housing myths busted

The housing shortage myth is imploding, right along with the myth that low interest rates justify high house prices. So how come house prices in Japan during the 90s and the US since 2006 kept falling with interest rates near 0%? And the same trend is happening in the UK & many Euro nations, even those countries that also had a rising population and a supposed housing shortage. The vested property interests (ie. banks, housing & building industry, property developers, mortgage brokers, real estate agents & marketeers) are running out of excuses for why "Australia is different". In fact, they are becoming either increasingly desperate or noticeably taciturn.

Unemployment rates were very low in Japan in 1989 when their stock & housing markets peaked (prices are still far below those peak levels over 20 years later) & unemployment rates were also low in the US when their housing market peaked in early 2006. So it's only natural that people extend themselves into maximum debt tolerance when they 'believe' that the outlook is rosy (just as we in Australia believe, especially during late 09 as our debt levels & asset prices peaked). So this is precisely the pre-condition required to reach maximum debt load - together with a peak in asset prices. Why?

As the article below shows, and as Steve Keen's work also confirms, house prices are high because of a credit-fuelled investment mania. We've seen the consequences of what happens when the Ponzi credit market screeches to a halt. It ends in disaster. And with the resultant debt deleveraging, asset deflation, global economic slowdown & rising unemployment the deflationary spiral unfolds - regardless of government intervention or central banks slashing interest rates to 0%. Australia now sits on the precipice.


Housing Shortage, What Housing Shortage?
by Kris Sayce on June 1, 2010

http://www.moneymorning.com.au/20100601/housing-shortage.html