House prices to keep falling for years

Beej · 24 April 2009

MrBurns said:
I think you'll find the removal of the boost will have a big effect on the market PLUS now we have the banks INCREASING mortgage rates so the time may have come for the fall.

Well we shall see.... I think you will proven wrong, as have all the great house price crash pundits thus far. Median prices moving UP right now pretty much everywhere except Perth/Brisbane.....

Re mortgage rates, a couple of them tweaked FIXED rates upwards - variable is still heading down mate. Alan Kohler on Business Spectator today predicts 2% cash rate.... So let's see who's right on that one as well, but again I think you will be proven wrong if you think variable interest rates are heading up anytime soon!

Cheers,

Beej

kincella · 24 April 2009

waiting on the paperwork to lock in half the mortgage at 5.59 for 3 years and leaving half at variables....until I see the bottom ...rams has 6.19 for 10 years

keeping one prop forever, and may change another...hence the 3 year fix only on that one...
saving on interest this year will be about 30,000 on all props
no point locking in if you expect to change earlier...although this case scenario is locking in the low rates....when we expect them to rise later....so the break fees should not apply....knowing the banks they will get around that one
oh and bulls like me will probably buy another...if I can find the bargains...

anyone notice the big increase in the population...my post earlier today
and the other thread ...should I sell...2 br unit unrenovated in toorak at
565k ..... those prices are not dropping...
time will tell

helicart · 24 April 2009

kincella said:
waiting on the paperwork to lock in half the mortgage at 5.59 for 3 years and leaving half at variables....until I see the bottom ...rams has 6.19 for 10 years

keeping one prop forever, and may change another...hence the 3 year fix only on that one...
saving on interest this year will be about 30,000 on all props

how do you save interest by moving from variable to partially fixed when fix averages a 1.25% premium?

no point locking in if you expect to change earlier...although this case scenario is locking in the low rates....when we expect them to rise later....so the break fees should not apply....knowing the banks they will get around that one
oh and bulls like me will probably buy another...if I can find the bargains...

anyone notice the big increase in the population...my post earlier today
and the other thread ...should I sell...2 br unit unrenovated in toorak at
565k ..... those prices are not dropping...
time will tell

below is a comparison of rate scenarios under different economic conditions.....(xls is available by clicking on pic) NPV and nominal figures are fixed minus variable interest over 5 years....

I don't see svr's rising significantly for years....so am staying variable for the time being....

kincella · 24 April 2009

if you are stuck with one of the other players paying 10.4% on a variable..save money going to 5%
reason one is fixed...its my bet against a higher fixed rate down the track....like the big ones did this week
currently the difference in the two rates is .39 ie 5.20 to 5.59
and I am still expecting the variable to go lower....which may bring the other fixed rates lower...and then lock it up for 5-10 years....
and I expect house prices in some cases to rise....
cheap money means one can spend a bit more

CamKawa · 24 April 2009

MrBurns said:
He's backed himself into a corner now , if he drops it the market will plummet if he doesn't it inflates further and will eventually plummet more later.

He will be figuring how to delay this and more handouts till just before the election or call it early, he's worked out that FHBG boosting and cheques in the mail will ensure him success at the polls and the little worm will time it to suit.

I agree with you. He's dug himself into a hole now. If he continues to dig and the finanical crisis comes to a speedy resolution then he will be OK. On the other hand he is fukced. It's a double or nothing choice for Kev.

helicart · 24 April 2009

kincella said:
if you are stuck with one of the other players paying 10.4% on a variable..

ouch...you must have really wanted that property.

save money going to 5%
reason one is fixed...its my bet against a higher fixed rate down the track....like the big ones did this week

yup it is more likely fixed will go up (slowly) in the short to medium term....mainly foreign wholesale funds....

currently the difference in the two rates is .39 ie 5.20 to 5.59
and I am still expecting the variable to go lower....which may bring the other fixed rates lower...and then lock it up for 5-10 years....

I also expect the variable to go lower, and I don't expect it to come up significantly for 1-2 years thus making the breakeven point between fixing and not today, even for 5y, fall in favour of variables imho...

and I expect house prices in some cases to rise....
cheap money means one can spend a bit more

considering the compromises fixing puts on redraws and offset accts, and revals and LOCs, accessing equity for another buy has me staying variable.

good luck to both of us...

kincella · 24 April 2009

no I refinaced at a lower rate...then GE took over the lender and hiked...and then no cuts
the looming problem will be the govt spending.....borrowings, and then our rating drops to AA and the banks will have to pay more...article somewhere today raises this issue

helicart · 24 April 2009

kincella said:
no I refinaced at a lower rate...then GE took over the lender and hiked...and then no cuts
the looming problem will be the govt spending.....borrowings, and then our rating drops to AA and the banks will have to pay more...article somewhere today raises this issue

yeah that's net foreign liabilities business.....public liabilities are low (though Rudd is fast fixing that) but private liabilities are growing.....we really are a nation that cannot internally fund asset prices at current levels, and need foreign money to do so.

As net foreign liabilities go up, we'll lose AAA, and fixed funding will have upwards pressure. Hopefully though, the RBA won't be stupid enough to increase rates to control headline or core inflation...nor attract foreign money to buy govt bonds to pay for Labor stimuli. If not, then variables shouldn't be as effected as fixed.

MrBurns · 24 April 2009

Despite ths blokes name the report is spot on -

http://money.ninemsn.com.au/article.aspx?id=805721

Government warned not to extend first home scheme
24/04/2009 10:30:00 AM
By Stuart Fagg, ninemsn Money

The government has been warned not to cave into public pressure and extend the increased grant for first home buyers amid revelations the scheme has inflated house prices at the bottom of the market.

gfresh · 24 April 2009

CamKawa said:
I agree with you. He's dug himself into a hole now. If he continues to dig and the finanical crisis comes to a speedy resolution then he will be OK. On the other hand he is fukced. It's a double or nothing choice for Kev.

Correction: The whole country will be f'ed if he gets it wrong I've been thinking the same thing recently. He is basically gambling the prosperity of the next few years on this crisis being all over by 2010, and company profits revenues coming back to somewhere near it's old levels. No doubt listening to the same clowns that underestimated this crisis in 2008. Yet even the IMF is saying Australia will cop only 0.6% growth in 2010.

If it's not a fast recovery, Australia will receive higher taxes, higher levies, and high inflation with the added kicker of low growth. All this spending will get him re-elected with an early election, but when the monetary restraints really kick in to pay down this thing, it'll soon wear off on the public in the 2nd term as that is where the nasty decisions will need to be made.

Helicart: I think they will. The RBA was busy doing it in 2007 as imported inflation were the real drivers of inflation, and even then the global crisis was known in many people's eyes. Banks are raising their fixed rates, especially on the longer dated ones, means they know where we're heading. The RBA will also do it to increase bank profitability, and as you say encourage foreign funds. They state their mandate is the financial stability of the economy, but it's also about protecting the probability of the banks, even if they are probably related.

MrBurns · 24 April 2009

There will be no early end to this mess, Microsoft just reported a 32% fall in profit - that's 32%

http://www.abc.net.au/news/stories/2009/04/24/2551763.htm

MrBurns · 24 April 2009

Haven't seen the report but the headline says it all -

http://www.moneymorning.com.au/reports/first-home-buyer-grant.php?gclid=CMG_19rEiJoCFRFWagod1xZuLA

FREE Report: Why the First Home Buyers Grant is a trap that will enslave hundreds of thousands of young Aussies for years and create a home-grown sub-prime nightmare...

Beej · 24 April 2009

MrBurns said:
There will be no early end to this mess, Microsoft just reported a 32% fall in profit - that's 32%

http://www.abc.net.au/news/stories/2009/04/24/2551763.htm

You are a real "glass half empty" guy aren't you Mr Burns? The world, and the US in particular, are in the middle of a nasty credit crisis initiated recession, and a major US based multinational technology firm, which derives it's revenue from both the global corporate sector and the western consumer, still reports a massive quarterly profit of US$3B, which is "only" 32% lower than the previous corresponding quarter in a boom year, and you think that's a really bad result?

I'd say that was a pretty good result for Microsoft under the circumstances! Look at GM, Ford, GE, the US big banks etc etc for a reality check on what "bad" results look like!

Beej

MrBurns · 24 April 2009

Beej said:
You are a real "glass half empty" guy aren't you Mr Burns?
Beej

Beej I know a few people who took the glass half full approach in the past and they're now broke.

You have to wake up and smell the rot, these figures will lead to massive unemployment globally, it will effect everything and it's not really started yet, wait and see how the market reacts over the coming couple of weeks.

I'm as keen as anybody to get out there and do something but I'm not stupid, if you or anybody else is willing to gamble on this market stocks or real estate at present good luck to you, you may get very rich or you may go down badly.

Beej · 24 April 2009

MrBurns said:
if you or anybody else is willing to gamble on this market stocks or real estate at present good luck to you, you may get very rich or you may go down badly.

That's called risk! No risk no reward How much you take on is an individual choice; clearly you are choosing no risk at all, therefore no reward, unless everyone/everything else fails! That's why you see everything in the worst case "glass half empty" context.....

PS: Microsoft stock went up in after hours trading after their results were announced.

Cheers,

Beej

MrBurns · 24 April 2009

Beej said:
That's called risk! No risk no reward How much you take on is an individual choice; clearly you are choosing no risk at all, therefore no reward, unless everyone/everything else fails! That's why you see everything in the worst case "glass half empty" context.....
Beej

Beej clearly you are one of those guys that calls everyone who is cautious a "glass half empty guy" or someone who doesnt take risks, There are risks and I've taken plenty with commercial property and won, there are also stupid punts I dont go in for those, thats a mugs game it really is gambling, when my antenna tells me it's time to go, I do, and I usually win.

helicart · 24 April 2009

Beej said:
You are a real "glass half empty" guy aren't you Mr Burns? The world, and the US in particular, are in the middle of a nasty credit crisis initiated recession, and a major US based multinational technology firm, which derives it's revenue from both the global corporate sector and the western consumer, still reports a massive quarterly profit of US$3B, which is "only" 32% lower than the previous corresponding quarter in a boom year, and you think that's a really bad result?

I'd say that was a pretty good result for Microsoft under the circumstances! Look at GM, Ford, GE, the US big banks etc etc for a reality check on what "bad" results look like!

Beej

Beej, I think Burnsy was implying a 30% drop in Microsoft profit is an indication of how bad the GFC is. The media, corporations, central banks, and govts are all trying to sell the economy up....and yet every couple of weeks they have to come out and revise their fluffy figures and expectations downwards....go figure.....

there's no point being a glass half full or empty in times like this....you get the most objective data you can and interpret it yourself, objectively....with no spruiker spin ....

no one would have been surprised by Microsoft's big profit drop if the govt and media hadn't been snowing Joe Public.

MrBurns · 24 April 2009

helicart said:
Beej, I think Burnsy was implying a 30% drop in Microsoft profit is an indication of how bad the GFC is. .

Correct, another indicator you cant ignore.

Beej · 24 April 2009

helicart said:
no one would have been surprised by Microsoft's big profit drop if the govt and media hadn't been snowing Joe Public.

Sorry but who was surprised? If anything the market seems to have been surprised by how well Microsoft profit is holding up! If you want to pick big corporate results that show how bad things are, go for GM, Citigroup etc - I think using this latest Microsoft quarter to proclaim the sky as falling is drawing a long bow, that's all!

PS: I don't own Microsoft shares.

Beej

MrBurns · 24 April 2009

Beej said:
Sorry but who was surprised? If anything the market seems to have been surprised by how well Microsoft profit is holding up! If you want to pick big corporate results that show how bad things are, go for GM, Citigroup etc - I think using this latest Microsoft quarter to proclaim the sky as falling is drawing a long bow, that's all!

PS: I don't own Microsoft shares.

Beej

I think just to say it's not as bad as the others doesnt make it good, it's freeking awful that a virtual monopoly can drop a third of it's profit, it's first loss since it's inception...........just like that.

Stuff the auto industry, who has got themselves another bailout by the way, we have enough cars but we cant do without the new upgraded mega pixled gigabited Windows V.XXX111, I can't wait

House prices to keep falling for years

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