19-04-2005 21:06									#1
	US Housing starts drop 17.6% Get a bigger avatar today!

What does this mean?

	19-04-2005 21:09									#2
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It means inflation is rising and the demand for new houses is declining. It means proprty values will drop because fewer people are interested in buying. It means my buddy, who is a general contractor, will have some lean months ahead - he is already out of work. But, it is all transient and 9 months from now things could be completely opposite..

	19-04-2005 21:10									#3
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Interest rates are on the rise. Lots of implications.

	19-04-2005 21:14									#4
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I've always wondered, what was the cause of the demand that drove this rise in prices in the last years in the USA and europe? I mean, here, we've experienced a large rise, but we've gained almost 50% to our population in the last 15 years.

	19-04-2005 21:16									#5
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At one level, you would think that less housing starts would decrease the supply, thus keeping prices up

	19-04-2005 21:19									#6
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THE SKY IS FALLING, THE SKY IS FALLING, THE BUBBLE'S GONNA BURST!!!

	19-04-2005 21:22									#7
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Many experts say that appreciation will begin to slow, hardly any I have seen say it will depreciate. With the current rates of appreciation it would take a large drop in property values to adversly effect the market.

	19-04-2005 21:22									#8
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I just wonder about this: is there already some sort of concensus that these prices are unsustainable? and if so, who the hell keeps buying?

	19-04-2005 22:00									#9
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People who need/want a house.

	19-04-2005 22:42									#10
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quote: Originally posted by Az I've always wondered, what was the cause of the demand that drove this rise in prices in the last years in the USA and europe? I mean, here, we've experienced a large rise, but we've gained almost 50% to our population in the last 15 years.

I think the main form of demand is the ability of households to take on more housing-related debt than before, partially due to lower real interest rates but mainly due to the 'money illusion' of lower nominal rates.
This can be seen by the large rises in mortgage debt as a percentage of income:

Mortgage debt as % of disposable income in 2003 and (1993):
United States: 84% (64%)
Japan: 62% (54%)
Germany: 77% (54%)
Britian: 102% (78%)
France*: 60% (54%)
Italy: 31% (15%)
Canada: 73% (66%)

	19-04-2005 22:49									#11
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The figure is quite disheartening for Britain, el freako .

quote: People who need/want a house.

Not really. Unless they have secret cloning bases, I assume most of the increased demand is due to people wanting more space, and people starting to live alone.

Plus el freako's numbers.

	19-04-2005 23:06									#12
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For the US, there's a pretty huge difference between 1993 and 2003. We've just come off a period of extremely low interest rates, whereas in 1993 the interest rates were as low as they were going to get. Trough to trough, the difference was a full 2 percentage points. This is important to keep in mind when considering a mortgage market like the US that runs mostly on fixed rates and refinancing.

People can handle very large mortgages nowadays.

Last edited by DanS on 19-04-2005 at 23:14

	19-04-2005 23:12									#13
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quote: Mortgage debt as % of disposable income in 2003 and (1993): United States: 84% (64%) Japan: 62% (54%) Germany: 77% (54%) Britian: 102% (78%) France*: 60% (54%) Italy: 31% (15%) Canada: 73% (66%)

I think that most of our population is ****ed...

	19-04-2005 23:30									#14
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quote: Originally posted by Az The figure is quite disheartening for Britain, el freako .

Well you also need to compare it with assets (the OECD figures I use have a section called 'non-financial assets' which is probably mostly housing)

Those went from 304% of disposable income in 1993 to 455% by 2003, the comparable figure for the US went from 206% to 243%

So whilst the UK's debt went up relative to it's income it went down compared to the assets (whereas in the US debt rose against both)

Here is the amount of mortgage debt as a percentage of non-financial assets:

USA: 35% (31%)
Japan: 11% (16%)
Germany: 15% (23%)
Britian: 23% (26%)
France: 15% (17%)
Italy: 5% (3%)
Canada: 25% (26%)

On that measure the US looks the most vunerable of the G7

Also British households have an above average asset-to-income ratio.
Net assets:

United States: 5.5 years worth of income
Japan: 7.6 years worth
Germany: 5.1 years worth
Britian: 7.2 years worth
France: 6.4 years worth
Italy: 8.1 years worth
Canada: 5.2 years worth

	19-04-2005 23:58									#15
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el freako: if these by "non-financial assets", it means not bonds or stock, then real estate is indeed all that remains, and we go back to the bubble situation. ( I assume that the assets-to-income is a number that is, too, "non-financial assets" figure)

I really don't like this picture.

	20-04-2005 01:15									#16
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Where's your data from?

This is the chart from this week's AIA online newsletter, which gives a completely different picture.



http://www.aia.org/aiarchitect/this...415/0415otb.htm

Another factor not mentioned above but existent is that some people choose to renovate rather than demolish and rebuild.

	20-04-2005 01:18									#17
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where I live housing is overpriced. Many people cannot afford to live in a house (myself included).

It costs about $300,000 to buy an average house where I live. Yes you californians will laugh, but your income is much higher. Our income is the same as it was when housing costed $120,000.

	20-04-2005 02:56									#18
	Re: US Housing starts drop 17.6% Support Apolyton, buy Galactic Civilizations

quote: Originally posted by pchang What does this mean?

I think it means the economy isn't so hot right now.

	20-04-2005 03:47									#19
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This is bad news. Our mills are doing well with the housing starts in the US continuing to rise. This is why they have so far prospered even through the new tariff and our high dollar.

	20-04-2005 03:49									#20
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Overpriced? Vancouver has some crazy prices for a small house on the west side. 800K CDN!

What's going to happen when all the young people, like me, simply refuse to pay those kinds of prices?

	20-04-2005 04:09									#21
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The slide in prices is going on in London albeit slowly...I am positioning myself to take advantage of this situation in a few years time...

	20-04-2005 04:19									#22
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quote: Originally posted by Ben Kenobi Overpriced? Vancouver has some crazy prices for a small house on the west side. 800K CDN! What's going to happen when all the young people, like me, simply refuse to pay those kinds of prices?

It simply means that young people will have to live in smaller houses, apartments, or elsewhere. There are plenty of older people with the cash.

	20-04-2005 04:36									#23
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quote: Originally posted by Ben Kenobi What's going to happen when all the young people, like me, simply refuse to pay those kinds of prices?

You'll become homeless? Either that or you will spend your entire life as a renter never earning equity.

	20-04-2005 05:33									#24
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"What's going to happen when all the young people, like me, simply refuse to pay those kinds of prices?"

Get a used RV. Move from supermarket to supermarket to park at night or stay where you work with your employer's permittion. Get water at any friend's outside spicket. Get rid of waste at a highway dump site. Save all you make except food and gas costs. In 10 years move to the Philippines and live like a king.

Always go used RV shopping in the rain so you know if the roof leaks.

If prices drop like a rock you'll be well positioned to take advantage of the situation. If not, you'll be enjoying tropical breezes before you know it.

	20-04-2005 05:43									#25
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Traditionally, houses have sold for 100 times the monthly rental. Prices in L.A. are up to about 400 times the monthly rental.

One real estate expert I talked to says that bubbles in residential real estate markets don't act like normal bubbles. When the dot.com bubble burst, the market tanked as people tried to dump their stock. By with RE, especially residences, people tend to hold on to their homes and ride the bubbles down, so any decrease in price tends to be both slower and smaller.

	20-04-2005 06:09									#26
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Actually, I think both my data and Pchang's data are correct- those architects hired three months ago are for houses that have not yet started construction.

So, nothing to worry about- things are heading up.

	20-04-2005 06:38									#27
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Australia has been in a similar condition re: housing bubble. Seems to be petering out now... (rate hike a month or two ago)... but people are feeling the mortgage pinch. I'm glad my parents were able to purchase their dreamhouse in the rainforest during the recession of the early 90's and not now... when it's probably worth about 3 times as much.

Funny thing is that people are chuffed by low interest rates but fail to notice that prices are so much larger that it's probably not going to make a great deal of difference. My parents borrowed for their home at a time when rates were upwards of 17% (Keating's way of "de-spivving" the economy ), yet if they borrowed for it last year when rates were 5% they could well have been paying even more.

It's kinda hard to feel sorry for the people who are complaining about the rise in rates at the moment... if they took out a variable rate loan at the height of a housing spike and at an historically low interest rate (as far as the past 30 years are concerned) then you'd think they'd budget for rate rise... but I guess bubbles are built upon people with spare money (or easy access to credit) and no foresight...

	20-04-2005 07:45									#28
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quote: Originally posted by el freako Mortgage debt as % of disposable income in 2003 and (1993): United States: 84% (64%) Japan: 62% (54%) Germany: 77% (54%) Britian: 102% (78%) France*: 60% (54%) Italy: 31% (15%) Canada: 73% (66%)

	20-04-2005 07:47									#29
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quote: Originally posted by Dissident where I live housing is overpriced. Many people cannot afford to live in a house (myself included). It costs about $300,000 to buy an average house where I live. Yes you californians will laugh, but your income is much higher. Our income is the same as it was when housing costed $120,000.

I'm not from California, and I think complaining about 300k is hilarious

	20-04-2005 12:39									#30
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quote: Originally posted by Kuciwalker I'm not from California, and I think complaining about 300k is hilarious

yeah well. Our housing prices have nearly tripled, but our wages haven't. we make less money than the rest of the country (except the south)