Alarm call after call, unemployment rising and what's worse is you don't know the half; Smudged unemployment rates in a slowing economy, yet inept bulls scream to load up on debt!
ok so how much is substantial then? you keep telling us prices are going to crash, put a number on it.
you keep crapping on about saving a deposit, surely you have $100 worth of pocket money saved by now?
Your so scared aren't you? Hey but there's many many more like me and seeing people like you for what they are. Scum.
After a bubble has burst, no one denies that it existed. But before it does, the popular refrain is that though bubbles existed elsewhere in the world, “there’s no bubble here”. So housing bubbles are admitted to have existed in Japan, the USA, Spain and Ireland – because they’ve already burst.
Oh come now. The same thing has been happening for the last twelve years, through three cycles.
classic case of confirmation bias.
it happened like this a few years ago, so it will happen the same way again.
until it doesn't.
just like the story of the turkey who gets fed by the farmer every day for a year. the turkey thinks the farmer will continue to feed him like he has. Until the day he doesn't.
I suppose the moral is, try and be open to other opinions and understand events happen that change the reality very quickly.
it happened like this a few years ago, so it will happen the same way again.
until it doesn't.
just like the story of the turkey who gets fed by the farmer every day for a year. the turkey thinks the farmer will continue to feed him like he has. Until the day he doesn't.
I suppose the moral is, try and be open to other opinions and understand events happen that change the reality very quickly.
Confirmation bias sounds interesting. But i would put the gun to someone else's head and pull the trigger. Not my own. Because i know that every time i squeeze a trigger the rifle or shotgun or pistol goes bang. Strange, every single time. Peter :pop:
Why? Because when economic activity is slowing, as evidenced by rising unemployment and lower inflation, the RBA steps in and cuts interest rates.
People don't really know if a million dollars is a good price for a house. They do, however, know what the monthly interest payments are like compared to what they are paying for rent or on their current house. This is behavioural economics, considering the relevant price of a good but not the absolute one.
Can you afford to buy a million dollar house with an $800k mortgage when interest rates are at 9.5%? No, it's too expensive.
Can you afford the same house and mortgage when interest rates are at 4.8%? Yes, and you might be prepared to pay $1.1m for it. Or even $1.2m
No there isn't much of a lag.
trvllr
14 Sep 2013, 10:27 PM
classic case of confirmation bias.
it happened like this a few years ago, so it will happen the same way again.
until it doesn't.
just like the story of the turkey who gets fed by the farmer every day for a year. the turkey thinks the farmer will continue to feed him like he has. Until the day he doesn't.
I suppose the moral is, try and be open to other opinions and understand events happen that change the reality very quickly.
I don't see how this can be called confirmation bias. Do you even know what that means?
See my previous post for an explanation of why it happens
Why? Because when economic activity is slowing, as evidenced by rising unemployment and lower inflation, the RBA steps in and cuts interest rates.
People don't really know if a million dollars is a good price for a house. They do, however, know what the monthly interest payments are like compared to what they are paying for rent or on their current house. This is behavioural economics, considering the relevant price of a good but not the absolute one.
Can you afford to buy a million dollar house with an $800k mortgage when interest rates are at 9.5%? No, it's too expensive.
Can you afford the same house and mortgage when interest rates are at 4.8%? Yes, and you might be prepared to pay $1.1m for it. Or even $1.2m
No there isn't much of a lag. I don't see how this can be called confirmation bias. Do you even know what that means?
See my previous post for an explanation of why it happens
good post, I agree with that although there is usually a lag of up to 6 months, but that can vary. Reactions to interest rate variations can be peculiar, for instance once this buying rush gets underway any initial rate rise will increase the rush rather than dampen it, but if they increased rates now before this boom really gets underway nationwide, it will dampen the market except where the market is already hot. It's the fear of missing out that drives counter intuitive behaviour. People who are marginal buyers who have been on the cusp of buying suddenly buy almost anything because prices may slip beyond their ability to borrow and repay, which is often a mistake. But what can you do, property ownership has been tattooed onto our frontal lobe. We should run courses in tattoo management.
Any expressed market opinion is my own and is not to be taken as financial advice
The level of delusion in our society is greater I believe than at any time in history, because in the face of logical outcomes from dire established facts, people with a vested interest just Jam their heads in the ground like Ostrages and pretend it just aint so. In years past people would rise to a challenge and behave rationally, but not any more.
A decade or more ago the Prime Minister of the day told the Australian public that pensions would soon disappear an that they needed to amass personal super to be able to live in retirement. Since that day the level of welfare spending in this country has skyrocketed. Forget old age pensions, they are a drop in the bucket compared to sole parents and carers and disabled "genuine or not" and special payments to new refugees that can amount to $50,000 pa. per family. It is out of control, and every effort to reduce it fails.
This leads to an obvious conclusion, that at some point in the future the government will either default on the majority of these or we will be struck with a hyper-inflation that will essentially have the same end result. We have already reached the point where for many low wage earners it makes more sense to be on welfare and do a day or two's work a week. That is one reason why the unemployment figures are so low.
To believe that a nation of poverty stricken renters are going to be able to funnel hundreds of millions of dollars a week into the pockets of the millions of landlords that this nation now boasts is ridiculous. There is now a vast oversupply of rental units compared to what will be actually needed when our economy re-balances with the rest of the world's economies. Supply and demand will dictate, and over the last 15 years there was a huge demand for residential investment properties, greater than at any time in history. That demand was met by the fact that investors could outbid FHB's and by an unprecedented construction boom.
Now these 2 have past. Sales are down because prices are too high for many potential investors and they are scared about future prospects for the market. The only reason many bought in the first place was because houses had gone up in price for 15 years. It looked like a win win investment, but now that it has become obvious houses can fall for years and years it is too risky for many. That is why we had a collapse in construction. Demand vanished post GFC. It had nothing to do with builders struggling to get credit. People just didn't want to buy rentals in the far flung bush and FHB had been priced out. This leaves millions of new landlords facing repayments for 20 or 30 years with falling demand for their assets. Either from rental returns or actual sales. They are trapped with enormous unrecoverable debts at the worst possible time in history.
The past 5 years was not a correction. It was just the opening round in a global re-set of economic activity and wealth.
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