Want a house bust = get a recession

[kincella]

benjamin...its good to get another view...I actually stopped spending in June 07...had my last big spend up in may that year....

regarding the 2% ...in my case and most of the property investors I know...and I know quite a few...they are baby boomers ....they are all quite conservative...most of the houses are under the 400k mark....no problem with diminishing values there...in fact that is the market that is quite hot...
all have less than 50% debt on the IP's, have substantial cash for any inevitable need....and secure jobs....
we are all very similar...we stopped spending and conserved our cash, but with interest rates going down..I am currently saving about 15,000 pa on the rate cuts alone...and expecting another similar saving this year....
I equate that to having an extra part time income....saving 30,000 pa a year...
have been thinking about spending again...do my bit for the economy and help people stay in jobs....just cannot think of anything I need....I may want a new car
here is the 20 year chart for Australian props...1986 -2006.....

http://www.aph.gov.au/library/pubs/RN/2006-07/07rn07.pdf

cannot find my 100 year chart...but basically it just goes up in an incline from say 5000 to 300,000....like any other chart there are little drops but off it goes again.....
I think there is a real knee jerk reaction out there....but as news today, the banks are going to pass on the rate cuts to business...and the govt has promised they will get funding for business if the banks wont do it....

saw that on tv...said write to the minister and he will guarantee it for you
http://www.news.com.au/business/story/0,27753,25158571-5017672,00.html

I have posted several items on this forum today...all positive for property
cheers

 

[Uncle Festivus]

Temjin....
It does not really worry me....am self employed and part time retired....have sufficient funds and income, am not over committed on debt...my housing debt is less than 40% of the market values...
the houses I own are in the under 400k range...aka fhb range..so if I did want to off load...it would be easy...
I am a realist...been living thru the past recessions and crisis since the 70's...
it a been there done that attitude for me.....I am basically immune to it...

its all the others that worry me...they are worrying unnecessarily....and bombarded with fear and scaremongering.....
some people will lose their jobs and suffer hardship....but not everyone is in that boat....
some make it sound like its going to be so bad and last for years....
there is probably a year of pain for some.....but a year of wonderful things for property owners with a mortgage.....interest rates down to 2% sometime this year...absolutley stunning for some of us

Where to begin....? I think you are missing the big picture here because, as are most property permabulls, you/they live in an artificial world supported by taxpayers and excessive credit creation, with a little bit of supply/demand brought about by immigration. A pampered lot who will winge to the government again when the going get's tough or the golden mantra 'property always goes up' fails spectacularly this year.

The big picture and why it's different this time ie you won't be immune to it, is that property has basically gone up because of money/credit availability, and the real estate 'valuation' bubble is the by product, not because of any intrinsic demand. Even the skilled immigration program is a by product of excess credit creation, causing a commodities bubble ie the cycles start with central banks creating excess credit - all that flows from this eventually reverts to 'fair' value but only after becoming 'oversold. RE is not immune to this, it's a matter of when not if?

GM is a good example as to why we have a GFC. It realised years ago that there was no money in actually making things, so it became a money shuffler, and the trend caught on in a big way ie globally, financed by a country that has been stagnating for over a decade now - Japan - the Yen carry trade.

So what you are basically saying is that Aus is immune from all this? In a globalised world the hope is that a reformed communist state will bail out the capitalist system? There is nothing 'normal' about this cycle; there are unprecedented events happening which threaten the very existance of cycles as we have previously known them.

The chart is for the US, but with the rest of the world following the same path, can you see the outcome being anything else than several years of wealth destruction and nothing but massive debts to show for it? If anything, some people are far too optimistic and trusting of the very same people who got us into this mess in the first place.

Have you even considered the probabilities of things getting much worse before they get better, possibly years/decades from now ie what if you are wrong, have you planned for that outcome?

 

[Temjin]

its all the others that worry me...they are worrying unnecessarily....and bombarded with fear and scaremongering.....

Yes, but aren't you making the assumption that those who preached doom and gloom are all depressed and worrying unnecessarily?

Using myself as an example, I may be expressing my bearish predictions (global economy, etc) all over the place and that the world is heading for the next great depression, but that does not mean I am permisstic about my own well being.

Based on the "doom and gloom" threads/posts on this forum so far, I don't see a correlation between these "posters" and their behaviours.

I am a realist...been living thru the past recessions and crisis since the 70's...
it a been there done that attitude for me.....I am basically immune to it...

The problem is that you only known the past recessions and crisis since the 70s. You never lived through the great depression before, and neither for any of us.

Even Warren Buffet himself is admiting this crisis is much worser than he thought and that he does not know when it will end.

Bring a realist myself too, there are plenty of statistic that shows certain things are worse than the great depression. These are FACTS, not predictions.

So no one can guarantee that this crisis would only be a "typical recession" and everything will be back to normal again. But of course, everything WILL be back to normal again, but definitely not before going through things that we may never had experienced before.