The Doom And Gloom Is Laughable

[Mighty Mouse]

wow how right u are, recession?, what recession. stand by to invest. this is boom time for me.............

Caution is still required. Although stock prices are looking very attractive right now, as compared to what they were about one year ago, prices may still fall further before gaining support.

Prices may then bounce around that support level for years before they head higher and provide good profits for you.

It is more prudent to ensure that the market (or market sector) is in full recovery mode before buying in. You may not get the lowest price available but you will still be in on the upswing. Bottom picking is much too difficult to accomplish.

I do however, expect to see a good bounce over the next few weeks. I hesitate to say "months." It will only take one more major lending institute to announce huge losses and the market could go into free fall.

[david96]

In Australia for example, our house prices double every ten years.

correction! should read "have doubled every ten years." i stand of course corrected if you can look into the future

Australia.

Wages and salaries increase about 3% per year, to purchase a house priced at $300,000 one needs an income of $100000 a year.

Speculators, no deposit buyers, morgage"brokers", lax lending policies by Banks and non regulated financial sources, and the borrowing on the "capital gain"of an asset have been some of the problems. There are others including shortage of land and the high cost of developing land with the infrastructure that is required by governments nowadays.

[PeaceBlondie]

Australia.

Wages and salaries increase about 3% per year, to purchase a house priced at $300,000 one needs an income of $100000 a year.

Okay, this is eighth grade math, or simple Excel spread-sheeting skills. If wages increase 3% a year and housing increases 7.2% a year, at the end of twenty years, wages have increased 80.6%, and housing has quadrupled. Johny and Mathilda cannot buy a home. You cannot sell your home. My sister in Orlando cannot sell her home at its inflated 'value.'

[Mighty Mouse]

Wages and salaries increase about 3% per year, to purchase a house priced at $300,000 one needs an income of $100000 a year.

Australian private sector workers enjoyed a 1.3 per cent ordinary time earnings pay rise in the February quarter (2007) to $1041, with their full-time wages growing at an annual rate of 3.5 per cent.

Public sector wages grew by 0.1 per cent to $1,192.20 for an annual rise of 2.3 per cent.

First home buyers, who rely on their wages to purchase a home, are finding it very difficult to get into the housing market.

Most will therefore need to be very good to their parents and hope that their inheritance money will allow them to get out of the rental market.

Currently, the auction clearance rate for homes in Sydney, is running at a little over 50%. (It slowed down from about 62% just before the Reserve Bank started raising interest rates) Buyers are mostly those who already own a home and are either downsizing as they age, or upgrading as their family grows.

In this regard, wages has little to do with transferring from one home to another....unless of course the upgrade is substantial.

The trend seems to be NOT to sell the family home but rather to renovate/extend it.

Edited March 31, 2008 by Mighty Mouse

[siamamerican]

Australia.

Wages and salaries increase about 3% per year, to purchase a house priced at $300,000 one needs an income of $100000 a year.

Okay, this is eighth grade math, or simple Excel spread-sheeting skills. If wages increase 3% a year and housing increases 7.2% a year, at the end of twenty years, wages have increased 80.6%, and housing has quadrupled. Johny and Mathilda cannot buy a home. You cannot sell your home. My sister in Orlando cannot sell her home at its inflated 'value.'

It simply couldn't continue and now we are in a correction. As most corrections, this will probably over correct. It has happened time and time again. You've seen it many times in Texas ( your home state ) over the last 50 years. This time around, it might be a little worse than previous cycles. If you purchased a home pre 2000, you are still substantially in the money. When almost everyone feels housing is a sure thing, then it probably isn't the time to buy; unless you plan on holding the house for 5-10 years.

A record number of first time homebuyers purchased homes in the three years prior to 2006 and now a record number of those buyers are foreclosing. The experienced buyers, people like my parents, are doing just fine. Sure they've last lost 20% the last couple of years, but there house value is 9x of what it was in 1974.

If I was planning on living in the US, I would definitely purchase a home in a the next two years, knowing that a few bad years were probably ahead. I'm not smart enough to pick a bottom, but I can figure out when the market is extremely overpriced and that is why after to moving to California, I didn't purchase a home the last three years.

[david96]

Australia.

Debtland

Reporter: Stephen Long

Broadcast: 31/03/2008 ABC TV. "Four Corners Programme."

Mortgages doled out to people on disability support pensions; loans to refugees with no English and no jobs that leave their families with next to nothing to live on; home loans so large they push borrowers below the poverty line…

This isn’t America’s sub-prime meltdown – it’s Australia’s debt debacle, the legacy of a credit binge that’s sent household debt through the roof and lending standards through the floor. Now the hangover is kicking in.

As many as 300,000 Australian households may be at risk of losing their homes. It mightn’t take much – another rate rise or two, a family illness or maybe just the car breaking down – to send people under. And for thousands more who are better off but feeling the pressure, this credit crisis is getting too close to home.

Dianne and her family are frontline casualties. Their home is being repossessed after constant refinancing landed them with two mortgages, one at 10 per cent and another – on terms they didn’t understand - at 20 per cent.

Four Corners meets them as they despairingly pack their belongings and give up the keys. Why did they take out loan after loan? "Because they keep giving them to us," is Dianne’s blunt reply.

It’s not just fringe lenders but also big banks which have pushed unaffordable credit. "We lent to whoever we could and as much money as they wanted," admits a former bank credit salesman.

Four Corners reveals how one major bank dished out unsustainable loans to numerous refugee families in one area. Some had no English and no job. In one such transaction a nine-year-old girl acted as interpreter. Elsewhere a disabled pensioner tells how her welfare cheque and small part time wage were enough for another bank to lend her $200,000. She is now in penury.

These cases exemplify how lending standards have slackened. Not long ago the rule of thumb was that mortgage payments should not exceed 30 per cent of gross household income. Now lenders leave borrowers teetering on the poverty line.

Mortgage stress is compounded by plastic debt. "The banks are just handing out money on credit cards like there’s no tomorrow… It’s quite terrifying to think that the average household… now has three months of their disposable income on a credit card balance," says one analyst.

All the rage now are store-branded cards offering in-house credit with zero to pay for several years – then, typically, punishing interest takes effect. More than 10,000 stores offer these cards and many shoppers have several of them - but behind nearly all of them is one global financial colossus.

Many Australians have gone deep into the red to fund a newfound love affair with the stock market. The amount they have borrowed to buy shares now equals the total they have racked up in credit card debt. And as Four Corners discovers, when the market plunges and a margin call comes, some people are just reaching for the plastic…

Reporter Stephen Long surveys the human wreckage of the household debt crunch and looks at the key players and tactics behind recent aggressive lending. Long’s disturbing report also throws doubt over the data that banks rely on to make crucial lending decisions.

[david96]

And here is a copy of the transcript of the above programme.

http://www.abc.net.au/4corners/content/2008/s2203896.htm

[LaoPo]

If the above is true for just 50% I find it quite alarming.

Ozzies...any comments ?

LaoPo

[david96]

If the above is true for just 50% I find it quite alarming.

Ozzies...any comments ?

LaoPo

I viewed the programme and GE Finance was the main player behind the store cards. The Commonwealth bank was one of the banks mentioned for "aggressive "lending.

[LaoPo]

If the above is true for just 50% I find it quite alarming.

Ozzies...any comments ?

LaoPo

I viewed the programme and GE Finance was the main player behind the store cards. The Commonwealth bank was one of the banks mentioned for "aggressive "lending.

I see;........Banks....."legalized Mafia" as a Banker once told me himself...

LaoPo

[BEENTHEREDONETHAT]

Dosen't that have a very familiar ring to it, only in the US they called it the subprime crisis. So how does this differ, besides being in Australia? And more importantly what happens next?

Just for interest I recently read that the average house in new Zealand required 80% of an average wage to make the payments.

Aren't governments keeping an eye on things anymore? It would appear not.

[david96]

Dosen't that have a very familiar ring to it, only in the US they called it the subprime crisis. So how does this differ, besides being in Australia? And more importantly what happens next?

Just for interest I recently read that the average house in new Zealand required 80% of an average wage to make the payments.

Aren't governments keeping an eye on things anymore? It would appear not.

Here is an example. Australia.AUD. Loan $300000./ 25 years/ 9.25%/ pymts monthly each $2569/ after 10 years $50373 has been paid off the principal.

Average gross income per month $4350 then deduct income tax.

Add credit card debt, store card debt, car loan. Then living expenses on top of that. Allow for interest rate rises in the near future, no reserves in savings.

Edited April 1, 2008 by david96

[siamamerican]

Dosen't that have a very familiar ring to it, only in the US they called it the subprime crisis. So how does this differ, besides being in Australia? And more importantly what happens next?

Just for interest I recently read that the average house in new Zealand required 80% of an average wage to make the payments.

Aren't governments keeping an eye on things anymore? It would appear not.

You don't actually believe this do you? What is your source?

The average house doesn't consume 80% of an average wage earner in NZ. This is why I started this topic. The doom and gloom is laughable and your post is good example.

Edited April 1, 2008 by siamamerican

[longway]

Dosen't that have a very familiar ring to it, only in the US they called it the subprime crisis. So how does this differ, besides being in Australia? And more importantly what happens next?

Just for interest I recently read that the average house in new Zealand required 80% of an average wage to make the payments.

Aren't governments keeping an eye on things anymore? It would appear not.

You don't actually believe this do you? What is your source?

The average house doesn't consume 80% of an average wage earner in NZ. This is why I started this topic. The doom and gloom is laughable and your post is good example.

according to this link he is right. unless of course its an aprils fool joke.

http://www.stuff.co.nz/blogs/showmethemone...ing-dont-panic/

Edited April 1, 2008 by longway

[LaoPo]

The NZ house market looks not too good.

If the mortgage % rate -2 years fixed- is between 7 and 9% (now climbing to 10%) in the past 2 years, one doesn't have to be a genius to calculate that trouble is there and a lot of house owners have to say bye bye to their house in the very near future.

Australia:

I just got an answer to my question from a friend who lives and does business in Australia. Business is 'quiet' as he wrote and they are renting out their house in Byron Bay as the 'need the money'.

He never said that to me before....

LaoPo

[siamamerican]

Dosen't that have a very familiar ring to it, only in the US they called it the subprime crisis. So how does this differ, besides being in Australia? And more importantly what happens next?

Just for interest I recently read that the average house in new Zealand required 80% of an average wage to make the payments.

Aren't governments keeping an eye on things anymore? It would appear not.

You don't actually believe this do you? What is your source?

The average house doesn't consume 80% of an average wage earner in NZ. This is why I started this topic. The doom and gloom is laughable and your post is good example.

according to this link he is right. unless of course its an aprils fool joke.

http://www.stuff.co.nz/blogs/showmethemone...ing-dont-panic/

April fools or you didn't read the article. No where in the article does it state that The average house consumes 80% of an average wage earner in NZ. You don't have to be an economist to call BS on the claim of the earlier poster.

Interesting article; reminds me of California and it might be a great opportunity to short builders in NZ.

[Mighty Mouse]

The "average" household debt in NZ should not be anywhere near 80%. No doubt there would be some poor soles who can't manage their own finances and may be putting most of their earnings into paying off credit cards etc, but they do not represent the 'average' of the population.

Last financial year in Australia, households were spending, on average, a record 11.9 per cent of their income servicing debt following interest rate increases. Since then, there have been several more interest rate hikes, resulting in many property foreclosures due to the owners' inability to make monthly mortgage payments.

The average Aussie household is now supporting debts that are 58.7 per cent greater than their total annual income. This is an increase from 41.3 per cent over the previous four years.

Credit card debt rose at its fastest rate in three years, increasing by 8 per cent to just under $40 billion. (2007 statistics)

On the positive side, the Reserve Bank's figures on household finances show that assets are rising faster than debt. Households now have assets, including housing, superannuation and other investments, that are equal to eight times their annual income.

This is a capital gain over the past three years equivalent to 60 per cent of a full year's income.

[david96]

Dosen't that have a very familiar ring to it, only in the US they called it the subprime crisis. So how does this differ, besides being in Australia? And more importantly what happens next?

Just for interest I recently read that the average house in new Zealand required 80% of an average wage to make the payments.

Aren't governments keeping an eye on things anymore? It would appear not.

You don't actually believe this do you? What is your source?

The average house doesn't consume 80% of an average wage earner in NZ. This is why I started this topic. The doom and gloom is laughable and your post is good example.

Not difficult at all in Australia Average wage $1000, deduct income tax and medicare levy then take 80% of net income.

You will be very close to $600 a week.

[david96]

3 years ago warnings were given concerning consumer debt including housing prices in Australia.

A friend of mine applied for a bank loan of $80000 in 2005, he was told that he could have $250000 by the bank, no problem. He said no, I only want $80000 and that was it.

In 2006 the CBA bank offered to give me $25000 limit on my credit card, it was already approved just needed a keystroke by the bank. I declined and lowered my limit to 1 months salary and maintain a zero balance, just use it when there is no other way of payment. I hear no more from my bank and that is the way I like it. I informed them that they were not acting in a responsible manner as far as lending was concerned.

Lending policies by financial institutions need to be brought back to the 1960s standards.

[LaoPo]

3 years ago warnings were given concerning consumer debt including housing prices in Australia.

A friend of mine applied for a bank loan of $80000 in 2005, he was told that he could have $250000 by the bank, no problem. He said no, I only want $80000 and that was it.

In 2006 the CBA bank offered to give me $25000 limit on my credit card, it was already approved just needed a keystroke by the bank. I declined and lowered my limit to 1 months salary and maintain a zero balance, just use it when there is no other way of payment. I hear no more from my bank and that is the way I like it. I informed them that they were not acting in a responsible manner as far as lending was concerned.

Lending policies by financial institutions need to be brought back to the 1960s standards.

You acted and behaved very wise !

But, not all people are the same...a lot are not, unfortunately.

And, I fully agree that (worldwide) Banks should go back to old fashioned banking...but the banks won't agree with you and me.

They won't make a penny anymore...

Governments should promote 'saving' again. Billions of people don't even know anymore what that is....To Save Money...

But, if all the people in the world would start doing that tomorrow, we'll be in a recession the day after. Shops wouldn't sell (luxury) goods anymore.

LaoPo

[Mighty Mouse]

Governments should promote 'saving' again. Billions of people don't even know anymore what that is....To Save Money...

But, if all the people in the world would start doing that tomorrow, we'll be in a recession the day after. Shops wouldn't sell (luxury) goods anymore.

LaoPo

Very true. Governments want their people to spend spend spend.

If they wanted us to save, they should decide not to tax savings.

With Aussie interest rates rising, the return on my term-deposit money is growing nicely....but then the tax man puts his hand into my pocket to take his share.

[Naam]

Governments should promote 'saving' again. Billions of people don't even know anymore what that is....To Save Money...

But, if all the people in the world would start doing that tomorrow, we'll be in a recession the day after. Shops wouldn't sell (luxury) goods anymore.

LaoPo

Very true. Governments want their people to spend spend spend.

If they wanted us to save, they should decide not to tax savings.

With Aussie interest rates rising, the return on my term-deposit money is growing nicely....but then the tax man puts his hand into my pocket to take his share.

the latest development indicates "no more AUD rate hikes".

Edited April 2, 2008 by Naam

[Mighty Mouse]

the latest development indicates "no more AUD rate hikes".

The whispers in the corridors indicate that there may be another hike next month. Inflation is currently running higher than the Reserve Banks' upper limits.

If so, I'll be able to buy you two beers at our 2018 Walking Street meeting.

[siamamerican]

Governments should promote 'saving' again. Billions of people don't even know anymore what that is....To Save Money...

But, if all the people in the world would start doing that tomorrow, we'll be in a recession the day after. Shops wouldn't sell (luxury) goods anymore.

LaoPo

Very true. Governments want their people to spend spend spend.

If they wanted us to save, they should decide not to tax savings.

With Aussie interest rates rising, the return on my term-deposit money is growing nicely....but then the tax man puts his hand into my pocket to take his share.

Most the electorate doesn't save which makes it difficult to pass legislation that doesn't tax savings. Most Americans wouldn't save much more than they do currently if those savings weren't taxed. I would benefit because I save 80% of my income, but 80% of Americans would see little to no tax savings. With a little foresight, you can avoid most taxes on saving/investments in the US; not sure if that applies to other countries.

[johnnyk]

Peter Peterson, Wall St. heavyweight, was on TV last night and he said a generation ago Americans were savers, putting away 8-9% of their income. He ascribed some of the problem today to a boomer-yuppie mentality that "wants it all and wants it now".

[egg6447]

Lending policies by financial institutions need to be brought back to the 1960s standards.

You acted and behaved very wise !

But, not all people are the same...a lot are not, unfortunately.

And, I fully agree that (worldwide) Banks should go back to old fashioned banking...but the banks won't agree with you and me.

They won't make a penny anymore...

Governments should promote 'saving' again. Billions of people don't even know anymore what that is....To Save Money...

But, if all the people in the world would start doing that tomorrow, we'll be in a recession the day after. Shops wouldn't sell (luxury) goods anymore.

LaoPo

wow a first. you did say in another post that you did have a opinion of your own. just never seen it , well done and keep it up. much more intresting than your cut and past.

[Naam]

the latest development indicates "no more AUD rate hikes".

The whispers in the corridors indicate that there may be another hike next month. Inflation is currently running higher than the Reserve Banks' upper limits. If so, I'll be able to buy you two beers at our 2018 Walking Street meeting.

20.30 local time! i'll be waiting

[david96]

the latest development indicates "no more AUD rate hikes".

The whispers in the corridors indicate that there may be another hike next month. Inflation is currently running higher than the Reserve Banks' upper limits. If so, I'll be able to buy you two beers at our 2018 Walking Street meeting.

20.30 local time! i'll be waiting

The Australian Reserve Bank has left the MLR at 7.25%, but there may be rises later on if consumer spending and inflation is not reduced.

[david96]

4/4/2008, Australia.

Inflation rate 4%, Unemployment rate 4%. Credit card debt $42,000,000,000. Persons in the workforce 10,500,000.

Ref. ABS.

[LaoPo]

4/4/2008, Australia.

Inflation rate 4%, Unemployment rate 4%. Credit card debt $42,000,000,000. Persons in the workforce 10,500,000.

Ref. ABS.

Is that 42 Billion AUD ?

Are you sure....? On 20 Million people (you may deduct 4 million, being under 15) leaving 16 million.

16 Million people having AUD 42 Billion in Credit Card Debts.....

I suppose that number can even be a lot lower, if one deduct the elderly above, let's say 75, who won't spend a lot on CC's.

If I calculate it would come to an average of AUD 3,000/PP, and that's just credit card debts....

That's a lot of debt and a lot of problems with a lot of interest...

LaoPo