Singlefish, an interesting illustration to the current issues of most family households with a mortgage -two incomes are required to service the debt. More interesting how increasing unemployment could have a potential multiplier effort on defaults over the previous recession.
In the previous recession were it was not prevalent to require two incomes to service the debt, 10% unemployment would have resulted in 10 mortgage defaults in Singlefish's simple example. With two incomes required, this defaults to 20.
It would be interesting if someone had some stats on the number of people of working age in 1990 who were employed compared with today. I assume that that
Kincella, I agree the figures look very small, but if Singlefish's example is somewhat correct, then 1% change in unemployment in 1990 would have had a smaller impact on mortgage defaults than a 1% change today. I think this same situation was also seen when interest rates increased to 9%, it had a similar effect to when interest rates were in their teens in the 90's.
If two incomes are required to support the debt to acquire a home, is it affordable?
There must be a tipping point whereby unemployment rising results in realestate prices decreasing due to increased defaults and fire sales. Eg. 5% unemployment <1% defaults, 10% unemployment <4% defaults, 20% unemployment defaults - a hell of a lot.
As unemployment increases, employees are not the only group under stain, business owners are generally not as affluent and not looking to invest profits in any other asset than keeping their business alive as it generates them their greatest cash flows.
I know of several small business owners that would love to take advantage of some realestate buying opportunities at the moment but are more concerned with keeping their often well established business afloat through as the RBA announced, a recession.
I think Singlefish's example presents the idea that if two incomes are needed to services a mortgage, then an increase in unemployment will see greater mortgage defaults than seen in the 90's which leads to the issue, is housing affordable and are prices going to see a correction due to the current economic situation?
Went to several auctions today in South & Port Melbourne, good results for those properties with realistic prices, just below peak prices. Quite a few discerning buyers around, just no one being silly.
Cheers