Saturday, November 8, 2008
The crash to end crashes
Bringing the house down
... and hence housing booms. Interesting perspective not really discussed before.
Posted by letthemfall @ 01:08 PM (1210 views)
8 thoughts on “The crash to end crashes”
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paul says:
“maybe one reason we love talking about property prices so much is because it’s one of the only times it’s socially permissible to boast about how rich we are.”
Haha. Spot on.
planning4acrash says:
(20min podcast) The Austrian Theory of the Business Cycle
plato says:
Anyone who doesn’t get on with figures, read this extract from the article. Memorise it and never forget it. Obviously it doesn’t apply if you downgrade, but he’s talking in general terms here. In essence the advice is correct.
‘The money you have in your house is not liquid money; it’s not money that can easily be converted into something else other than your house. It’s stupid to feel richer because the value of your house has gone up, since the resulting rise isn’t money you can use or spend. If you’re going to move, you still need somewhere to live, and the cost of that place, too, will have gone up, so there will be no net gain from the increase in your property’s value.’
phdinbubbles says:
@plato
Absolutely correct. But isn’t this bleeding obvious! This is one of the most basic arguments surrounding the housing bubble phenomenon and I’ve explained it to so many people over the past few years and have been constantly amazed by the number of supposedly educated people who don’t get it – most of whom are on the first rung of the so-called ladder and would benefit from lower prices to upgrade.
High prices = good to downgrade. Low prices = good to upgrade (or obviously be indebted on your first property). Not difficult is it, so why do so many not understand???!!!
Luckyjim says:
What crash?
This isn’t a crash – it’s a freeze.
plato says:
phdinbubbles……..
My experience has been exactly the same. In all honesty you may as well talk to a brick wall. Regardless of the ‘intelligence’ level, the made up mind of an adult cannot be altered without some kind of devastating influence in the majority of cases. One for the psychologists (even though in many cases they are used as contributors). The root causes are complex and driven by many factors, not least of all the very system we live and learn in. True freedom is the ability to think independently.
Squirrell says:
Bang on – one thing he refers to however is that the mortgage payments he made were cheaper than the rent paid, this in the end seemed to mean he came out on top. Thats one factor missing today – if you sell 10 years later for the same price you will most certainly lose as mortage, maintenance, rates etc are twice rent.
timmy t says:
‘The money you have in your house is not liquid money; it’s not money that can easily be converted into something else other than your house. It’s stupid to feel richer because the value of your house has gone up, since the resulting rise isn’t money you can use or spend. If you’re going to move, you still need somewhere to live, and the cost of that place, too, will have gone up, so there will be no net gain from the increase in your property’s value.’
The reason this crash will be the worst in history is that this time the money in people’s houses HAS been liquid money because so many of them MEW’d. So they DID feel richer because they COULD spend it. And those that felt the best and spent the most will shortly feel the worst and have the largest negative equity.