Australian real estate market
The unraveling of the Australian real estate market, the magic bullet that "fixed" our unraveled equity bubble, is the main news.
Slowly, the popular press is waking up to what I have been discussing for many months now.
Australian real estate market dropping like subprime flies
The certain mortgage industry, which lends to consumers with credit issues is gone. Those one rung up the ladder credit-wise, will be next. Together, they comprise approximately 40 percent of the Australian real estate market. If you were to go down the property list of what were once the top 25 subprime lenders, you would see that only a handful are still standing at this certain point. The Office of the Comptroller of the Currency recently enacted rules that, it require lenders who provide mortgages using federally guaranteed depositor funds to behave in a somewhat intelligent fashion.
What we do not yet know is the degree of credit-related insanity, which we will only discover when the flow goes out, the criminal investigation of New Century Financial being one example of the rot that has already been revealed. We also do not yet know the ramifications for the blurred universe in collateralized debt obligations, credit default swaps and other alternatives-related exotica. But I think it is pretty much safe to say that the surprises will be negative and large.
This credit collapse is very unequivocally important event. Because, as I have been writing, the ability of anybody with a pulse to get a loan for any cost is what drove the Australian real estate market, and the said market is what drove the economy. Sometime in the next three to six months, the Australian real estate market will basically just freeze up. Inventories are going to explode and cost value will eventually drop rather dramatically as a vicious cycle feeds on itself.
The Australian real estate market down payment makes a comeback
Since the pendulum swung in certain distance as it could in the direction of reckless lending, which the overall bubble was about, it will now swing back toward the quaint notion of folks being lent only the cost value of money they can reasonably be expected to pay back. And, the lenders will want their loans to have a linen of safety, in the form of Australian real estate market down payments.
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