Nobel Prize-winning economist Joseph Stiglitz told a Sydney forum on Friday that “There is the beginning of a cause of concern, and it would probably be prudent to take some actions” on our housing bubble. Professor Joseph Stiglitz was a former world bank chief economist.
His predictions could be on the money if mortgage approvals is anything to go by. The ABS has today released Housing Finance Data showing once again finance commitments for owner-occupied housing fell 3.9 percent for the month of June and 28.4% from its peak last year. Economists had only expected a 2 percent drop. The number of approvals have not been this low since 2001.
AMP Capital Investors chief economist Shane Oliver said “It’s basically telling us the housing recovery that we’ve seen over the last 18 months has come to an end,”
CommSec economist Craig James also expressed concern, saying “In the last couple of months, investors had served to prop up the overall market but that wasn’t the case this time around.”
» Forever blowing bubbles – The Sydney Morning Herald, 9th August 2010.
» Home loan approvals weakest since 2001 – Yahoo 7 Finance, 9th August 2010.
This economist is also the same economist who praised Labor for their “good economic management”.
Based on that, I take his opinion with a grain of salt. Any government can have a strong economy by borrowing a $100 million / day.
My preferred economist is Hyman Minsky. He proposes that when you have many years of economic growth speculative bubbles form because people get unrealistic expectations on asset growth and they begin to speculate on their investments.
House prices need to fall, so that investors have a investment yeild which is comparable to other investments (Expecially now that capital returns have stagnated/falling).
Oh, but wait – surely this cannot be right! After all “there’s nothing as safe as bricks and mortar”, “house prices ALWAYS double every 7 to 10 years”, “best buy NOW or you’ll be locked out of the Market forever”, and so on.
Looks like a few out there are about to have a lesson in the rules of basic investment – along the lines of “DON’T put ALL your eggs in the one basket”.
Would have to agree with you Adam, Labor are trying to claim that they are good at running the econ? well I can tell you that if I went out and borrowed 100 million / day and injected that into the econ I would expect one hell of a lot more bang for my buck that they have managed! anyone can look good when they are living on borrowed money the problem now is that as the interest comes due and they can not just keep spending to keep the party going as such, they are living on borrowed time!!
Heard on the news today that the most pricey suburbs here in Melbourne are starting to take a hit, some properties are quoted as having fallen by more than 15% in toorak, now if we had a fall like that in the sharemarket everyone would be claiming the end of the world was upon us.
But because it’s realestate know one wants to even admit to it.
Keep those heads in the sand everyone.
Another interesting story popped up in the AGE today :
http://theage.domain.com.au/real-estate-news/supply-outstrips-demand-as-market-slows-new-research-20100809-11t6i.html
It appears that despite the “under supply” claim touted by experts, the realestate for sale adds are now starting to get rather crowded out there as sellers fail to get their asking price. No doubt we can expect those with significant interest in turn-over to try to continue the under-supply push in vain.
Hi “investors”
the end is nigh ! the end is nigh ! the end is nigh !
Cheers,
Bob (who owns his house for the purpose of living in it)
Who wins in a housing bubble? see: http://www.prosper.org.au/2010/08/10/did-you-remember-to-sell-the-house-today/
Your blog is getting good. Looking forward to more updates as the ponzi economy crashes and burns.