Housing market 2021

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Gigantic said:
Both US and Canada hiked earlier and harder

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Thanks, that is what I'm looking for.

As I mentioned in a previous post, the biggest indicator of what's coming for Australian rates is what the Fed has done and will do, Australia can't afford to fall behind.
 
sabre_ac said:
Economies like Australia normally just follow the Fed, is Australia behind in terms of rate rises this cycle when compared to the Fed? I don't know the answer, I haven't been following.

The only certainty in my mind for Australia to continue to raise its interest rates is if it's either behind the Fed or its instep with the fed and the Fed goes again.

Your graph is interesting, though I'm not sure how much we can learn from history in regard to the COVID cash injections, that was fairly unique. In general, we've been in a new dynamic since 2008 as governments around the world have printed money, and risky (Crypto) or familiar investments (homes) have exploded.
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The RBA boss Lowe has been ( unofficially ) quoted as saying he expects at least 3 interest rate rises this year.

Personally I think he is on a hiding to nothing.

He has one tool at his disposal to quell inflation - namely blunt force trauma.

Politicians in all states, of all persuasions, try to buy votes by "helping with the cost of living".... They are the current fuel on this fire. This is one of the main reasons I think interest rates will rise for most of this year. Politicians can't help themselves.
 
For those of you following the Fed funds rate ( which you should if you are a serious investor )

The money market is finally starting to price in higher US rates, for longer.

 

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Put an offer in for my first home yesterday. Fingers crossed!
 
Kanga Commando said:
WBC not as bold with their rate predictions as I have been, but they still expect the next 3 RBA meetings to result in rate rises ( as do I, along with many more this year )

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Monetary policy works with a lag. It's like tugging on a brick with an elastic band. You tug and tug and nothing happens, then all of a sudden it jumps off the table and knocks your teeth out. Not mine. I wish it was.
 
sdfc said:
Monetary policy works with a lag. It's like tugging on a brick with an elastic band. You tug and tug and nothing happens, then all of a sudden it jumps off the table and knocks your teeth out. Not mine. I wish it was.
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“Teeth”…? no.

This elastic band will take heads off.

Rate rises will continue for much of this year.

Edit - US rates will hit at least 6.5%, more likely 7%, over the next 12 months.
 
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Kanga Commando said:
“Teeth”…? no.

This elastic band will take heads off.

Rate rises will continue for much of this year.

Edit - US rates will hit at least 6.5%, more likely 7%, over the next 12 months.
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Makes f all difference what the US does. 90% of the population there is on fixed rates, generally between 20 and 30 years. I got a fixed rate of 22 years for my place over there about 5 years ago

Raising rates has a much smaller impact there than it does here
 
Lyyynnnchy said:
Makes f all difference what the US does. 90% of the population there is on fixed rates, generally between 20 and 30 years. I got a fixed rate of 22 years for my place over there about 5 years ago

Raising rates has a much smaller impact there than it does here
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You are actually wrong.

I've done the math - the correlation coefficent for US Fed Funds rate / US GDP %Change VS RBA EFFR/AUS GDP %Change is higher.

I will post the charts later ( data sourced from FRED, RBA, and WorldBank )
 
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Kanga Commando said:
You are actually wrong.

I've done the math - the correlation coefficent for US Fed Funds rate / US GDP %Change VS RBA EFFR/AUS GDP %Change is higher.

I will post the charts later ( data sourced from FRED, RBA, and WorldBank )
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would rather see the correlation between rate movements and impact on inflation rather than GDP

I also believe we’re in unseen times. I’d prefer to look at real, current data, rather than historical. A whole lot of good historical data was for predicting GFC and Covid…
 
Kanga Commando said:
“Teeth”…? no.

This elastic band will take heads off.

Rate rises will continue for much of this year.

Edit - US rates will hit at least 6.5%, more likely 7%, over the next 12 months.
Click to expand...
US cash rates hitting 6.5%+?

Would that mean a retail mortgage rate like 9-10%?
 
CatToTheFuture said:
US cash rates hitting 6.5%+?

Would that mean a retail mortgage rate like 9-10%?
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Given the spread between Fed rate and mortgages you would think that's a fair ballpark. TBH I don't follow US mortgage rates in constant detail - just the Fed rates. It's the most important number in the financial system worldwide.
 

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Kanga Commando said:
Given the spread between Fed rate and mortgages you would think that's a fair ballpark. TBH I don't follow US mortgage rates in constant detail - just the Fed rates. It's the most important number in the financial system worldwide.
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I'm just thinking what catches on there gets here eventually.

I need to upgrade to a bigger house at the moment but on repayment estimations a 9% retail rate is very, very limiting
 
Kanga Commando said:
The RBA boss Lowe has been ( unofficially ) quoted as saying he expects at least 3 interest rate rises this year.

Personally I think he is on a hiding to nothing.

He has one tool at his disposal to quell inflation - namely blunt force trauma.

Politicians in all states, of all persuasions, try to buy votes by "helping with the cost of living".... They are the current fuel on this fire. This is one of the main reasons I think interest rates will rise for most of this year. Politicians can't help themselves.
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Surely the RBA should never have dropped rates so low in the first place during the pandemic, a rebound was inevitable.
 
Some Idiot said:
Surely the RBA should never have dropped rates so low in the first place during the pandemic, a rebound was inevitable.
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Yep, sure, I agree.... There was always going to be a reckoning for that amount of liquidity and they should know better - I mean, who doesn't want cheap money...

But I don't lay the blame solely at the feet of the RBA because they don't force people to borrow. Thats not an abrogation of responsibility of course.

Governments on the other hand have many choices. Neither side are particularly good at them.
 
Some Idiot said:
Surely the RBA should never have dropped rates so low in the first place during the pandemic, a rebound was inevitable.
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Easy to say in hindsight, the RBA was lowering the cash rate before the pandemic from May 2019 when the cash rate was at 1.50%.

IMO the mistake was keeping it so low for so long and waiting for the inflation data to knock them out of their seats before reacting.
 
Sqotty from office works said:
The thing that normally breaks inflation is a complete bust in one of the main sectors.

HOUSING definitely the best option to bear the brunt of collapse.
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Kanga Commando said:
Sadly yes
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IMO it'll be unemployment that busts before housing, I think its happening right in front of us however once again data is lagging. Yes, in many ways they're interlinked however the government has vested interests and won't allow housing to completely collapse. Plenty of QE available to prop up housing with unemployment rising.

  • I think interest only loans, even for those who's servicing traditionally wouldn't allow it will be one of the first
  • Reducing the rate serviceability buffer from 3% back to 2% or 2.5%. APRA will be more confident doing this when we have a bit more certainty with rates
  • repayment holidays during periods of unemployment

etc
 
Lyyynnnchy said:
IMO it'll be unemployment that busts before housing, I think its happening right in front of us however once again data is lagging. Yes, in many ways they're interlinked however the government has vested interests and won't allow housing to completely collapse. Plenty of QE available to prop up housing with unemployment rising.

  • I think interest only loans, even for those who's servicing traditionally wouldn't allow it will be one of the first
  • Reducing the rate serviceability buffer from 3% back to 2% or 2.5%. APRA will be more confident doing this when we have a bit more certainty with rates
  • repayment holidays during periods of unemployment

etc
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I'm in Geelong and for the last 6 months there has been an average one job per day listed that suited me.
Companies would take anybody and train them to suit.
In the past month it's dried up to an average of 3 suited jobs per fortnight.
And lots of minimal hours work advertised.

Housing and jobs are definitely going bottom up NOW.
 
Sqotty from office works said:
I'm in Geelong and for the last 6 months there has been an average one job per day listed that suited me.
Companies would take anybody and train them to suit.
In the past month it's dried up to an average of 3 suited jobs per fortnight.
And lots of minimal hours work advertised.

Housing and jobs are definitely going bottom up NOW.
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I agreed with you to the end of last year however I'm seeing a bit of a shift and the data backs it up. Dead cat bounce perhaps. Some big prices being achieved on the Northern Beaches in Sydney

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Gigantic said:
Easy to say in hindsight, the RBA was lowering the cash rate before the pandemic from May 2019 when the cash rate was at 1.50%.

IMO the mistake was keeping it so low for so long and waiting for the inflation data to knock them out of their seats before reacting.
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Would inflation have been as bad if not for supply issues caused by Russia's invasion and China's (lack of) COVID vaccine response. They probably went 2-3 months too late but until those supply side issues developed, they were still looking at low inflation numbers for 2022.

You also need to look at the language they are using. They are talking about normalising rates - Under 1% was never meant to persist. Get used to the RBA rate with above 3-4% for a long while, just like it was for generations post the very low rates post war.
 
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