Simple and Sustainable Forums: Max Carnage - Viewing Profile - Simple and Sustainable Forums

This chap reckons if your economy is dependent upon unsustainably high credit growth to keep growing at a given rate, then you stop the unsustainable credit growth, the economy will grow more slowly.

Sounds sensible. It's only one small logical step to realise that if your economy is dependent upon unsustainably high credit growth for positive growth, then you stop the unsustainable credit growth, the economy will shrink...

Baby steps, though.

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More: http://blogs.reuters...rowth-and-debt/

IMHO, the "lower potential growth going forwards", the steady-state sans credit bubble, is somewhere around Japan level.

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http://www.kerryman....ar-3034164.html

From €431k (~$700k) to €185k (~$230k). In five years. Unfathomable.And they're still calling it "the boom" and "the property boom", though they did correctly call it "the bubble" later.

Title says it all. Jessica 'Rents Through The Roof' Irvine is on Q and A tonight. You can ask her a question.

I've read a bit of banter lately from Aussie housing bubble bloggers which have used Houston, Texas as some kind of ideal for Australia to aspire to. I disagree.

This disagreement comes from two fronts. Firstly because I think Australians, despite all the whinging, have it much better than Houstonians, except for the lucky-by-birth ones. And secondly, because I think only part of the Houston picture is being presented.

Houston – a great place to be. For a small number of people. From Wikipedia:

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http://en.wikipedia.org/wiki/Houston
No problem so far. Diversity is great. Unless you happen to be one of the diverse.


Let’s get this straight. As unlucky as younger Australians are to have been born too late to buy cheap houses, this pales in comparison to the unlucky hordes of Houstonians who were not born into a privileged white household. Houston is a city of gross inequality, largely along racial bounds.

That’s all I’m going to say about race, for fear of hijacking my own thread. But the inequality segues nicely into my second point. It is but one of many factors that differentiate Australian and Houstonian housing markets.

The way it’s told by certain commentators you’d think that the only difference was the restrictiveness or not of planning rules. This is IMHO, either ignorant or deliberately deceptive. There are a multitude of differences.

Some suggest that Houston was immune to the housing bubble. Unfortunately, data are scarce and what are available come from the Houston Association of Realtors. And these are scattered inconsistently across dozens of press releases. But having compiled them, I’ve found that median Single Family Homes increased from an average $83,756 in 1996 to an average $148,350 in 2006. Median Town-homes & Condos increased from an average $55,214 in 1997 to an average $127,681 in 2007. 131% increase in a decade in an area supposedly immune to bubbles?

Also worthy of note is a huge discrepancy between median and mean price. The mean Single Family Home price peaked at $227,340 in June 2008, compared to $160,050 for the median Single Family Home. The mean for Town-homes & Condos peaked in June 2008 at $179,331 compared to $136,750 for the median. I suspect these gaps relate directly to income inequality. Suspect? I know it does:


So, other relevant factors? A historic oil boom & bust for starters. 250k of Houston’s existing homes were built in the boom years of the 1970s. That compares to ~140k in the 1960s and 1980s. And ~112k in the 2000s. Meaning what? That historic construction and subsequent contraction as well as demographics as well as population growth rates (and the type/income of growth subsets) and housing stock are likely to have played a big part in both low starting prices and the size of increases.

Houston spent much of the 1980s in recession. Between March 1982 and Jan 1987, a net 222k jobs (over 14%) were lost. It took until May of 1990 to regain the pre-recession peak of 1.58 million employed. Bankers with long memories of the area’s recession might have been important too. Oh, there’s some speculation: I’ll bet Houston has a higher proportion of regional vs national banks?

Might both the lower incomes and lower income growth be relevant?


Can anybody think of other ways Australian cities are different/similar to Houston? Or is it fair enough just to point to the low prices and supposedly non-existent planning laws and say "Ahah!"?

I'd be interested in seeing his figures. "[O]n a pure numbers basis it worked out to be a line-ball decision" he says, but that depends which numbers you plonk in. The result is very different depending on whether you plug in compound growth of 8% or 0% or a drop of 20% followed by compound growth at the rate of inflation. I suspect it's something like the former, given that "the thousands of dollars in government bribes" skew the figures. Clearly he's not considering the possibility of price declines exceeding the 'government bribes'. What's the biggest FHOG (state+fed) currently? Around $20k? Mmmm... Dangerous thinking.

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More: http://www.barefooti...m/rent-instead/