Tuesday, Sep 05, 2006

Face it: The housing bust is here

MSN Money: Face it: The housing bust is here

Missed in last week's 'Fed is done' euphoria was more stark evidence the housing bubble has burst. Growing numbers of homeowners can't make their payments.

Posted by mowgli007 @ 10:56 PM (629 views)
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1. sirgoogle said...

Since she's unable to refinance (in part, due to a nasty prepayment penalty), she must sell her house. The problem: Because everyone else is pretty much in the same boat and Detroit's economy isn't so swell, she can't -- even with having reduced her original asking price of $470,000 to $270,000. (Note: That would leave her $54,000 in the hole.)

so that is a 43% drop for that type of property in Detroit .... so has the HPC started in the US .... Humm maybe yes.

This is bad. If the maxim is true that when the US sneezes the UK catches a cold ... then we are in deep doo doo.

Wednesday, September 6, 2006 07:09AM Report Comment

2. indiablue19 said...

Yes, not only the UK is likely to feel ill, but other places where the USA is deeply invested, such as Ireland; and places where the supply line is strongly represented in Walmart [ASDA], such as China, Malaysia and Japan. Walmart is America's TESCO -- and then some. Except for food [which is more locally produced], most of the items in Walmart can be done without -- at least in my opinion. And those are only a few of the serious dependent consumer relationships.

Interesting that HPC is now being called the "lending boom" that it has been rather than a house price bubble. A whole different animal.

Wednesday, September 6, 2006 09:09AM Report Comment

3. uncle tom said...

One has to remember that Detroit is not quite typical USA - it's big name employers in the motor trade have had a really bad time in the last year or two, and are being forced to downsize their workforces with indecent haste...

However, the US does seem to be waking up to the fact that the only way is down now for house prices. That should cause a sharp reduction in equity withdrawal, which in turn will impact consumer spending leading to unemployment.

The most immediate effect in the UK is likely to be a loss of confidence amongst potential BTL buyers - it depends how well the American woes get reported here...

Wednesday, September 6, 2006 09:15AM Report Comment

4. indiablue19 said...

UT......The American consumer can make a mental U-turn much faster than I've noticed people doing here. One major difference: there's not such an extraordinary emotional investment in the idea of property "wealth." In my own lifetime there have been several major changes in housing prices over there. And those of older generations still remember the Depression and keep it in the public conscience. I'm amazed that no one seems to do that here -- much less the ideas of rationing and real hunger that people experienced in all of Europe after WWII.

By the way, does anyone have a take on how downturn in the USA and UK will effect the rest of Europe and its housing markets? There have been reports that the bloom is already off the rose in Spain and France.


Wednesday, September 6, 2006 09:40AM Report Comment

5. George Monsoon said...

Did the guy in this article once star in Chips?

Wednesday, September 6, 2006 10:34AM Report Comment

6. the bald man said...

From the articel: "That, ladies and gentlemen, is how Alan Greenspan managed to make folks' lives ultimately even worse, in attempting to bail out his equity bubble with a real-estate bubble." For Greenspan read Gordan Brown.

Wednesday, September 6, 2006 10:37AM Report Comment

7. Geed said...

Uncle Tom is right. Localised falls amount to little and Detroit is very reliant to the big three car giants. A few examples of house reductions are no sure sign of a general bust - there have been examples made of the Aussie housing market especially in Sydney where huge falls have been documented but I have yet to see serious reductions in thegeneral market. There have been lots of false HPC alarms in the past in the UK and I'm sure there will be more.

Wednesday, September 6, 2006 11:06AM Report Comment

8. European-bear said...

Indiana...no idea how the downturn will affect rest of European housing markets, but can speculate...in those markets that have not suffered the HPI, and these are notadbly Germany (prices in real terms are lower than 10 years ago), and Switzerland (prices in real terms are the same as in 1970!), I suspect will have little effect. Indeed German property prices look very cheap which ever way you look at it. Indeed, one myth that needs to be countered is the "world wide" nature of the present housing boom. The second and third largest economies in the world (Japan and Germany), have had house price deflation, not inflation over the past decade and these two countries, whose econimes are now improving rapidly (without a debt overhang) may actually provide the main engine of world growth when the US and UK go into recession next year or the year after. Places like the Netherlands, Spain and to a lesser extent France have had spectaculor HPI, so there is the danger of HPC when the feeding frenzy stops

Wednesday, September 6, 2006 11:21AM Report Comment

9. Bfskinner said...

I agree UT, that how well these woes go reported will be an important factor. Another I think, is how well people understand the links in the chain of the global economy. Traditionally, when one major ecconomic market crashes (i.e. UK, USA, Japan) the rest follow as the investors flee the sinking ship. I suspect, given the way that ecconomics tends to be reported these days I dont think many investors realise this. People will think that as long as the UK looks internally strong things will be ok. However, they fail to see the true state of the ecconomic outlook, given the under reporting of negative forcasts and I think many people also fail to see that a strong UK economy is dependant on the economic conditions in the rest of the globe.
just some thoughts


Wednesday, September 6, 2006 01:02PM Report Comment

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