Thursday, May 12, 2011

The Heavy Weights Stare. Who will Blink First?

in New Zealand dollars: $1901.80 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $44.44 per oz
Previous all time high: $48.58
per oz

In New Zealand and Australia, it appears that the housing market is undergoing a 'stare-out'. You know, like the heavy weight fighters stand and stare at each other before a boxing match to see who blinks first.

New Zealand house prices are at a point of decision. Now more than ever.

Will we follow the US and UK where the corrections are significant? And still continuing.
Average house prices slumped 3pc in the first three months of this year, a decline that pushed the number of homeowners in negative equity – where a mortgage is higher than the value of a property – to 28pc from 22pc a year earlier, according to new research from Zillow, a major US property website. (Telegraph online)
That's nearly one-third of all homeowners that owe more than their house is worth. This is why foreclosures are at an all-time high in the US.

When will this housing correction hit New Zealand and Australia?

The IMF states that house values in NZ are 15 - 25 per cent overvalued. Already many here are in the unfortunate position of having negative equity, but if this report is true, many more will follow. And with the economy struggling and businesses on the brink, the ability to repay even the smallest mortgage is called into question.

Before the global financial crisis, rising household debt created a bubble in housing. People bought houses, with cheap money, thinking they would always go up. Well nothing goes up forever. Just note the recent commodities shakeout.

Now there are property investors (Sellers) who are in trouble financially and need to sell. So we have the Sellers on one side, wanting high prices, and the Buyers, with more realistic expectations, on the other?

Selling times are getting longer, with Sellers not willing to budge. Although there are signs this may be changing in the last few months. Average house prices are definitely falling. House prices are down 15 per cent already from the peak in 2007.
"However, given that prices appear elevated relative to historical relationships with incomes and rents, prices may yet drift lower, particularly in real terms, for example if enough buyers are unwilling to pay current prices and prefer to rent while sellers' expectations adjust," the RBNZ said.
This is not going to be an easy ride for those still invested in real estate in New Zealand and Australia.


Articles of interest:

Silver Update

See article here
Trader Dan Norcini

The next twenty years will be completely unlike the last twenty years.

See podcast with Chris Martenson here
The Financial Sense Newshour

The Anglo-Far East Company
The Original Private Bullion Custodian
Your reference: an-001

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