A mere price drop by itself is meaningless. Just a reaction to...

  1. 1,018 Posts.
    A mere price drop by itself is meaningless. Just a reaction to chronic unaffordability, media reporting of a bubble and rise in rates etc. If that is all it is then it is a correction than back to the party going on.

    The bearish case goes more into the price falls being lights out for the construction boom. This is where you get the death spiral of rising unemployment and falling prices. It is no different to the recent iron ore bust, where highly leveraged bets against an underlying commodity that loses value leads to a huge contraction of the entire industry. In the USA prices started falling by around mid 2006 but it wasn't really having a recession called until early 2008. I won't try and crystal ball precisely when pain may come, but i'm fairly confident whoever wins the 2016 election may wish later they didn't.

    Now of course some argue we can take the hit to dwelling construction/price appreciation because other sectors of the economy will fill the capital expenditure gap. We were extremely lucky this was the case ~2003 when we last attempted a bubble deflate, but I have serious concerns we may not be anywhere near as lucky this time around....

 
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