Housing downturn almost over?

Just read this upbeat article from AFR:

Housing downturn shallow and short-lived, says CoreLogic and Moody's

Kinda hard to reach the same conclusion from evidence around me, but that's what these experts think based on their data.

Your thoughts?

 

Their data is only from what has happened and is currently happening.

I'd say Sydney Melbourne housing downturn has only just started and getting warmed up.

Probably take a couple years to play out. Depends how the economy goes and various other factors. ..

 

10/10 for optimism on their part. Hardly an unbiased source of market data. Do your own research.

 

Downturns generally don’t last for only 12 months. An entire RE cycle takes 7-12 years historically.

Wages need to grow and immigration numbers to rise before you will see a return to double digit growth IMO.

 

For Sydney and Melbourne.... it will be gentle/modest, but nevertheless....

 

I basically agree with Corelogic and Moodies, and a "bottom" is what I am seeing on the ground. Houses may have a little further lower to run.

Housing cycles are actually closer to 20 years, and we had a big correction only 10 years ago. So the next big correction is not due yet.

Good time to buy.

Best,

 

Says the buyers agent lol

Talking about cycles. Those longer term 20 30 40 year cycles u mentioned are super cycles. IMHO we are likely coming off an unprecedented credit and housing supercycle which has lasted decades without any significant correction or crash.

If USA succeeds in crashing china's economy and we end up with another Japan, Aussie economy and property will be in a seriously bad bust.

 

My first thought, too!
Marg

 

I agree. You can't really call the end when interest rates are at 60 year lows, and Australians have the second highest level of household debt in the world!! (unless of course you are a spruiker or buyers agent like John)

When interest rates go up, it's inevitable price will go down.

We also have the IO cliff next year.

 

I dont think anyone really knows, it will become a lot clearer once the RC into the banks hands down its interim report in September.
It might be plain sailing after that, or there may be some fundamental changes on how much can be borrowed, based on your actual income.
And as the Irish found out the,the soft landing turned into a large thump when other areas outside of their control took effect, in their case it was problems in other countries that caused a domino effect.
Bad things just happening at the wrong time.

 

Ha. I know, it is like asking a barber if you need a haircut. My comments are thought through and sincere nonetheless.

I do understand the more alarmist views and I acknowledge that (a) we have been in a bond bull market for over 30 years; and (b) the yield curve is on the cusp of inverting, which is not a good thing.

The difference is that property markets don't correlate directly to other financial markets because a small portion of the residential real estate market is what you would call an investment class.

So there tends to be a lag between a stock market crash to trickle down into a property market crash, which we haven't seen yet. Plus, property markets are tied more into demographics, which are healthy.

Hope this helps clarify my position.

 

Sure let's revisit in week or so and see the data from corelogics monthly update. Perhaps then corelogic and moody will do another article on how the downtrend has just started.

Methinks it's still way too premature to call a bottom on Sydney Melbourne. Perth? Maybe.. .

Us\aus bond wise, Aussie 10yr is now way below us10yr more than 25 basis points. Pretty sure there is some reversal of the carry trade and capital outflows occurring right now even though stock market hasn't fallen much, just a matter of time.

 

True. Even if it has bottomed, it will take months for the data to play out.

 

For the sip of your Connemarra single malt.........this ole gambler will reveal all.....

 

Mwaahhhh......mwahhhh.....haaaa....haaa...mwahhhhh.....

 

My thoughts are declarations "it's over" (or "bottom picking") are as useless as declarations "the market will fall by x". Solid employment growth and loose monetary policy have been a thing for years now, and are no stronger currently as a general force in the market than they were when the downturn began. These factors are pretty meaningless and when bubbles burst job losses tend to happen a few years after the correction begins (if that's what's happening as some other experts seem keen to predict).

Decelerating supply could be a good sign or bad sign and in of itself isn't predictive. If that is happening, it could be because of the $100b drop in investment money coming into the market has caused developers to pack up and go home. That could be a problem if it translates to a drop in construction employment. Right now there's no sign investors are returning to the market, which is going to be more determinitive than a mere slowing of supply. Assets are also being added to the market by existing assets failing to sell, or existing investors leaving the market, so slowing builds may not be enough.

The only easing of controls has been ARPA removing the 10% speed limit, which was meaningless anyway, as loan growth on its own was coming nowhere near this. Both the regulator and RBA have promised tightening regulations in the future. The RBA recently made comments that were unusually candid, basically saying it feels house prices and debt are still too high, which strongly suggests the next rate move will be up and the chance of a drop if prices continue falling is very low.

The point is, no one knows where this is heading. You could pick just as many indicators (sentiment, clearance rates, investor numbers) that are hugely unfavourable. The best option is to ignore the experts and just see how it plays out, making individual choices.

 

Its highly probable that over the next 5 years interest rates are going to go up.
Just out of curiosity how often do housing markets go up in value at the same time as interest rates go up, especially when you consider yields in the Sydney and Melbourne are around 2-3%, and banks tightening up on easy money.

 

Indeed, the book authored by Nate Silver "The signal and the noise" there is a section dedicated to why economic predictions as such so often fail:

"A related doctrine known as Goodhart’s law, after the London School of Economics professor who proposed it, holds that once policy makers begin to target a particular
variable, it may begin to lose its value as an economic indicator. For instance, if the government artificially takes steps to inflate housing prices, they might well increase, but they will no longer be good measures of overall economic health. At its logical extreme, this is a bit like the observer effect (often mistaken for a related concept, the Heisenberg uncertainty principle): once we begin to measure something, its behavior starts to change. Most statistical
models are built on the notion that there are independent variables and dependent variables, inputs and outputs, and they can be kept pretty much separate from one another. When it comes to the economy, they are all lumped together in one hot mess.".

 

... and how many housing markets go up in value when household leverage is at close to 200% of household disposable income.