Welcome Guest [Log In] [Register]


Reply
Supply and demand. Sorry to repeat myself.
Topic Started: 4 Aug 2013, 11:13 AM (17,704 Views)
skamy
Member Avatar


Wisebear
9 Aug 2013, 10:58 AM
It's what's called a thought experient where you change one variable at a time.

Your claim is:


so let's test that: let's say banks were to offer $2m mortages to anyone that wants one at , say, 0.1% fixed for 20 years.
Why do you think people won't borrow this money and bid up prices?

Let me try to explain to you how the market works.

Paddington was once the domain of Irish navy workers they could all afford house there by borrowing what they could on their wages.

All the doctors and lawyers and bank executives had better houses in the city.

Now the city grew and more doctors and lawyers and bank executives came and there were no house left in the city so they started to bid up the Paddington prices and the Irish navies moved on down the line. The cost of land and a new home provides the floor to a normal market.


This is the way house prices grow and this has happened for 100s of years. It has nothing to do with permitted borrowing capacity (which has not changed for decades) or even wages growth it is to do with an increase in the number of people on good wages and not enough supply of the homes they desire.


This is from John Jacob Astor from the late 1880's who made his fortune from real estate:

Buy on the fringe and wait. Buy land near a growing city! Buy real estate when other people want to sell. Hold what you buy!”

Do you seriously think a credit boom was what made his profits grow, what about these guys from the same period, all those fortunes made through property did they have a huge credit boom back then?


Every person who invests in well-selected real estate in a growing section of a prosperous community adopts the surest and safest method of becoming independent, for real estate is the basis of wealth.”
-Theodore Roosevelt

“Buying real estate is not only the best way, the quickest way, the safest way, but the only way to become wealthy.”
-Marshall Field

Ninety percent of all millionaires become so through owning real estate.
-Andrew Carnegie

The major fortunes in America have been made in land.
-John D. Rockefeller

If you want to grow into your username you need to wipe that doomer shit from your eyes.
Definition of a doom and gloomer from 1993
The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
Profile "REPLY WITH QUOTE" Go to top
 
Simon
Member Avatar


skamy
9 Aug 2013, 11:34 AM
If you want to grow into your username you need to wipe that doomer shit from your eyes.
wisebears name is an oxymoron
Profile "REPLY WITH QUOTE" Go to top
 
zaph
Default APF Avatar


Wisebear
9 Aug 2013, 11:18 AM
But when you create massive amounts of cheap credit demand does exceed supply.
Cheap (and presumably easy) credit would also add to supply. More builders/developers could get finance and produce more supply at a cheaper price than if credit was expensive and constrained.

Profile "REPLY WITH QUOTE" Go to top
 
Wisebear
Default APF Avatar


Sorry Shadow but for you the debate is lost.

You had your opportunity to defend your ridiculous statement and failed.

Better luck next time.
zaph
9 Aug 2013, 11:37 AM
Cheap (and presumably easy) credit would also add to supply. More builders/developers could get finance and produce more supply at a cheaper price than if credit was expensive and constrained.

It depends what affect the cheap credit has on input prices such as land.

If land prices were to rise faster than property prices then the opposite would be true.
Edited by Wisebear, 9 Aug 2013, 11:44 AM.
Profile "REPLY WITH QUOTE" Go to top
 
Shadow
Member Avatar
Evil Mouzealot Specufestor

Wisebear
9 Aug 2013, 11:41 AM
Sorry Shadow but for you the debate is lost.

You had your opportunity to defend your ridiculous statement and failed.

Better luck next time.
You might think this is a clever way to save face and avoid addressing the points I made, but to everyone else it's just a transparent cop-out.

My points (that you are carefully avoiding) are as follows...

Demand only exceeds supply if demand exceeds supply. In Japan there is a declining population and therefore supply is always exceeding demand. It doesn't matter how much cheap credit you throw at Japanese people (and credit is very very cheap there). They aren't bidding up the price of homes because there are more homes than people need. Cheap credit will increase demand, but if it doesn't increase demand to a level that exceeds supply, then people are not going to bid up prices.

People are not bidding up the price of houses in places where there is ample supply and little demand, like Japan, or Detroit. Credit is very free and easy in Detroit. Are they bidding up the price of houses there? No. Because there is not enough demand regardless of how much credit you throw at people.
Edited by Shadow, 9 Aug 2013, 11:52 AM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
Profile "REPLY WITH QUOTE" Go to top
 
skamy
Member Avatar


Wisebear
9 Aug 2013, 11:09 AM
You'll have to explain this to me.

You claimed that:


BUT your chart shows payments varying between 18% and 32% of disposable income. How is this the same?


It looks to me like the amount lent varies with interest rates which is exactly my point.
That's Ok Wisebear, I will do my best to explain it to you, a lot of folk come over here to APF from that Macrobusiness site with the same misunderstandings.



You were claiming a trend ie gains in house prices were due to increased debt burdens, yet you have spoken about noise.

Let us put the two graphs together to help you get the picture
Posted Image
Posted Image

Your claim was that the second trend caused the first trend, but it didn't did it, they have no correlation at all by the looks of it.
The total debt taken on goes up AND down due to interest rates, banks lend what folk can afford to pay and that obviously depends on interest rates. This is the same as it has been for decades. There were obviously times when folk have been too stretched ie paying 30% of income, usually the government will try to alleviate that with lowering interest rates, then we will observe a drop again to a lower income %.
Simon
9 Aug 2013, 11:37 AM
wisebears name is an oxymoron
Ain't it strange how the posters with the most pompous usernames seem to post all the daft stuff on APF.
Edited by skamy, 9 Aug 2013, 11:56 AM.
Definition of a doom and gloomer from 1993
The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
Profile "REPLY WITH QUOTE" Go to top
 
zaph
Default APF Avatar


Shadow
9 Aug 2013, 11:50 AM
You might think this is a clever way to save face and avoid addressing the points I made, but to everyone else it's just a transparent cop-out.

My points (that you are carefully avoiding) are as follows...

Demand only exceeds supply if demand exceeds supply. In Japan there is a declining population and therefore supply is always exceeding demand. It doesn't matter how much cheap credit you throw at Japanese people (and credit is very very cheap there). They aren't bidding up the price of homes because there are more homes than people need. Cheap credit will increase demand, but if it doesn't increase demand to a level that exceeds supply, then people are not going to bid up prices.

People are not bidding up the price of houses in places where there is ample supply and little demand, like Japan, or Detroit. Credit is very free and easy in Detroit. Are they bidding up the price of houses there? No. Because there is not enough demand regardless of how much credit you throw at people.
In other words cheap credit is an enabler for demand, not an underlying driver of demand.
Profile "REPLY WITH QUOTE" Go to top
 
barns
Member Avatar


zaph
9 Aug 2013, 12:02 PM
In other words cheap credit is an enabler for demand, not an underlying driver of demand.
I would concede this point.

PS cheap credit is also an enabler for supply.
Edited by barns, 9 Aug 2013, 01:20 PM.
“You Keep Using That Word, I Do Not Think It Means What You Think It Means” - Inigo Montoya
Profile "REPLY WITH QUOTE" Go to top
 
Veritas
Default APF Avatar


Simon
9 Aug 2013, 11:37 AM
skamy
9 Aug 2013, 11:34 AM
If you want to grow into your username you need to wipe that doomer shit from your eyes.
wisebears name is an oxymoron
Join the debate then you snivelling little sneer.

All you do is come up with these pathetic one liners in favour of your bull daddies.

Get involved in a proper way or fck off.
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?

The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly.
Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
Profile "REPLY WITH QUOTE" Go to top
 
Wisebear
Default APF Avatar


skamy
9 Aug 2013, 11:34 AM
If you want to grow into your username you need to wipe that doomer shit from your eyes.
Skamy,

Why the offensive remarks? I think you may have the wrong opinion of me.

I don’t disagree with much of what you say above but you are making some fundamental mistakes.

Quote:
 
It has nothing to do with permitted borrowing capacity (which has not changed for decades)

Sorry but the amount that people have borrowed has changed over the decades. The average mortgage is bigger, personal debt is significantly higher and your own chart shows that the percentage of disposable income spent on interest varies considerably over time. Why do you post a chart showing that it has changed then continue to insist that it hasn’t? I don’t get it.

Profile "REPLY WITH QUOTE" Go to top
 
0 users reading this topic
Go to Next Page
« Previous Topic · Australian Property Forum · Next Topic »
Reply



Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.

Forum Rules: The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.

Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.

Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.

This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.

For more information go to Limitations on Exclusive Rights: Fair Use

Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ

Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy