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  1. #1
    Join Date
    May 2007
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    Wellington
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    1,520

    Default Who says house prices don't fall?

    US house market fall 'new blow'

    5:00AM Wednesday January 30, 2008


    Purchases of new homes in the US unexpectedly fell to a 12-year low in December, ending the worst sales year since records began in 1963.
    Sales decreased 4.7 per cent to an annual pace of 604,000, the Commerce Department said yesterday.
    The median price dropped 10 per cent from December 2006, the most in 37 years.
    The dollar extended its drop as the figures spurred speculation the Federal Reserve will keep reducing interest rates.
    "Today's numbers are a new blow," said Chris Rupkey, a senior financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd, who forecast a decline. "The broader economy is very, very close to falling over the edge. The Fed really needs to think aggressively."
    - BLOOMBERG

  2. #2
    Join Date
    Sep 2007
    Location
    Auckland
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    8,350

    Default

    And still more to come I reckon.

    This is all playing out in super slow time. A friend of mine who trades shares on world markets for a living sent me this link saying is was very significant, more so than the 50 points cut again today. http://www.bloomberg.com/apps/news?p...Lw4&refer=home

    I'm not sure why it is so significant, but maybe we're yet to find out!

    David

  3. #3
    Join Date
    Jun 2005
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    Auckland
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    5,086

    Default

    DFTBA

  4. #4
    Join Date
    Sep 2003
    Location
    High up above and deep down under
    Posts
    10,915

    Default

    S&P Lowers or May Cut $534 Billion of Subprime Debt (Update1)

    By Jody Shenn

    Jan. 30 (Bloomberg) -- Standard & Poor's said it cut or may reduce ratings of $534 billion of subprime-mortgage securities and collateralized debt obligations as default rates rise.

    The downgrades may extend losses at the world's banks to more than $265 billion, S&P said.

    The securities represent $270.1 billion, or 47 percent, of mortgage bonds rated between January 2006 and June 2007, S&P said today in a statement. The New York-based ratings company also said it may cut 572 CDOs valued at $263.9 billion.

    The downgrades may increase losses at European, Asian and U.S. regional banks, credit unions and the 12 Federal Home Loan Banks, S&P said. Many of those banks haven't written down their subprime holdings and S&P said it will start reviewing their ratings.

    ``There could be rating actions for selected banks, especially for those that are thinly capitalized,'' S&P said.

    Some of the largest global banks have already taken ``significant'' losses and they aren't likely to have more writedowns, S&P said.

    http://www.bloomberg.com/apps/news?p...nz0&refer=home
    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  5. #5
    Join Date
    Sep 2003
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    High up above and deep down under
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    10,915

    Default

    Hi Cube

    So:
    Historically, median home prices and median incomes have always shared a close relationship. From the mid-1970s to 2001, the historical ratio of median housing value vs. median household income was consistently between 2.6 and 3.0.
    If this was applied to NZ what should I prices be then?

    It would be interesting to know what the historical ratio of median housing value vs. median household income has been in NZ?

    Regards
    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  6. #6
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    Jun 2005
    Location
    Auckland
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    5,086

    Default

    One for Kieran, I imagine.
    DFTBA

  7. #7
    Join Date
    Jun 2005
    Location
    Auckland
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    3,936

    Default

    Quote Originally Posted by Muppet View Post
    It would be interesting to know what the historical ratio of median housing value vs. median household income has been in NZ?

    Regards
    If you check the graphs at the Back of Kieran's property cycle book. you can see affordabilty, wages etc all graphed against house price growth.

  8. #8

    Default Correction-reversion?

    Quote Originally Posted by cube View Post
    Great article, cube. Thanks.

    There's a school of thought that fundamentals (like the ones this article refers to) always re-assert themselves (the classic 'reversion to the trendline')....
    it's just a question of how rapidly this happens and which factor gives up the most ... Olly Newland has stressed that landlords can't just raise rents willy-nilly in response to increased costs because tenants' incomes aren't rising enough and they just can't afford it.

    Here's a short clip of Westpac housing market research economist Dominick Stephens speaking at our Market Update evening last month (Dec07)... quite interesting to hear how the economists' analysis of acceptable investment returns were frustrated by borrowers' strategies for keeping their mortgage rates low ... until the day of reckoning.
    http://www.empowereducation.com/down...pdate_clip.mp3 (MP3 2MB)
    Peter Aranyi
    Blog: www.ThePaepae.com

  9. #9
    Join Date
    Jan 2004
    Posts
    1,545

    Default This is interesting too

    From a local - Part 3 yet to come

    Now Here’s a Real Bubble!-Yarns from Down Under...Part 1
    The Greatest Bubble of All!
    by John Needham, The Daniel Code Report | January 16, 2008
    Print
    How it began

    http://financialsense.com/fsu/editor...2008/0116.html





    Uridashi! The Bubble Buster
    Yarns from Down Under, Part 2
    by John Needham, The Daniel Code Report | January 29, 2008
    Print
    The story so far

    Being hit by a bus is usually an act of fate which with hindsight can be seen as avoidable. Standing in front of a bus on a dark, rainy night and watching it barrel down the highway towards you at high speed is an act of either suicide or stupidity. It doesn’t happen often yet this is precisely what is happening to the great housing bubble Down Under!!

    The common factor in all notable financial catastrophes is that they seem to be of the “OOPS-Sorry” variety, which is explainable if not understandable by sober persons after the act. To see and understand the imminent catastrophe before it cracks is a rare opportunity.

    Long Term Credit Management had an oops-sorry episode when it turned out that the Nobel Prize winning Scholes-Black pricing formula for vanilla options (nothing to do with ice cream folks), had a problem. The problem was that it didn’t actually work as advertised. Mortgage backed securities are still having their oops-sorry moment. We now know that those AAA ratings didn’t actually mean what they said.

    http://financialsense.com/fsu/editor...2008/0129.html


    I've said all along to watch the carry trade and the JPY/NZD!
    Find The Trend Whose Premise Is False - Then Bet Against It

  10. #10
    Join Date
    May 2007
    Location
    Wellington
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    Default

    The volatility in the dollar is amazing, it has been going up and down 0.50 cents every half hour....at some point even against the $US it will severley correct.

    Carry trades work well when the $NZ stays steady or goes up steadily, if it drops a good sum at all some of those funds lose millions.


 

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