buyer retreat spells slump in home prices

Buyer retreat spells slump in home prices
April 07, 2011

BUYERS are deserting the housing market at a pace that threatens a slump in housing prices and a risk to the economic outlook.

http://www.heraldsun.com.au/money/buyer-retreat-spells-slump-in-home-prices/story-e6frfh5f-1226035067289

Buyers disappear just as the stock of unsold houses mounts. From a supposed undersupply of houses to a glut of houses for sale - all in just a matter of months!

The housing bubble was not driven by lack of supply or a growing population but simply by a credit fuelled investment mania. But now that the fever has broken (the greatest fools have already entered the market) and the music has stopped (banks are now restricting credit) house prices have nowhere to go but down. But how much and for how long?

Well if house prices were to revert to long-term averages in terms of income and rental yields, then they'd need to halve from recent record highs. Such an asset deflation and debt deleveraging cycle would take years to unwind. And only then would Australian homes become truly affordable again.