Australian Housing Bubble Is Collapsing
Stories out of Australia give us an idea of what's to come. "Banks were partly responsible for the boom in prices because they were prepared to accept top values for dwellings and often offered almost unlimited credit. In effect, the banks put the housing prices up and they have now reduced them; a dangerous game."
"Those who bought standard Sydney or Melbourne inner city apartments and borrowed 90 per cent of the value may now find that their loan is more than the current market value of their unit."
"At the top of the real estate market (2003) St George lifted their housing lending by 18 per cent and introduced no deposit and low-doc loans. Then, last year, dwelling lending went up by another 16 per cent. It was a time when investors were responsible for between 40 and 50 per cent of the market. Now they have been burned off."
I expect this turn of events will occur in the US, too. "Only a month ago the Reserve Bank was forecast to raise rates further. Now that seems most unlikely and a rate cut seems more appropriate."