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Aussie Economy downcaste while US to Surge

Discussion in 'Property Market Economics' started by MTR, 20th Dec, 2016.

  1. MTR

    MTR Well-Known Member Premium Member

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    I have made no secrets I am investing in USA I am a believer.

    We may also be heading for a rocky road ahead in Australia, time will tell......

    Aussie economy downcast while the US is set to surge
    (Yahoo finance, Samantha Menzies, 20 December 2016)
    Extract below

    While economic news from the US is bringing Christmas cheer to investors, the story in Australia isn’t looking so positive.
    “Despite a rather rocky year, the US looks like it is going to finish the year on a relative high,” says David Bryant, chief investment officer at Australian Unity Wealth

    “The fact that the Federal Reserve raised interest rates is a sign of ongoing confidence and strength in their economy, it’s the forward projections that are of most interest

    Also read: Zombies, but no horror in budget update

    “It’s now likely that there will be three rate rises in the US in 2017, which should help stimulate the economy and boost consumer and business confidence

    “Investors in the US and global assets will be well-placed to benefit from this.
     
  2. zed_kid

    zed_kid Well-Known Member

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    I would take the 3 rate rise forecast with a grain of salt. In 2016 the FED forecast 4 rate hikes, if I remember correctly, only 1 eventuated.
     
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  3. MTR

    MTR Well-Known Member Premium Member

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    I have been watching this closely on fox, they are now talking about 4 rate rises, rather than projected 3.

    The point is IR have risen and the signs and indications are that US economy is on the mend. From what I am seeing in terms of property markets - it on fire at the moment.

    How this all impacts on Australia is something we should probably not ignore.

    I know it will impact on Au$ for starters.

    MTR:)
     
  4. Barny

    Barny Well-Known Member

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    Many think it's all for show, they have been trying to show confidence for years. I'll believe 3 rate rises when I see it. I call bs on 3.
     
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  5. Roshy

    Roshy Active Member

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    Yep, the US market is recovering.

    The fact that the Federal Reserve has increased rates is a good sign that they have confidence in the market.

    Whether the US will have 4 rate increases is up for debate. In the past, they have been conservative. I think the market is expecting 2-3 rate increases. If the Federal Reserve follows through with 4 rate increases, then the $A/$U will drop, all else constant.

    The Trump effect is also having a positive impact to property and the share market in the US. So good that some are now questioning whether the shares market is overvalued. Historically it does look expensive. However, the market is hoping that Trump will implement its aggressive fiscal policies. If he does, this will be a game changer for shares and property in general.
     
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  6. MTR

    MTR Well-Known Member Premium Member

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    Feds have already raised interest rate no BS, fact
     
  7. Barny

    Barny Well-Known Member

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    Fact once. Not 3
     
  8. MTR

    MTR Well-Known Member Premium Member

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    game changer for property, its been hot since 2011, just to give you an idea ....melt down was in 2007 with some markets crashing 70% it's recovered from this and close to 2007 values at peak

    I agree with Trump at the helm we will see continued bullish markets
     
  9. MTR

    MTR Well-Known Member Premium Member

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    that's right, it's the beginning of IR rises, no one person can predict how many rises but if us economy continues to grow I expect rates to continue to rise
     
  10. Barny

    Barny Well-Known Member

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    Home ownership in America is at a 60 year low, how do you think these 3 rate rises will affect property prices when many can't afford it already?
     
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  11. MTR

    MTR Well-Known Member Premium Member

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    Pretty good for me;) rents have been soaring, but then again so has real estate.

    Economy was down the gurgler and now we are seeing it moving ahead, what do you think happens when economy starts to go into positive territory.

    I am a glass half full kind of gal, always have been

    Lets review this in 12 months time, we will have a better idea on how Trump works the deals.....

    MTR:)
     
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  12. Barny

    Barny Well-Known Member

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    Lowest interest rates ever. Is it moving ahead or just bubbling ahead.
    I'm a realist and only see the glass.
     
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  13. MTR

    MTR Well-Known Member Premium Member

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    Fair enough. LOL
     
  14. Kangabanga

    Kangabanga Well-Known Member

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    There is a unexpected chance that Trump may actually overheat the economy and result in maybe 8 interest hikes up 2% or more as FED tries to control hyperinflation.

    Another possibility is that of Hyperinflation which hasn't shown up despite massive QE1,2,3. According to normal economics, too much central bank easing usually causes hyperinflation. My theory is that any hyperinflation since GFC was masked by the drop in USD and also the "recession/depression" that happened during the GFC.

    Many of the big corporations on the DOW/Nasdaq are still in an earnings recession with many still having declining revenues/earnings due to weak global economy. Until this reverses, things actually don't look rosy for american economy or anyone else. This month has also seen concurrent "tightening" in the three major central banks. (EU/China/USA) with Japan no change.

    However due to shift in sentiment we should continue seeing USD appreciate, rates to go up and capital outflows from emerging markets and australia back to US. Chinese Yuan is already almost at 7 to the USD. Well at least until Trump takes charge on 20Jan a month from now.

    Despite no AAA downgrading, AUD seems to be taking a beating this week.
     
  15. bumskins

    bumskins Well-Known Member

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    My view at the moment is that they aren't increasing rates because the US is booming but because they can no longer justify keeping them so low.
    The rate they are now should be reserved for emergencies and they aren't currently in one.

    After having low interest rates and printing money for so long its to be expected that you would see inflated asset prices and an expensive sharemarket.

    Not saying the possibility for a further boom isn't there, but I don't think there is enough evidence at the moment to say the US is going to boom.

    But if you look at our property market heading into Christmas last year, it looked like it might have finally run its course and then look at how it performed this year. So anything is possible.

    I don't think they would have dithered for so long about about a rate rise if the economy was so strong.
     
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  16. MTR

    MTR Well-Known Member Premium Member

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    good points, no clear signs of property slowing down in my neck of the woods ....only 30 days inventory, which is rare, should be 60 days. Also what is new - US has never had hedge funds buying resi property....

    must admit thinking how long can this go ?
     
  17. bumskins

    bumskins Well-Known Member

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    Thats the problem, if you stay out of the market too long you lose too.
     
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  18. MTR

    MTR Well-Known Member Premium Member

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    Here are some stats (US Census Bureau)

    Home sales surge
    New homes sold in the U.S. rose by 14.6% in 2015 to about 501,000 units, according to the US Census Bureau - the highest number of new housing units sold since 2008. In Q1 2016 there were 132,000 homes sold - up by 17.9% y-o-y.

    [​IMG]
    The South accounted for 61% of new home sales transactions in Q1 2016, the West for 23%, Midwest for 11%, and Northeast for 5%.

    "There cannot be too much wrong with the economy if consumers keep buying new homes. It shows confidence," said Chris Rupkey, chief economist at MUFG Union Bank in New York.
     
  19. Barny

    Barny Well-Known Member

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    What interest rates are available for residents?
     
  20. Tekoz

    Tekoz Well-Known Member

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    Donald Trump has got many vested interest in the property, so I guess he will not let his own business down or devalued for the sake of affordability.

    Therefore I believe that property price will become higher in USA slowly but steady.