Tuesday, April 12, 2011

Australian Housing Market at 9.5 Months' Supply

RBA and government incentives hurt housing market
RP Data senior research analyst Cameron Kusher says that monthly sales stood at 37,500 in May last year, which was when prices peaked. By December, they were down to 27,500. So there is now 9 1/2 months' supply of houses on the market, up from 5 1/2 months' a year ago.
6.5 is considered stable.

A further finding is that variable rate mortgages destabilise housing markets, as people are encouraged to enter the market during periods of low interest rates without fully appreciating the interest rate risk they are taking on.
Fixed rate didn't save the U.S., but the rise of variable rate (because brokers earned more for writing them) certainly increased the pain. Proposals in the U.S. to shelve all but 30 year fixed have unfortunately gone nowhere. Keep beating this drum; it's important.

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