House prices

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Blowin started the topic in Friday, 9 Dec 2016 at 10:27am

House prices - going to go up , down or sideways ?

Opinions and anecdotal stories if you could.

Cheers

flollo's picture
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flollo Friday, 6 May 2022 at 12:37pm

I think that the currency expansion discussion has been thrown out of the window in the last 48 hours.

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velocityjohnno Friday, 6 May 2022 at 12:51pm

We're looking at the other side of it, from the top

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velocityjohnno Friday, 6 May 2022 at 12:54pm
donweather wrote:

It reduces spending which reduces demand which reduces inflation.

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velocityjohnno Friday, 6 May 2022 at 1:10pm
freeride76 wrote:

Interest rate rises can't suppress demand for non-discretionary items - and if that is where most of the price growth is (which it is) then interest rate rises will be useless.

.

I can easily see the mechanism where IR increases would suppress demand. If housing is non-discretionary, as soon as the IR rises shift the sentiment of buyers and sellers, the sentiment can dramatically alter a market very fast - one recent example being the vignette of Victoria BC in this thread. Pricing/number of listings may follow. Every single chart any of us ever reads, is ultimately a chart of human sentiment toward a particular thing.

I note in your favour BOE minutes suggest supply side bottleneck as well, and they forecast their inflation to reduce from 10% (!) later this year, to much lower in 2025.

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velocityjohnno Friday, 6 May 2022 at 1:14pm

Oh yeah, in addition to the mullets I am seeing more flannel out there. You all know what that means.

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velocityjohnno Friday, 6 May 2022 at 1:24pm

"Housing demand dwindles as buyers take a step back due to rising mortgage rates. Compared with the month before, the number of houses sold in Toronto tumbled 26% in April. Vancouver home sales also slipped. "

https://www.zerohedge.com/markets/toronto-housing-bubble-deflating-home-...

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indo-dreaming Friday, 6 May 2022 at 6:41pm

Decent article

"Help to Buy v Home Guarantee: Will either party’s plans help aspiring homebuyers?

Economist Peter Tulip is blunt when asked if either major party’s home buyer incentives will make a difference. “Yes,” he says. “I think they will both do harm.”

https://www.domain.com.au/news/help-to-buy-v-home-guarantee-will-either-...

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Roystein Friday, 6 May 2022 at 8:19pm

Thanks for your detailed explanations flollo.
Can I ask what’s you do? Academic?

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DudeSweetDudeSweet Saturday, 7 May 2022 at 11:39am

Hold on to your hats folks, the Ponzi scheme/ developer dictated neoliberal multiverse still has 5 dimensions of rorting up it’s sleeve.

Ala Crocodile Dundee:

“ That’s not a laughably corrupt siphoning of taxpayer money detrimental to the good of the public …..THIS is a laughably corrupt siphoning of taxpayer money detrimental to the good of the public!

https://www.independent.ie/irish-news/politics/taxpayers-to-fund-new-120...

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donweather Saturday, 7 May 2022 at 5:45pm
flollo's picture
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flollo Saturday, 7 May 2022 at 9:53pm
Roystein wrote:

Thanks for your detailed explanations flollo.
Can I ask what’s you do? Academic?

I have a Bachelor of Economics followed by an MBA from UNSW. I'm not working in academia full time but I love to do a lot of research. Also, I get involved with a bit of Alumni stuff with UNSW + mentor a few people here and there. Currently, I'm in services infrastructure (water, telco, power, transport) at a corporate level. Prior to the current business, 5 and a half years with Lendlease + a few other good positions and projects prior to that. Also, a bit of startup action and a few private projects on the side with my wife.

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flollo Saturday, 7 May 2022 at 10:11pm

I watched Bloomberg on Friday and in one of the conversations someone mentioned: 'Are we seeing the resurgence of the Phillips curve?' And then they went into a discussion about it enthusiastically. The context here was more about the current state of the global economy, so not just Australia in isolation.

I thought that was quite interesting, I didn't even think about the Phillips curve in a long time. For those interested, the below link explains it nicely.

https://www.econlib.org/library/Enc/PhillipsCurve.html

Basically, it represents a relationship between the rate of inflation and the unemployment rate. This relationship is far more important than the housing vs interest rate discussion. Although we mainly discuss interest rates in terms of housing it is important to remember the broader implications of rate changes. If the Phillips curve holds and the central bank is raising rates aggressively, the outcome will be an increase in unemployment (through reduced inflation). This might bring the housing prices down but it will also reduce the number of people who are able to buy them. So, one needs to be careful with wishing for high-interest rates. What we have now is definitely not normal but what we need to wish for is a modest equilibrium rather than system-wide destruction.

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Patrick Saturday, 7 May 2022 at 10:31pm

Hmmm, we might need more data.
Has velocityjohnno plotted a mullet curve?

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monkeyboy Sunday, 8 May 2022 at 7:48am

We wont get high interest rates - well not High as in double figures. We may get 6 or 7% home/business loans with RBA at 3 perhaps 3.5%. What will have a bigger impact is siphoning off the incredible QE. Recall 2018 when QT was in effect - a 6 month bear market, the FED could stand it no more and reversed course.

There was a window last year to pull the brake on; it wasnt taken, I can understand why. I see a slow down, a pause and then off we go again later in the year, perhaps once the US elections are out of the way, who knows really.

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freeride76 Sunday, 8 May 2022 at 8:21am

I agree Flollo.

People sometimes forget part of the RBA charter is to maintain/aim for full employment.

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oxrox Sunday, 8 May 2022 at 10:49am

Thanks for the link Flollo.

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monkeyboy Sunday, 8 May 2022 at 12:18pm
kaiser's picture
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kaiser Sunday, 8 May 2022 at 5:35pm
freeride76 wrote:

I agree Flollo.

People sometimes forget part of the RBA charter is to maintain/aim for full employment.

There’s some conjecture over this part. What is full employment? It used to be a smidge under or over 5% was considered full employment. Others say it’s the lowest level of unemployment possible that also doesn’t cause inflation to become a problem.

In any case we’re well past the target.

Feels like they’ve reacted quite late, almost like they’re wanting to see just how low they can get the unemployment rate. Just for shits and giggles. Might be some consequences in that.

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velocityjohnno Sunday, 8 May 2022 at 6:09pm

Mullet curve would be something shaped like a J curve. I note Dusty is shortening the back so this might be tempering the amount of recession, if it gains widespread traction.

Going through the weekly video call throwing chart ideas around with the kids, the 90 day bill has continued its precipitous falls (ie yield up) and is a bit above 98.5 now.

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freeride76 Sunday, 8 May 2022 at 6:30pm
kaiser][quote=freeride76 wrote:

Feels like they’ve reacted quite late, almost like they’re wanting to see just how low they can get the unemployment rate. Just for shits and giggles. Might be some consequences in that.

They said that specifically didn't they?
That they wanted to experiment with maximising employment.

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velocityjohnno Sunday, 8 May 2022 at 6:46pm

from Wolf's article, US figures:

"In 2021, a home bought at the national median price at the time of $326,300, with 10% down, and financed at the average 30-year-fixed mortgage rate at the time of 3.09%, came with a monthly payment of $1,251.

In 2022, a home bought at the median price of $375,300, with 10% down, and financed at 5.27% came with a monthly payment of $1,869.

In other words, the mortgage payment jumped by nearly 50%, and related expenses of property taxes and insurance also increased. This 50% jump in cost of homeownership at the current price is going to wipe out demand from big layers of potential buyers.

Most people, when they apply for a mortgage, get a rate that is guaranteed for a certain period of time, such as three months. Many current buyers still have rate locks that were obtained in prior months, and they’re not fully feeling the spike in mortgage rates. But people who get their mortgages today are feeling it.

The volume of purchase-mortgage applications has already dropped substantially as has the volume of home sales. And over the next few months, the new reality in the housing market will become more apparent.

Interest rate repression, including through QE, caused the biggest housing bubble ever. Interest rate increases, including through QT, are going to unwind it. It’s the Fed’s effort to get the housing bubble under control before it tears up the financial system again."

The Ms saw a similar news story on Ch9 I think which outlined what increases per month look like in Melbourne suburbs. And Philips curve article was good too. If only I was better at paint and visual stuff and linking pics, I would gladly illustrate the mullet curve for you all.

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kaiser Sunday, 8 May 2022 at 6:47pm

Yeah seems like an experiment on an experiment. Start with MMT, then push everything hard.

There were some references to hyperinflation earlier in the thread. The circumstances that can foster Hyperinflation are pretty limited, but I must say the principles of MMT seem like a decent incubator to a layman like me.

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Robwilliams Sunday, 8 May 2022 at 7:33pm
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velocityjohnno Sunday, 8 May 2022 at 8:08pm
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monkeyboy Monday, 9 May 2022 at 10:18am

The Phillips curve was debunked by the FED itself no less some time back; I'll try to find some links but it was a few years ago. Mind you, there's an academic theory for everything which is ok - it works until it doesnt I guess. Most of these girls and boys dont live in the real world or get paid real world salaries so they have to use theoretical models; not criticising just commenting.

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velocityjohnno Monday, 9 May 2022 at 10:44am

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velocityjohnno Monday, 9 May 2022 at 10:45am

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velocityjohnno Monday, 9 May 2022 at 10:46am
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velocityjohnno Monday, 9 May 2022 at 10:48am

Oh Canada.

That's the monday morning chart porn done for now.

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flollo Monday, 9 May 2022 at 11:00am
velocityjohnno wrote:

https://twitter.com/MPelletierCIO/status/1522704947556483073

Oh Canada.

That's the monday morning chart porn done for now.

I saw this on OECD website, Australia is not looking any better.

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flollo Monday, 9 May 2022 at 11:06am
monkeyboy wrote:

The Phillips curve was debunked by the FED itself no less some time back; I'll try to find some links but it was a few years ago. Mind you, there's an academic theory for everything which is ok - it works until it doesnt I guess. Most of these girls and boys dont live in the real world or get paid real world salaries so they have to use theoretical models; not criticising just commenting.

Its weakness was shown in the 70s as both inflation and unemployment grew. Hence, the commentators were asking the question 'are we seeing a resurgence of the Phillips curve?' as the current landscape looks quite similar to the Phillips curve environment. It might hold, it might not, it will be interesting to see.

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velocityjohnno Monday, 9 May 2022 at 11:28am

Yep flollo, the twitter account was trying to get Oz data for that one at time I linked.

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velocityjohnno Monday, 9 May 2022 at 11:34am

OK this link is mint (and a bit foreboding), did you guys discuss it before? The dollar 'milkshake' theory.

It's nothing new - I've seen this happen before in markets. My allegory is that NY/City are the 'core' of the body of the world financial system; like when a body gets cold, the blood runs back from the extremities (think: isolated mining outposts, haha) to the 'core'

We've already seen AUD devalue from 0.74 levels to 0.71. It's also for this 'milkshake' reason that I can see an external forcing that may require RBA to hike higher than the 1.25% level CBA analysts suggested - with markets pricing 3.6% by mid 2023 - this is to keep relative value of currency as the Fed goes fighting 8.6% domestic inflation. If RBA don't, import inflation will add to present scene here in Au, I would think.

&t=2s

The snarky takeaway would be 'who runs Bartertown? USD runs Bartertown."

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velocityjohnno Monday, 9 May 2022 at 11:35am

here's that markets prediction, note this stuff can change over time, too

https://www.asx.com.au/data/trt/ib_expectation_curve_graph.pdf

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thermalben Monday, 9 May 2022 at 11:45am

This topic is well outside my area of expertise, but I thought this GIF was pretty interesting.

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monkeyboy Monday, 9 May 2022 at 12:18pm
velocityjohnno wrote:

https://twitter.com/9NewsAUS/status/1522708286306349056

Nope - nothing like the GFC. No liar loans or ninja, no CDOs or CDOs squared in Oz. A lot of Home Loans here are made from deposits via good old fractional reserve lending. Plus we cant just walk away from our mortgages....

and if the MSM are printing it, it aint gonna happen, it'll just scare people. Ok thats opinionated, sorry.

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donweather Monday, 9 May 2022 at 2:40pm
velocityjohnno wrote:

OK this link is mint (and a bit foreboding), did you guys discuss it before? The dollar 'milkshake' theory.

It's nothing new - I've seen this happen before in markets. My allegory is that NY/City are the 'core' of the body of the world financial system; like when a body gets cold, the blood runs back from the extremities (think: isolated mining outposts, haha) to the 'core'

We've already seen AUD devalue from 0.74 levels to 0.71. It's also for this 'milkshake' reason that I can see an external forcing that may require RBA to hike higher than the 1.25% level CBA analysts suggested - with markets pricing 3.6% by mid 2023 - this is to keep relative value of currency as the Fed goes fighting 8.6% domestic inflation. If RBA don't, import inflation will add to present scene here in Au, I would think.

https://www.youtube.com/watch?v=xxzy3sLs4Bs&t=2s

The snarky takeaway would be 'who runs Bartertown? USD runs Bartertown."

This is EXACTLY why Bitcoin was invented. To ensure no central bank can ever rule the world. Fck the USD I say!!

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velocityjohnno Monday, 9 May 2022 at 3:06pm
monkeyboy wrote:
velocityjohnno wrote:

https://twitter.com/9NewsAUS/status/1522708286306349056

Nope - nothing like the GFC. No liar loans or ninja, no CDOs or CDOs squared in Oz. A lot of Home Loans here are made from deposits via good old fractional reserve lending. Plus we cant just walk away from our mortgages....

and if the MSM are printing it, it aint gonna happen, it'll just scare people. Ok thats opinionated, sorry.

monkeyboy, there are liar loans - link above in thread suggests 38 to 41% on average, higher at one bank in recent survey.

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velocityjohnno Monday, 9 May 2022 at 3:08pm

A bit more from Canada

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monkeyboy Monday, 9 May 2022 at 4:31pm
velocityjohnno][quote=monkeyboy wrote:
velocityjohnno wrote:

https://twitter.com/9NewsAUS/status/1522708286306349056

monkeyboy, there are liar loans - link above in thread suggests 38 to 41% on average, higher at one bank in recent survey.

oh really - sheeeettttt ! I pity the regional and so called digital "banks" (every frikkin' deposit taking institution became a bank after 2008 !) that took these on to grow their book..

Bitcoin !!! Noooooooooooooo. (love the idea, not a fan of the mania that surrounds it but its fun being an observer: https://mishtalk.com/economics/as-bitcoin-breaks-support-bulls-and-bears...

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velocityjohnno Monday, 9 May 2022 at 5:19pm

I too love the idea but have noticed it seems to be behaving like a risk asset - maybe try correlation with QQQ.

Anyone see XPJ this afternoon? It got fcking pwned. Anyone familiar with things like head and shoulder formations? I feel I saw a couple within it.

Oh yeah - closely watching DXY, will it overcome the ceiling from 2016/2020 area it's currently up at? If it does...

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monkeyboy Monday, 9 May 2022 at 5:23pm

My favourite byline of the evening from the UK Telegraph:

"Traders have ploughed into tobacco and pharmaceuticals stocks at the fastest rate since the Lehman Brothers crash, as part of a wider move towards "safe haven" investments...."

I know nothing about Bitcoin but the chap who runs microstrategy lost a bundle in the dotcom smash and anyone who advertises they have a margin call at a certain price is begging to have it hit (Hello Bill Gates and that half a billion Tesla short) :)

Pride cometh before a fall.

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velocityjohnno Monday, 9 May 2022 at 5:29pm

"since Lehman"

shudders

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velocityjohnno Monday, 9 May 2022 at 5:35pm

Very interesting about the BTC margin call for that firm. In the bitcoin thread some time ago I asked an open question about loans taken in the legacy financial system to speculate on BTC, and wondered if it would be a mechanism whereby calls on those loans could transmit contagion from the crypto universe and make it a bomb in the legacy system, if the loans could not be repaid. We may get to witness such an event.

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monkeyboy Monday, 9 May 2022 at 8:07pm
velocityjohnno wrote:

Very interesting about the BTC margin call for that firm. In the bitcoin thread some time ago I asked an open question about loans taken in the legacy financial system to speculate on BTC, and wondered if it would be a mechanism whereby calls on those loans could transmit contagion from the crypto universe and make it a bomb in the legacy system, if the loans could not be repaid. We may get to witness such an event.

Absolutely. The total amount of leverage "out there" is supposed to be "known". Changes were made after the GFC to identify who held what and who had collateral with whom. But this has all gone to shit somehow - look at Archegos for example and this year we had the LME having to bail out its largest trader at the expense of other participants or the LME would have gone under. It's like warning signs.

https://mishtalk.com/economics/lme-violates-number-one-cardinal-rule-nev...

I've gone off track sorry.

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kaiser Monday, 9 May 2022 at 8:21pm

So a quick search reveals the current crypto market cap is 1.53 trillion. And how many of us knew there’s more than 10,000 crypto currencies in the market?

1.53T - That’s an economy bigger than Australia. And of course people borrowed cheap money to pump it into speculative instruments that had grown and everyone swore would continue to. The irony of the theory that Bitcoin was the antidote to US$ dominance is that it will eventually suffer as everyone is forced to convert their Btc back into usd. The further irony is as those are forced to abandon BTC, they will push the usd higher yet again

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flollo Monday, 9 May 2022 at 8:47pm

Leveraging crypto is outside my risk appetite. I can see potential in it, especially as younger generations spend more time in the metaverse (sadly). But from an investment perspective, I stay out of it. So many coins are in circulation that it's impossible to stay on top of it. I'm old school, I like assets that provide some sort of income. To me, crypto seems like a gambling game with a risk of developing serious addiction. Mind as well gamble on soccer, I would probably do way better,

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donweather Monday, 9 May 2022 at 10:27pm
kaiser wrote:

So a quick search reveals the current crypto market cap is 1.53 trillion. And how many of us knew there’s more than 10,000 crypto currencies in the market?

1.53T - That’s an economy bigger than Australia. And of course people borrowed cheap money to pump it into speculative instruments that had grown and everyone swore would continue to. The irony of the theory that Bitcoin was the antidote to US$ dominance is that it will eventually suffer as everyone is forced to convert their Btc back into usd. The further irony is as those are forced to abandon BTC, they will push the usd higher yet again

You’re assuming that USD will remain king. I’m not convinced it will.

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flollo Tuesday, 10 May 2022 at 12:07am

USD is surging. It is very likely AUD/USD will go below 0.7

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donweather Tuesday, 10 May 2022 at 5:27am
flollo wrote:

USD is surging. It is very likely AUD/USD will go below 0.7

Short term yes but Medium to long term it’s gonna die.