1980 (this is a very, very rough explanation). Even if we get to 2.5%, inflation is running at 7% so we'll still be negative real rates, which tends to eat the value of money. What follows (speculation, my own opinion, not financial advice) would be a long time of constant inflation, volatile asset markets, and unrest. Like the 1970s. So: choices, do you be mean now and stop it early, or fail for a decade or so and then someone else is mean and stops it when much more damage is done. Of course, if the inflation is all supply-side, it will be gone by next year. If not, however... (bonus research: look up all the crop failures due to weather extremes like frosts)
That environment would pay off debt through inflation, and there would be a struggle on all sides to make sure their wages/earnings keep up. So not too bad for debtors provided their cash flows remain secure, but a house might be 5Mil and a Big Mac $30 by the end of it. Terrible for savers and retirees, who would be pushed into far greater degrees of risk just to keep up, or face destitution, as would the homeless and working poor.
If the rate hikes push places into recession, prices will revert to their means (one would hope, unless more stimulus is thrown at sectors). Zombie companies would be hosed away. Lots of pain for recent purchasers - but remember the 17% rates of the early 1990s did not last long. Then rates would fall (market predicting 3 cuts in 2023 in US presently after this years' rises- this can change!) Hopefully, this would allow better growth afterward, like coming out of the 1921 recession in the US. Ever since the 1990s recession, whenever storm clouds gather, we've found some form of relief/bandaid to make sure we don't go into recession. Each time, housing prices have gone higher relative to incomes.
Here's Ben Bernanke, the Fed chair at the time of the GFC:
"“I’m hoping and guessing that oil and food prices will at least stabilize and preferably begin to moderate,” he said, while acknowledging that “things could go bad” if the above does not go to plan and inflation persists, leading Americans to start losing confidence in the central bank.
“Then the Fed might have to crack down much harder,” Bernanke said."
https://www.zerohedge.com/economics/us-economy-has-decent-chance-avoidin...
velocityjohnno wrote:
You know how to tickle my fancy!
Nick Bone wrote:velocityjohnno wrote:You know how to tickle my fancy!
Was perfect
Cheers VJ - interesting reading.
donweather wrote:Yes how’s the 2024 no rise coming along!!! RBA should be shot for making these kinda statements as it’s these statements that fuel the ridiculous housing price bubble.
it did seem a really really stupid thing to say at the time - as pointed out by many commenters on here - pure hacker commenters... who could still see the recklessness of such comments... projecting 3 years into the future essentially!
but I guess it was all about patterns, trends, and going on the financial zietghiest of the time - where money printing was not so on the nose, and inflation was 'under control'...
MMT was not such a ridiculous proposition back then... (for some - hello factobum!) ...but once again, commenters on here (hackers) could see the shortcomings of such fanciful thinking... raising concerns about inflation, devaluing of currencies, and skyrocketing assett prices...
we'd seen 12+ years of essentially money printing back then (following 2008 GFC), ...and the results were patently obvious... skyrocketing wealth for the assett holding class, and a devaluing of dollars for average joes...
and perhaps most most importantly, splurges of money printing over more than a decade had failed to get the result the central banks were continually seeking...
or maybe they did get what they were seeking... they enriched themselves, preserved their stocks assett prices, and allowed the kicking of the can, again, again, and again... and again... (enter phillip lowes twisted googly eyes above)
what blows me away, is how they allowed interest rates to get so so low (negative even in some cases) ...before realising they've got nowhere else to go... the 'powder' was clearly done a long long time ago - yet they didn't change tact...
some serious herd thinking was going on... where even conservative by nature (not politics) economics people like alan kohler, were suggesting the possible 'harmlessness' of MMT...
geez we've gone through a very strange little epoch in economic thinking indeed... where many 'good people' were either too chicken, or too invested (ie. complicit) to raise their heads above from the herd...
a cynic might say it was ALL self interest at work
and they might very well be right!
...the ruling, media, financial, academic class, have failed miserably once again...
we're heading into decades of gross failures now
and once again, as pointed out above, there seems to be no repercussions...
again...
for some...
sypkan wrote:...the ruling, media, financial, academic class, have failed miserably once again...
we're heading into decades of gross failures now
and once again, as pointed out above, there seems to be no repercussions...
again...
for some...
the academic class have failed you? how so? I'm knee deep in marking first-year essays at the moment -- do think I should be marking a bit harder, is that it? or is that you think I didn't do such a good job explaining Godel's incompleteness theorem in my third-year mathematical logic seminar this year?
bit sensitive there chooky champ...
u don't think the system that has advised all of our current shit show through a grants, higher study, and exploitative overseas student system generally has failed the general population somewhat?
u don't think the various universities play a major role in influencing government policy?
I could go into how - for 3 decades or more - 'the system' produced endless 'irefutable' 'research' on the merits of high immigration and the like, ...and various other neoliberal supporting claptrap... only to have the lived experience of average joe and 'his truth' prove otherwise...
but let's just keep it to the first two
not sensitive at all -- I'm comfortable with my role and place in society as an academic.
You think the government turns to academic research. then based on that research, decides we need more immigration? you're delusional.
and where is all this neoliberal academic research that drives government policy? Barnaby Joyce...burning the midnight oil as he reads yet another academic research paper before making a decision to build a billion dollar dam and open up Narrabri for fracking....is that how you imagine the working of power and government?
Angus Taylor, so beholden to the whims of academic publications when he decides, yep...give that liberal party stalwart in the NT a few hundred million of tax payers dollars to frack the bettaloo basin. is that how you, the average Joe that is so clued into how things are, thinks the world works? absolutely fruit cake bullshit.
well, certain folk, media, and institutions cite certain 'research' ad nauseam to see their agenda implemented... be it a government department, or the business council etc. influencing them...
and, when I flirted with environmental studies as part of my degree, it was all about PPP's (public private partnerships) as 'solutions' to our environmental problems... whilst totally not without merit... I'd say an all in thinking on this has totally run its course and found its limits...
highly paid 'consultants' can only do so much... regardless of their good intentions...
it is the same old thinking for many issues
and the uni's spruiking the overseas student model... well...
your counter exanples are pretty predictable and lame in their bias, and pretty much plain spirious really...
This link is good as it suggests correlation between secular falling rates and exceptional house price growth in last 20 years
"As mentioned by CoreLogic, the secular decline in mortgage rates since 2008 has been a key driver of the Australian house price boom, with stimulus playing a supporting role over the pandemic.
Indeed, Australian mortgage rates more than halved over the 20-year period, with the average discount variable mortgage rate hitting a record low 3.45% before the Reserve Bank of Australia (RBA) commenced its tightening cycle in May:"
https://www.macrobusiness.com.au/2022/06/after-the-20-year-boom-comes-th...
velocityjohnno wrote:https://www.macrobusiness.com.au/2022/06/after-the-20-year-boom-comes-th...
These two statements are rather sobering to say the least!!
"If the market’s forecast for interest rates comes to fruition, then Australia’s discount variable mortgage rate will more than double to 7.1% by mid next year, taking rates back to 2011 levels"
"The difference this time is that Australian dwelling values as a share of household disposable income are 50% higher than they were in 2011. Thus, Australian house prices are much more vulnerable to a correction as interest rates are lifted."
That last statement above is definitely the key difference this time around.
And this one supports my theory I've been banging on about for some time:
"And if the RBA follows the market, then we will be staring at the biggest house price crash in living memory."
https://www.abc.net.au/news/2022-06-29/census-finds-1-million-empty-hous...
but yeah.. the housing crisis is a supply issue.
bonza wrote:https://www.abc.net.au/news/2022-06-29/census-finds-1-million-empty-hous...
but yeah.. the housing crisis is a supply issue.
1 million empty, or perhaps a large % of census not completed and assumed as an empty house.
perhaps. but census was conducted during Covid-19 - restrictions and lockdowns in place.
This pretty much sums up how quickly we’re gonna be in a world of pain.
https://www.realestate.com.au/home-loans/news/household-debt-australias-...
CBA hikes 1-5yr fixed by 1.4%
https://www.abc.net.au/news/2022-06-30/commonwealth-bank-lifts-rates-by-...
bonza wrote:perhaps. but census was conducted during Covid-19 - restrictions and lockdowns in place.
Population approx 25 million, average of 2.5 people per household so approx 10 million houses/apartments.
That article suggests 1 in 10 is empty. Just don’t know where they would be.
velocityjohnno wrote:CBA hikes 1-5yr fixed by 1.4%
https://www.abc.net.au/news/2022-06-30/commonwealth-bank-lifts-rates-by-...
Commonwealth fixed rates for 3 x 5 years now between 6% and 7%.
I’ve always worked on the theory that the banks won’t charge these levels if they think the variable rate will be higher than that in the same term. They hope consumers lock in due to fear of further rises yet know the variable would be a better deal for the consumer.
In short, if the banks are charging 7% for 5 years, I’d bet the variable will average at least 0.75% below that over the same period.
Yep, places still selling like mad here.
Place sold for a million last March just sold for 1.7 million last week.
Nice $ earn per Day...
CB. Try Merimbula for a start on where those empty houses are.
freeride76 wrote:Yep, places still selling like mad here.
Place sold for a million last March just sold for 1.7 million last week.
There's gonna be a lot of blood on the streets.
Still a lot of Tesla's and Lexus's cruising around here Don, more than ever.
I feel like it’s dropping off a little here. But in saying that, entry level houses are still completely outrageous and still selling.
Maybe a glimmer of hope for people to buy in where they’ve lived all there lives. Not another investment/short stay property.
Still selling like hotcakes in my local. Bloke 2 doors put his McMansion up for sale and had accepted an offer for 'an undisclosed amount' within 24 hours.. Est value of the property was $1.2M before the sale so I'm guessing he got a fair bit more than that.
As for the cars getting around , most newcomers are trading in the Audiis and Mustangs for Raptors or RAMs. The potholes are as deep as the farkin Grand Canyon around here.
A 4% home loan is still free money. ooops - I beg your pardon - more like less than 3% still.
And thats assuming you have to borrow anything.
The job market is storming, make hay while the sun shines (well, before the floodgates open and Australia gets more immigration ... oh look the borders have reopened and the currency has/is taking a freefall....) Nicely done !
"...The job market is storming, make hay while the sun shines (well, before the floodgates open and Australia gets more immigration ... oh look the borders have reopened and the currency has/is taking a freefall....) Nicely done !"
how has opening borders put the currency in freefall?
an economic guru dude other day pointed out the last time commodity prices were this high the AU dollar was at parity with US dollar... and wondered why not now?
all the 'indicators' and events should have AU $ climbing, but we are seeing the opposite...
yeh I know US interest rates going up, but you would think our rates also going up would cancel that out?
sypkan wrote:"...The job market is storming, make hay while the sun shines (well, before the floodgates open and Australia gets more immigration ... oh look the borders have reopened and the currency has/is taking a freefall....) Nicely done !"
how has opening borders put the currency in freefall?
an economic guru dude other day pointed out the last time commodity prices were this high the AU dollar was at parity with US dollar... and wondered why not now?
all the 'indicators' and events should have AU $ climbing, but we are seeing the opposite...
yeh I know US interest rates going up, but you would think our rates also going up would cancel that out?
I wasnt suggesting opening the borders put the currency in freefall although it does read like that. The currency is dropping most likely as The Aussie is seen as a "risk on" type currency and with iron ore prices falling and a flight to the USD it isnt that attractive. We're also behind on interest rate increases (I can earn more on the US Bond than on an Aussie bond for example.
My point was more that by opening up our borders further it aims to address a huge shortage of workers (the goal being to redice wage pressures perhaps), letting the aussie fall helps with inbound tourism and foreign investment (yes it also makes our cost of living greater for those things we import anyway). Many commodities are way off their highs (Iron Ore for example - our biggest export).
Gas and coal offset that.
https://www.mining.com/web/australia-sees-commodities-boom-lifting-expor...
freeride76 wrote:Gas and coal offset that.
https://www.mining.com/web/australia-sees-commodities-boom-lifting-expor...
Yes indeed.
Déjà vu
House prices - going to go up , down or sideways ?
Opinions and anecdotal stories if you could.
Cheers