Mr.Samma Ketasin Director of Real Estate Information Center (REIC), said a survey of residential projects that have been affected by flooding in the area of Bangkok, Metropolitan areas and Ayutthaya province, including seven that are primarily residential. to be affected by about 50,000 units each of which meets at the affected differently. By exploring the data center to the allocation of project approval. The semi-detached house, townhouse, commercial buildings (excluding building) and build their own homes. The projects launched since 1990, compared to the flood map. Most of the houses were completed and are now living. The house is under construction and there is not much left to sell. The base housing has been affected by the crisis include both the East and West areas of Bangkok such as Nhongjok, Buengkum, Khlong Sam Wa, Bang Bua Thong, Rangsit etc.

However, the effect of flooding was the fourth-quarter home sales have decreased, however, believe that violence would not be equivalent to the economic crisis of 1997 because of different environmental factors. And financial institutions remain strong. While consumers themselves after the big flood is believed to be a judge. Mind in buying more homes. The factors to consider in making it. To give priority to the height of the project area. The altitude of the route around the sides. In order to protect Kanpai of flooding in the future. And may consider buying a condominium unit instead of buying a house, townhouse, or even more.

The operator is expected to run into trouble after the construction of a new project delays. Because of inclement weather. Building has been damaged and broken. Clan, or a higher price, such as concrete block, stone, cement, sand, etc. Transportation is also difficult. If the problem continues to prolonged flooding in the area with the housing market, such as Bangkok, Metropolitan areas and Ayutthaya would have slowed the housing market conditions.

Dr. Sopon Pornchokchai President of Research and Information Center, The Social Appraisal for property along the Thai, Agency for Real Estate Affairs (AREA) revealed that in 2011, has sold the remaining housing. To wait for sales in 2011 of 130,282 units, including semi-detached Town House Apartment Town House and land allocated for housing. Residential these It is not that a problem does not sell out or anything, but as the survey has not been sold and most are in the housing project launched shortly.

If compared with the total number of residents in the Bangkok and Metropolitan Area with 4.4 million units in it. Homes pending sale is this Accounted for only 3% of all housing. Statistical data from the Center for Social Research and Evaluation The Thai Ha Rim Property Agency for Real Estate Affairs (AREA) was collected last year from 1997 to 1999, it was found that this ratio was as high as 5% during the crisis. There is housing for about 150,000 units sold, but while he has only 3 million total housing units, so it can be considered. Homes for sale is pending. Would have no problem at all.

When considering in detail the type of products will be found. Situation of the unit is best when in 2010 the data center, research and evaluation The Social by side Sub Thai Agency for Real Estate Affairs (AREA) were offering the product launched in 2010 and previously combined 89,267. unit, but can sell up to 49,442 units sold in 2011 left only 39,825 units.

The townhouses are available in all markets sold 67,945 units and 26,962 units are still waiting to sell more units to 40,983 units, however, if the rate of home sales better than one. Town House also considered in good condition. And is likely to release more.

House may be the case that less than other groups because in 2010 there are 51,942 units to be offered in the market. Including both old and new projects. But it appears that only 13,869 units sold in discount sales in 2011 to 38,073 units, however, at the launch of a new house. The only house of public companies and large companies as a professional. Experience. Can still continue selling well, said Dr. Sopon This fact should be mentioned. That would not think of selling the house to be a problem at all.

It also has another 11,414 housing units that are waiting for a buyer who is also a semi-detached. Town and land allocated for housing. In the case of semi-detached is a rival of the house. It now has a house that looks like a semi-detached twin much But with construction in the area is just 35 square meters are cheaper than the typical house.

In the remainder of housing sold in 2011 at 130,382 units, up over 2010, the existing 110,666 units to 18% represents the accumulation of units sold increases rather However, if less units remaining for sale for a long time after ten years to a number of approximately 10,000 units, and if the residents wait for sales at a lower than 20%, another 41,000 units will be left to residents who are waiting for a buyer for just 79,000 units. which is considered not much.

Another major issue is number of residential sales at this time. Generated less than 19% may be canceled is if the total is 41,000 units and generated more than 40%, there is the number of residential units or 65,524 units, half of which are offered in the market. Housing they may be canceled if a crisis. However, the economic crisis would not happen now. Not unless there is reason to expect such as war or terrorism, etc.

In terms of the value Homes built less than 20% of the total value most. 102,781 of 379,439 million Baht or 27% of the total if the group was created by another 20-39% to 86,554 million baht, it will account for 50% of the total value of the foreclosed.

However, housing will sell well or not. Or experience any problems just yet, depending on whether located where. How much is the price level. Apart from that kind of housing is already So those wishing to invest or develop the housing project. It should study in detail the special.

This is a response questions. I asked when the six months about the direction of the financial system. Although the disclosure of information will come out in a manner that is not clear. Images, they also see you have other tracks that the future of the financial support of the residents of the United States will look like what.

The Ministry of Finance of the United States. We issue proposals and options on financial markets, housing revolution. Which contains the two main reasons.

First, a process that results causes the government to support the financial side. Home to the U.S. for many years at Fannie Mae and Freddie Mac have been damaged greatly during the past 3-4 years, as follows.

First, despite laws that established the two agencies. The purpose is to serve the U.S. people are encouraged to address their own, they live with the shareholder structure of the private sector. Along with overseeing the work the two agencies lax Driving operation is in a maximum profit. Results bear risk than the. And have to destroy people’s tax money eventually.

The two agencies both receive support from the government. The terms of the tax advantage over private sector Share capital of less than And received the protection that never fail in the eyes of U.S. residents. The expansion in the segment with a high risk to the quick. Cause damage. In addition, there is no self-sufficient buffer of capital well.

Finally, the enforcement agency supervising financial institutions, both noted to have poor performance due to the regulatory structure of U.S. financial institutions to include agencies. Directed several sure enough.

Secondly, the main content of the proposal that just came out is to find alternatives for financing for the housing of the United States. The new system. To balance the weight. During the public access to the funds was insufficient. And the use of public tax money to a minimum. To promote the economy, the Ministry of Finance. U.S. has proposed three options include.

First alternative to the private sector acts as a financial services provider in housing loans except those with low to moderate income. The existing agencies continue to provide financial assistance to that side. Live next The advantages of this alternative is that not a distortion of resource allocation between other sectors of the economy, with housing finance sector. And must bear the risk more than necessary as the past, but of course that people with low incomes would be able to access funding more difficult from this alternative because the market such as line of business that the private sector fails to cooperate. much attention. From the profits of this business for quite a few customers.

The second choice. Similar to the first alternative. But the gaps with no help from the government reserve system in times of crisis in the housing market by governments acting together to help the risk of such damage. With help from the government to supplement the process of financial services from the private sector through two types of set fees high enough price. Investment fund units or damage to government protection. As a compensation fund for damage caused when a crisis comes up. Of course, that Affects the interest rates people pay to buy a house in the loan at a higher level.

Option three Similar to the first alternative. But the gaps with no help from the government reserve system in times of crisis in the housing market by setting up a new agency of the U.S. government (unit B as shown) serves to guarantee the securities relating to housing loans. Instruments that are backed by home loans, including certain types of MBS (section C) a Reinsurance or insurance fund to supplement the strength of the private sector (unit A) If the crisis. Or fall of financial institutions in the future. Various investors. Access to MBS investors and trading mechanisms such as the interest rate will help people buy homes, do not borrow to pay much higher because many private investors. Can help cover the cost in time of crisis, the levels decrease. From the price mechanism, which has higher performance. Liquidity and credit shall also be accessible to people with low incomes more evenly.

I have noticed the new guidelines for the three criteria for a U.S. Treasury Department. Would be willing to offer ideas for the housing finance system in the alternative. The third official for the U.S. to be realized. Flow of ambiguity, they doubt the mechanism of a free market economy, while this particular issue of asset pricing through market mechanisms from Securitization CDO instruments during the last crisis. Resulted in the concept. Would be opposition parties. Both political and social currents. U.S. Treasury Department has proposed using the first and second choice, and then rely on more work than the private sector. To make a third choice. Compared to the more casually, and then tilt the receiving assistance from the government plus Or may be called the technique ‘Nudge’ to convey the contents of the public policies they want without being too much to resist.

The second mechanism to guide the market look to it again. Still rely on the structure of private shareholders. The operating style of the highest profit. Results have been at risk over the same. Reverse loss of experience and state financial institutions both Mentioned above.

Finally should be noted that the Ministry of Finance. U.S. will not dare to propose new financial architecture that very clear. Will be seen that the first and second choice. All it was a concept that still lacks guidelines and procedures that clearly the possibility that the U.S. Treasury Department may not want to be named who held. New agency set up in the government of their own. Because Mr. Timothy chicken quot Partners will not likely benefit much anything. If the new division to work as planned, however, if the agencies that cause damage to the U.S. economy in the future up to those who must be someone responsible for most is one who establishes agency said. up sure enough.

Said by : Dr. Boontam Rajitpinyolirsh

5 The most important thing in a mortgage :

1. Location : The location is something that can not be changed with most residents, if you decide to buy affect employment opportunities to choose from. His trip, safety, resale value of your home that your child goes to school, how much peace. You will have your quiet and dozens of other things.

Because the place is important because you may think your place is what should not compromise, but instead of committing all his time – moving to the suburbs beyond. work in the city because they want a big house / new / more pleasant for a lower price and sometimes worth the balance of power in a position to get more than you want.

2. Privacy : The type of housing you choose – your home, condo or house – affect the amount of privacy you have. People always let you know when you come and go, and if you are home or away?. You can play your music at the volume you want to launch a business television and without disturbing the neighbors? Your neighbors may see what you’re doing, even when you’re at home or in your backyard or not.

Please note that personal information of both – you want to keep the details of the life of your close neighbor or not.

If you buy a housing unit in the building of several privacy levels may vary with the general size and quality building materials used in construction location. His unit in the building and operation of the community (people give to themselves or anyone know?) Factors in the family home alone, such as the size of the large number above the ground, fencing, plant , the location of windows and if the door is in the house cUL – Bag or closed communities can affect every level of privacy.

Houses often offer more privacy than the condo or house, but not the house you want to live near the center of the city tend to privacy compensation for the position as the urban population is likely to have a higher density than suburban areas.

3. Types of Houses : If you choose a home or condo house will also affect how. Life resale value of your home and your financial monthly.

If you choose a floor, it is difficult or impossible to field a barbecue. Back home or a nice patch of grass for dogs – in fact, may not be possible to have a dog at all.

Condo livelihoods responsible for maintaining the exterior of which will be limited – not to repaint the house, replace the roof or mowing the lawn – but you have to pay for all these things in the form of home ownership. cases. Months of the relationship. You also have to reach if the extra money to repair large homeowner associations and is a short on money, although many people think that living in an apartment they have to pay the burden of relief. In case of major home repairs such as ending as fact. It really depends on how well your home owners association management.

In addition, condominiums and houses can be more difficult to command the best price. For when you sell, there may be other units for sale in the same or similar to your building larger than is actually being is also the same may be true in a neighborhood of tract houses. But even the way home with the same floor plans often have different properties in the same unit condominium building.

From the floor and house prices are often cheaper than at home, buy a house for the first time that the normal balance of power of choice over the past behind.

4. Price : The cost of the house of scores in the top of the list of major importance. Location and good facilities are nicer house price increases. If you are not rich, you have to sacrifice some things you want in your budget is really about what you get for your money and have to rely on. Calculate your own what you can afford is an estimate of the lender.

5. Conclusion : It is possible to find a perfect little house is perfect for your needs. Your taste and budget, and it is okay to make concessions to think about your priorities before you start looking for your home, but is flexible and willing to change his mind to see things. the body. Choose your real – are properties that can happen to change their priorities. And remember that if you can find a place that requires too much commitment is right to expect – your new home on the market every day.

The world is still bringing in a recession with large economies still grappling with the housing market to crash. Mexico has a lot of unwarranted negative press due to travel warnings from the swine flu. These factors have pushed demand and prices to historical lows. As everyone knows Puerto Vallarta in Mexico and property knows as a whole, these are only a temporary economic downturn and the inner strength of real estate in Mexico.

Note that when recovering the news of the recovery in the stream in real estate prices. So do not wait for new lows. To strengthen the confidence of investors, the Mexican government announced recently, “Vive Mexico” initiative. The initiative is the tourism industry, that any upward trend in the influx of tourists does have many spin-offs. In particular, the benefit Real Estate Mexico directly and then the local economy bounce back.So exactly “Viva Mexico” is It is a campaign to boost tourism industry $ 90,000,000 s Mexico, which has suffered from the outbreak of swine flu.

President Felipe Calderon on Monday in Mexico City announced the new campaign called “Viva Mexico” (Long live Mexico). Many Mexican celebrities joined the effort for the sector most affected revitalize New Mexico. The President of Mexico said Mexico is requiring Lives campaign is not just a campaign but a national movement, the participation of all Mexican citizens. Many celebrities, such as Spanish tenor Placido Domingo, Mexican actor Diego Luna, and Mexican soccer player Rafael Marquez are required to participate in the campaign to attract tourists to Mexico. The funds for the campaign is used to promote Mexico as a leading tourist destination with unparalleled sights, places, and beauty. The campaign is aimed mainly at Mexico as a tourist destination in North America, Europe and the rest of the world. All channels of the media such as radio, television, press, etc., are used to carry the message of the program. In addition, celebrities will be used creatively to educate the world about Mexico and its rich culture.

The campaign aims to promote tourism this summer. For real estate in Puerto Vallarta, this means that will benefit tourism, a key for the property market here much. How to recover the tourism, the economy will be injected with new life. So all potential investors are advised to invest in the light of all these factors before wisely in real estate. Your property on the beach in Puerto Vallarta is within your reach. Check out the list of properties in Puerto Vallarta plan properly to Finance Puerto Vallarta condos and homes, and plan for a beautiful future today. Contact Tom Budniak for the understanding of this booming market.

Mr Chanos rose to fame in 2000-01 when he identified flaws in Enron Corporation’s accounts, resulting in management significantly overstating the company’s earnings. Chanos began short selling Enron and made massive profits as the company’s stock declined from $90 in August 2000 to a low of nearly $1 near the end of 2001. Chanos’ ability to find and then exploit the fraud at Enron has made him somewhat of a celebrity in the financial press.

In his latest interview, Chanos warns that China is experiencing a severe real estate bubble and is headed for a crash; rather than the sustained boom that most mainstream economists predict.

Chanos first defines what he means by a bubble: a debt fuelled asset inflation where the rental income does not cover the debt expense incurred to purchase the asset. In other words, “Ponzi finance” that requires the “greater fool” and ever-increasing levels of debt to perpetuate it.

After watching Chanos – interview, I thought I’d examine how Australia’s residential housing market stacks up under his definition in order to determine whether we are experiencing a speculative housing bubble or asset inflation based upon sound fundamentals.

Up, Up and Away:
Anyone under the age of 40 and living in an Australian capital city knows first hand that it is becoming increasing difficult to find a decent, reasonably priced home within a reasonable commute to work. We’ve all watched in amazement, disbelief or dread as we, our friends or family are priced-out of the housing market or take on mortgages the size of a small African nation simply to put a roof over our head. But how expensive have Australian house prices become? Where has the money come from? And is this house price growth sustainable?

To answer the first question, Chart 1 plots average Australian established house prices (sourced from the Real Estate Institute of Australia) against average Household Disposable Incomes (HDI) and Average Full-Time Ordinary Earnings (AFTOE).

As you can see, the ratio of house prices to average earnings started at around 2.5 times HDI and 3.7 times AFTOE in 1986. This ratio increased slowly from the mid-1980s to 2000, rose rapidly from 2000 to around 2004 and then settled at around 6 times HDI and 7.7 timed AFTOE in 2008/09.

While you can argue about the choice of house price data and income measures, the fact remains that the trend in prices is clear – housing has become far more expensive overtime and Australians are now required to dedicate a much larger proportion of their lifetime’s earnings to purchase a home.

Buy now, pay later:
Since the growth in house prices has significantly outpaced the growth in incomes, it follows that rising debt levels have been the key contributor to rising house prices in Australia, since the only way to purchase something that you cannot afford through income is to borrow the difference. Chart 2 uses RBA data to plot the level of mortgage debt against HDI and GDP.

As with Chart 1, Australian mortgage debt has increased significantly from around 32 per cent of HDI and 12 per cent of GDP in 1990 to 138 per cent and 89 per cent respectively at the end of 2009.

Based on the above data, we can confidently conclude that Australia’s house price growth has been debt-fuelled, thereby fulfilling the first criterion of Chanos bubble definition.

If you can’t buy it, rent it:
So what about the second part to Chanos ” bubble definition ” the requirement that the rental income does not cover the debt expense incurred to purchase the asset, thereby requiring “Ponzi finance” and ever-increasing levels of debt to sustain asset (house price) growth?

To determine whether this part of Chanos – definition has been met, Chart 3 uses ABS data to plot the growth in real (inflation-adjusted) house prices against the growth in real rents. For this criterion not to hold, we would require rents to have increased at roughly the same rate as house prices such that rental incomes broadly cover the cost of debt repayments.

Ouch! According to the ABS, real rents have increased by only 14 per cent since 1987 while real house prices have risen by a whopping 163 per cent over the same period! It is no surprise then that yields on rental houses have plummeted from around 8 per cent in 1987 to around 3.5 per cent currently.

Remember that the rental yields shown above are before deductions for property expenses such as rates, land tax, maintenance and agents fees. If you take these costs into account, then current net rental yields would likely be tracking around 2.5 per cent, well below the current discount variable mortgage rate of around 7 per cent. Put another way, the average new housing investor would incur a pre-tax income loss of around 4.5 per cent on every dollar invested in housing!

The data, therefore, strongly suggests that the Australian housing market is being underpinned by Ponzi finance, whereby investors and owner occupiers are leveraging up to buy property in the hope of achieving rapid capital growth (in the case of investors) or “getting in” before prices increase further (in the case of owner occupiers). With the significant negative income returns from residential property, the only way that house prices can continue to increase faster than incomes is if buyers continue to believe that prices will rise and that large capital gains can be made by selling the same asset to other buyers (the “greater fool”). Such a scenario requires ever-increasing debt levels, which is clearly unsustainable.

This hypothesis is broadly supported by this recent investigation by the Economist, which found Australia’s housing market to be the most overvalued in a sample of 20 countries using an average price-to-rents methodology. Similarly, the IMF recently found the Australian housing market to be amongst the most overvalued in the OECD based on price-to-rents and price-to-incomes

Aussies love a punt:
So who is to blame for the rising debt levels and spiralling house prices? Is it the property investors encouraged to pile into rental housing by Australia’s peculiar tax laws? Is it owner occupiers that simply expect too much and are willing to pay any price to buy the home of their dreams? Or is it the banks for providing easy credit?

In my opinion, all factors are to blame. It is certainly true that investors have significantly added to housing demand and prices over the past two decades, as evidenced by investors’ share of total mortgages increasing from around 14 per cent of total mortgages in 1990 to around 30 per cent currently.And thanks to negative gearing – which allows landlords to deduct interest and other expenses against other income for tax purposes, without limit – the number of property investors claiming rental losses has skyrocketed. According to the 2007-08 Australian Taxation Office Statistics, there were around 1.7 million property investors claiming deductions in 2008. Of these, 1.2 million, or 69 per cent of property investors (1 in 10 taxpayers) claimed net rental losses, with total net rental losses equalling a massive $8.6 billion! By comparison, there were around 1.1 million property investors claiming deductions in 1995-06, with 56 per cent of these claiming net losses.

The impact of negative gearing on encouraging property speculation was also compounded by the Howard Government’s decision to halve the rate of capital gains taxes in 1999. Taken together, these two tax measures enable property investors to partly socialise any losses incurred through holding investment property, whilst privatising any gains achieved through capital appreciation.

Of course, some increase in investors was to be expected, even without the generous tax concessions, given the Baby Boomer generation the largest generation in history began to hit peak earnings age (45 to 55 years) from 1990. And as the Boomers and others realised that they had not saved enough for their retirement, they began buying up investment properties on masse as a way of catching up in a hurry, helped along of course by a proliferation of tacky property investment seminars marketing slogans like: “THIS WEEKEND CAN MAKE YOU A MILLIONAIRE” and continuous segments on tabloid television showing every man and his dog making fortunes on the back of property.

Keeping up with the Joneses:
Owner occupiers don’t escape blame either. Thanks to our unspoken desire to impress our neighbours, colleagues and friends, there has been a remarkable increase in the size of our homes. According to Clive Hamilton’s book Affluenza, and reiterated in Ross Gittins’s book Gittinomics, between 1985 and 2000, the average floor area of new houses increased by almost a third, while the average number of people per house has decreased from 3.60 in 1960 to around 2.56 in 2008 (see my previous post). So we, as a society, have been prepared to pay more for larger, better quality homes; although, some of this increase in the size (price) of our houses has been partly offset by a reduction in the size of the average block of land.

The Baby Boomers reaching peak earnings age from 1990 is also likely to have significantly increased demand (and prices) for owner occupier homes, since many in this demographic would have traded up to their most expensive (“peak”) home over this period.

Finally, we cannot forget the significant role that government policy in particular the introduction of the First Home Owners Grant in 2000 and the more recent First Home Owners Boost played in enticing first-time buyers into the market and significantly boosting housing demand. Combined with elevated levels of competition from property investors and runaway house prices, first time buyers have increasingly felt the need to leverage up with debt in order to “get on the property ladder” before prices rise beyond their reach.

If you can’t borrow the money, you can’t pay a high price:
While there are many factors that have increased the demand for housing – such as tax concessions, subsidies paid to first-time buyers, and Baby Boomer Demographics in the end, the extra demand for housing can only feed into higher prices if credit is readily available, enabling buyers to borrow large sums and pay high prices. Put simply, the supply of credit is the crucial ingredient to sustaining high house prices.

As explained in the excellent book, The Great Crash of 2008, it was the rise of the non-bank lender in the mid 1990s – raising funds via securitisation activities on the wholesale debt markets – that initially caused an intensification of competition among mortgage lenders (Chart 6 tracks their growth against bank mortgage lending). It was these non-bank lenders, whom have no formal regulator and no rules outside of regular trade practices and corporations law, which led the decline in Australian credit standards from the mid 1990s by introducing “innovative” loan products like low-doc loans in 1997, then “no-doc” loans in 1999, and more recently they were beginning to issue “non-conforming” (subprime) loans just before the Global Financial Crisis intervened.

Faced with this new competitive threat, the banks responded in kind by reducing their deposit requirements and tapping new sources of funding offshore. Gone were the days of requiring a minimum 20 per cent deposit and the banks funding their loan portfolios from domestically sourced funds (mostly deposits); instead, 5 per cent deposits became commonplace funded increasingly by the banks issuing bonds to foreigners.

As shown in Chart 7, the percentage of bank liabilities funded from foreigners has increased from just over 5 per cent in 1989 to around 22 per cent currently, totalling nearly $500 billion! Over the same period, the banks increased the proportion of loans channelled into housing, with housing loans increasing from around 35 per cent of total lending in 1990 to 56 per cent in 2010.

Anyone seeking an answer as to why Australia owes so much money to foreigners only has to look to the contemporary banking model of borrowing offshore to pump up housing.

With the banks awash with funds – sourced from both domestic and foreign sources – and with a higher proportion of bank assets (loans) being directed into housing, is it really a surprise that house prices and household debt has exploded over the past two decades?

The key risk is that Australia’s ability to sustain current house prices, let alone further price increases, rests with the willingness of other countries to continue lending the banks money. But in times of crisis, such as when Lehman Brothers collapsed, foreigners tend to zip up their wallets, leaving our banks, house prices, and broader economy exposed to a sudden liquidity shock as the banks are unable to roll-over their foreign borrowings (let alone increase them).

Few people realise that the Australian Government’s October 2008 guarantee of bank funding and deposits was issued after the larger banks made it clear to the Government that they were facing extreme difficulty in rolling over their wholesale funding, meaning that they would have to immediately withdraw credit from the Australian economy and would eventually face insolvency. So while it might be true that Australia’s banks managed credit risk well, avoiding the excesses of the sub-prime lending prior to the onset of the GFC, their heavy offshore borrowing created a liquidity risk that also rendered them too-big-to-fail, eventually leading to the Government’s funding guarantee. Hence, whilst North American and European banks became insolvent on the asset side of their balance sheet, due to holding dodgy loans and derivatives, our banks also faced insolvency, except that it was on the liability side of their balance sheet (a more detailed discussion of this issue is provided in the book, The Great Crash of 2008).

Bubble Trouble:
Contrary to popular opinion, the Australian housing market is currently in a fragile position. With Australian household’s already up to their eyeballs in debt and housing finance falling (particularly amongst first-time buyers), it is difficult to see how prices and debt levels can continue their upward trend. Even without an external shock, such as a China slowdown or a liquidity crisis that prevents the banks from rolling over their offshore debt, for prices to continue rising, investors and owner occupiers must continue to believe that capital appreciation will be sufficient to cover the negative income return from owning residential property. This is clearly an unsustainable situation and once the expectation of continued strong house price growth disappears, households will likely start to reduce their borrowings (deleverage) and prices will correct.

A greater concern is that an external shock leads to a steep rise in unemployment and/or a credit crunch. If such an event occurs, we can expect a house price crash and a prolonged period of debt deflation, similar to the experience of the USA and Europe following the GFC.

Although it won’t admit it, the Government is aware of these risks, which is why it implemented policies to sustain the housing bubble during the GFC, including: the First Home Buyers Boost; liberalised foreign investment rules; funding for mortgage securitisation by non-bank lenders; bank deposit and wholesale funding guarantees; and the current massive immigration program. These policies are clearly aimed at increasing housing demand and ensuring a steady supply of credit the two key ingredients for continued growth in house prices and debt. But most of these policies are likely to work only once and have merely delayed the inevitable correction we have to have.

For their part, the banks are continuing to channel funds into housing. Following the GFC, the large banks cut lending to business and apartment developers (thereby reducing supply), and instead directed these funds to purchasers of existing dwellings. Further, after realising that households had reached the limits of their debt servicing capacity, ING ” Australia’s fifth largest lender ” is now preparing to issue never-ending mortgages that have no fixed term and no requirement to repay any capital along the way, in a bid to reduce monthly loan repayments (see here for details). We can expect other lenders to follow suit in a desperate bid to encourage households to continue borrowing larger sums in order to sustain our overinflated house prices.

The government and banks will no doubt try anything to keep the housing Ponzi scheme alive and prevent the housing bubble from bursting. But for how long can the Australian housing market defy gravity?

The U.S. housing market has been in a slump for the past four years. When will it ever end?

In recent years, real estate has proven as jittery and unreliable as any other market. The average U.S. home price nearly doubled between January 2000 and April 2006, according to the First American LoanPerformance index. Since then, the average has fallen about 30%. The drop has been 53% in the Las Vegas metropolitan area and 39% in Miami, where about a quarter of all households with mortgages are behind on their payments or in foreclosure. The value of your home might be determined more by whether the neighbors keep their jobs than whether the house has ample light and closet space.

Here is a guide to navigating a fractured and volatile market:

1. Is the housing market getting better?
It has shown some signs of healing this year, but the much-touted recovery is tentative and fragile.

Home sales have increased from the severely depressed levels of 2008. The inventory of unsold homes listed for sale also is down. Bidding wars are breaking out for foreclosed homes in the sorts of neighborhoods (near jobs and decent schools) that attract both first-time buyers and investors seeking rental properties.

But more than 6.7 million U.S. households with mortgages, or about 13%, are behind on their payments or are in the foreclosure process, according to the Mortgage Bankers Association. Eventually, many of them will lose those homes, sending more supply onto the market. Unemployment has continued to rise, and the housing market is unlikely to show a sustained recovery until job growth resumes.

While the supply of middle-class homes on the market has declined somewhat, it remains ample in most places. And there is a huge glut of high-end houses for sale in many areas. That means prices of high-end homes might still have a long way to fall.

2. When will housing bottom out?
There probably won’t be any clear turning point. Monthly indicators, such as home sales and prices, tend to bounce erratically from month to month, making it hard to discern the underlying trend. And the housing bust will end at different times in different places. House prices already might have bottomed out in the coveted Virginia suburbs with short commutes into Washington, D.C., for instance. But it probably will be years before all of the unsold condos find buyers in parts of Florida.

Generalizations about states or metropolitan areas don’t say much about what is happening in your neighborhood. In Summit, N.J., known for good schools and an easy, 45-minute train commute to Manhattan, the median home price in September was up 1.2% from a year earlier, according to Otteau Valuation Group, an appraisal company. In Atlantic City, N.J., which suffers from too much speculative building of condominiums and weak demand for vacation homes, the median price is down about 12% from a year ago.

3. What signals should I watch to determine whether my local market is improving?
One way to get a sense of supply is to ask a good local real estate agent for stats on how many homes are listed for sale in your town and how many months it would take at the current sales rate to absorb that supply. Anything over about six months generally is considered high, meaning that sellers might have to cut prices. Another way to get a sense of a neighborhood’s health is to count the number of for-sale signs and vacant houses. If there are more than a couple vacant homes in a block, that might be a bad sign, particularly if no one is taking care of them.

The supply of homes listed for sale has fallen very sharply in some areas. But the supply is likely to balloon again in many areas with a renewed surge in foreclosures. Many local newspapers provide information on foreclosure filings.

Demand depends heavily on the job market. The U.S. Bureau of Labor Statistics provides unemployment rates by metropolitan area. In September, they ranged from 2.9% in Bismarck, N.D., to 30% in El Centro, Calif. State and local agencies provide job-market data, too. Celia Chen, a housing economist at Moody’s Economy.com, says help-wanted signs can be a useful local indicator; if you start seeing more of them around your neighborhood, that is a sign that business in your area could be starting to recover.

4. How can I figure out the value of my home?
You never know for sure what a home will fetch until you put it on the market, and then it is partly a matter of luck. Will the eager buyer who shares your taste in home style and neighborhood show up on day one or day 200?

Some Web sites — including Zillow.com, HomeGain.com and Cyberhomes.com — provide estimates of individual home values. These estimates are largely based on recent sales of nearby homes, and in some cases they are wildly off the mark. But they often provide a ballpark idea of a home’s value.

You might come closer to the real value by talking to a local agent and looking at recent prices for homes that you know are very similar to yours. If you want to be more scientific and don’t mind paying a few hundred dollars, hire a professional appraiser.

5. Does it matter whether I’m “under water”?
At least you have plenty of company. About 20% of owners of single-family homes with mortgages owe more than the current estimated value of their homes, according to Zillow.com.

If you can afford your monthly payment and don’t need to move soon, that might not be a big problem. But it is hard, and sometimes impossible, to refinance a mortgage if you are under water, and you will take a bath if you have to sell the home now. Some people who can afford to make their monthly mortgage payments are deciding it doesn’t make sense to do so because they don’t expect their home values ever to recover to past peaks, and they could rent similar houses for much lower monthly costs.

6. If I lose my home to foreclosure, how long will it take to repair my credit record?
It probably will be three to five years before you can qualify for a home mortgage insured by the government, depending on your circumstances, and that assumes you have re-established a record for paying your bills on time. The foreclosure will remain a blot on your credit record for seven years, likely raising your interest costs even if you do get another loan. If you pay bills on time, keep your credit-card balances low and don’t apply for too many cards, you can make a “slow, gradual improvement” in your credit score, says Tom Quinn, a vice president at Fair Isaac Corp., which provides tools for analyzing credit records.

7. If I’m renting, is now a good time to buy a house?
It may well be. Prices in most areas are well below their peaks, even if they haven’t hit bottom. Don’t kid yourself that you can time the bottom of the market perfectly. But don’t feel any pressure to buy in a hurry, because the supply of housing is likely to remain ample for years in many areas.

Generally, it doesn’t make sense to buy unless you expect to remain in the house for at least four or five years, because the transaction costs — including commissions for real estate agents and mortgage fees — are heavy.

But now is clearly a good time to rent. Many landlords need tenants badly. The national apartment-vacancy rate in the third quarter was 7.8%, the highest in 23 years, according to Reis Inc., a New York research firm. So landlords are cutting rents and offering such sweeteners as free flat-screen televisions or several months of free rent to retain or attract tenants. Some owners of condos will “cut their throats to get some kind of rental income to cover part of their expenses,” says Jack McCabe, a real estate consultant in Deerfield Beach, Fla.

8. Can I get a tax credit if I buy a home now?
Under an expanded and extended program approved by Congress earlier this month, tax credits are available to many people who buy or sign a contract to buy a principal residence by April 30 and complete the purchase by June 30. The tax credit is up to $8,000 for first-time home buyers and $6,500 for people who already have owned a home for at least five consecutive years during the previous eight years. The credit is available for individual taxpayers with annual incomes of up to $145,000 or joint filers with incomes up to $245,000.

9. Can I get a mortgage on attractive terms?
Only if you have a good credit record, a moderate amount of debt in relation to your income and the ability to fully document your income. That last requirement is fairly easy for people who work for a salary and have had the same employer for more than two years, but it can be tough for self-employed people with incomes that vary substantially from year to year.

A borrower with a strong credit score of 740 or higher (on the scale of 300 to 850) and the ability to make a down payment of at least 20% could get an interest rate of about 5% with no origination fees on a 30-year fixed-rate mortgage, says Lou Barnes, a mortgage banker in Boulder, Colo. But if your credit score is 680, the rate jumps to about 5.5%.

People who can’t make a down payment of at least 20% generally are being funneled into loans insured by the Federal Housing Administration. That means paying extra fees for the FHA insurance.

Borrowing costs are steeper at the high end of the housing market. For so-called jumbo loans — those above $729,750 in areas with the highest housing costs or $417,000 in places with the lowest costs — interest rates on 30-year fixed-rate mortgages last week averaged 5.95%, according to HSH Associates, a financial publisher.

10. Should I invest in foreclosed homes?
Probably not. A lot of investors chase these properties, and only the most experienced know how to deal with all of the pitfalls. Homes auctioned at trustee or sheriff sales are sold on an as-is basis, and there is no provision for an inspection before you take ownership. If after buying you find out that termites have been treating the floor joists as an all-you-can-eat buffet, that is your problem. You must pay for the full price within a day or two, so you need a lot of cash or access to special short-term loans for investors that come with interest rates of around 18%. This is a pursuit best left to people with a lot of time, nerve, cash and knowledge of the local market.

At the end of the decade’s last year we passed the price threshold of 10 years ago, when the high-tech bubble was at its height. In many places – Haifa, Be’er Sheva and the country’s outlying areas – prices at the end of the decade did not even reach those at the end of the 1990s.

Overall, the real estate market made a lot of noise this decade, but prices did not go up by much. In other words, if you bought an apartment in 1999 in the hope that the skyrocketing trend would continue into the new millennium, you lost.

To illustrate this, we need to begin in 1998. That was the year the real estate market began to be boosted by the high-tech bubble and apartment prices anywhere associated with this sector, particularly in Tel Aviv’s new north, Ra’anana and Haifa, went up significantly. According to the Central Bureau of Statistics, Tel Aviv apartment prices in 1998 and 1999 (in real terms) went up 20%; in Haifa they went up 16% and in Jerusalem 15%. For the whole country on average, prices increased only 5% because the high-tech frenzy only gripped a few areas.

That’s the context for the past 10 years, which opened with a sharp slide in prices, especially in the areas high-tech people like best. These areas had seen sharp rises at the end of the previous decade. Between 1999, at the height of the high-tech bubble, and 2001, prices dropped in Tel Aviv and Haifa by about 20% and in Jerusalem by about 15%. For the country as a whole, this fall was about 10%.

The second intifada at the beginning of the decade played its part in dampening the national mood. The number of purchases dropped from around 90,000 a year in the 1990s to only 64,000 in 2002 – the decade’s worst year in terms of housing purchases. In 2003 the number of transactions rose to 75,000 and in 2004 to 79,000, but prices stayed low. The number of transactions then rose steadily, topping 97,000 in 2007. It then shrank to 91,500 in 2009.

Orthodox to Jerusalem, others to the coast
Another key trend began at around the middle of the decade – purchases by foreigners. The real estate bubble in the West made its mark, along with a rise in anti-Semitism in some countries, leading to a significant number of housing purchases by Jews from abroad.

Most of them did not buy in order to immigrate, but to have a second home. Religious foreigners bought apartments mainly in Jerusalem and Ra’anana. Others preferred homes with a view of the sea in Herzliya Pituah, Netanya or Tel Aviv. The Ashdod marina projects also mushroomed, and foreigners did not avoid Eilat’s Shahamon neighborhood.

According to the Finance Ministry’s State Revenue Administration, foreigners bought 1,427 homes in 2002. This jumped to 2,305 in 2006 and peaked in 2006: Out of 87,000 transactions, 5,054, almost 6%, were by foreigners.

This may seem to be a small slice of the market. However, foreigners made their purchases in a limited number of communities, mainly upscale ones. This meant they were buying many apartments in Tel Aviv’s prestigious towers and fine homes in Jerusalem’s Rehavia and Greek Colony neighborhoods.

The influx of foreigners drove prices up. This phenomenon began in 2004 in Tel Aviv and Jerusalem and trickled down to the whole market the next year. The capital market gave prices another hefty push upwards, and the general public was buying apartments, too.

Prices rose in most of the country, though this took a while longer in outlying areas, particularly in the north, which was under missile attack during the Second Lebanon War in 2006.

After the world economic crisis broke in 2008, apartment purchases by foreigners slowed considerably. In 2008, foreigners bought 3,238 homes, a number that dwindled in 2009.

In fact, the role of foreigners in jump-starting the housing market ended three years ago. Now, locals are mainly responsible for rising prices, especially over the past year. Real estate has become a significant investment – it is estimated that some 28,000 of the transactions closed this year were by people who had found no better place to put their money.

“We’ve seen some more encouraging data [on] the housing picture, but we’re not out of the woods,” says Michael Sheldon, chief market strategist at RDM Financial Group. The challenges remaining for residential real estate include the many foreclosed homes moving onto the market, a large inventory of unsold homes, questions surrounding the federal government’s efforts to stimulate housing sales, and broader economic weakness that saps Americans’ ability to buy.

So what signals could demonstrate that the housing market has real strength? BusinessWeek asked economists and housing experts which indicators they’re watching closely.

Housing Inventory
As with any market, the balance of supply and demand matters in real estate. And that balance is still out of whack, but it is improving. In October the equivalent of seven months’ supply of existing homes were on the market, down from eight months in September.

“We’re showing signs that we’re clearing out the excess inventory,” says Michael Strauss, chief economist at the Commonfund, but inventories are still high. A more normal level would be 5.5 to 6 months, he says.

One good sign is that homebuilders seem to be adding very little supply, with new-home inventories at their lowest levels since 1982. “All the unsold stuff is starting to get liquidated,” says Michele Gambera, chief economist at Ibbotson Associates, a subsidiary of Morningstar (MORN). “But there is still so much that has to be sold before the market has a semblance of normality.”

Home Prices

Home prices remain depressed but may have hit bottom. The median sale price of an existing home in October was down 7.1% from a year ago, better than the 8% year-over-year decline in September.

When the weather gets warmer in spring, home buyers come out of hibernation and housing prices often move higher. The spring of 2010 may be the market’s best hope for a significant upswing in home values???the first in more than three years, says Michael Englund, chief economist at Action Economics.

“If the story is out that we’re seeing big increases in price, that will be an encouraging sign,” Englund says. That, in turn, could give a big boost to the psychology of the housing market and to the mindset of Americans who have so much of their wealth tied up in their homes. “We need the housing market to stabilize because it is such an important component of household wealth,” says Jerry Webman, chief economist at OppenheimerFunds.

Hidden Supply

Economists and real estate experts are grasping for any indication of how much “hidden supply” is out there waiting to come to market. First, there are home buyers who would like to sell but are waiting for better market conditions. Second, there are foreclosed homes in the process of being seized and sold by banks. Both are difficult to measure or predict. “There is all this shadow inventory building up,” says Mike O’Rourke, chief market strategist at BTIG. “The banks are so overwhelmed, it takes forever to work it out.”

One positive sign: Banks already have been liquidating foreclosed homes throughout 2009, often at deep discounts. And despite the desperate deals made by these sellers, home prices have essentially moved sideways this year, Strauss notes. The median price in October was only $1,600 below its level in May.

Government Policy

Two federal policies seem to have provided a boost to the housing market this year: A tax credit provided incentives of up to $8,000 to new-home buyers, and the Federal Reserve has purchased mortgage securities in an effort to keep mortgage rates low.

The tax credit has been extended until the spring of 2010. The future of the Fed’s mortgage program is an open question. At some point both stimulus programs will need to end. The government “needs to demonstrate the economy is able to stand on its own two feet,” Sheldon says.

The good news is that the housing market probably has at least another six months to burn off inventory with government encouragement, says O’Rourke. “We want to continue to see this inventory worked off.” Once the number of unsold homes stabilizes, the market can operate more normally.

“Presumably at a certain time the housing market will have some momentum of its own,” Englund says. When stimulus is withdrawn, “the goal is to have self-sustaining increases in the housing sector.”
The Broader Economy

Problems in the housing market arguably caused the financial crisis and led to the recession. But a sustained improvement for housing might need to wait for the economy to recover on its own. The job picture, in particular, is crucial for residential real estate. “As long as people are employed, they are more likely to be current on their mortgage,” Gambera says.

Demand for housing is driven by demographics???the number of new households being created???and the jobs picture. Strauss notes that demographic trends are actually favorable. “But right now those are being more than offset by current economic conditions,” he says.

If you want to know how much your house will be worth in a year or two, you might be better off watching the labor market than the housing market. And because real estate conditions often vary greatly from region to region, the most crucial metric may be the local job picture.

If you’re selling your home, the good news is that you’re likelier to find a buyer now than in the last couple of years.

The bad news is you should be prepared to slash your asking price.

This summer, recent data show, real estate agents are busy and, spurred by low interest rates, falling home prices, a wide selection, and government incentives for first-time home buyers, home shoppers are becoming home buyers.

“What we’re seeing is a turn in the housing market,” says Gary Wolfer, chief economist with Univest Wealth Management (UVSP).

What we’re not seeing, however, is rising home prices. And that’s disturbing to the many Americans who have a large share of their wealth tied up in real estate.

Supply of Homes Rising Alongside Sales
Even as existing-home sales rose 7.2% in July, the total supply of existing homes on the market rose 7.3%, to more than 4 million. According to National Association of Realtors data, released Aug. 21, if home sales continue at this pace, it would take 9.4 months to sell off the supply.

The rise in supply is more than quenching the rising demand. The median existing-home price in July was $178,400, 15.1% below a year ago.

A better gauge of home prices arrives on Aug. 28, when the June S&P/Case-Shiller Home Price index is scheduled to be released. The May index, released a month ago, showed prices were down 17.1% from a year ago, but up 0.5% from April. Action Economics expects June’s index to dip slightly lower again.

Even if prices improve modestly, it may be difficult to stop the slide of home prices entirely for several more months, economists say.

“Clearly the downward pressure on home prices should ease as we go forward,” says First American Funds chief economist Keith Hembre. “But there is still going to be downward pressure.”

One problem is foreclosures and other forced sales of homes. The National Association of Realtors estimates 31% of sales were “distressed transactions” in July.

These sales add supply to an already crowded housing market, but also have a broader impact. Just a couple of foreclosure sales can hurt prices across an entire neighborhood, notes OppenheimerFunds (OPY) economist Brian Levitt.

Weak Job Market Threatens Recovery
Other trends are working against the housing market. Last month, U.S. nonfarm payrolls fell another 247,000, less than expected, and the unemployment rate fell from 9.5% to 9.4%. Job losses may be slowing, but layoffs haven’t stopped. For the week ended Aug. 15, initial jobless claims rose by 15,000 to 576,000.

These labor market statistics affect both supply and demand in the housing market.

The unemployed are at risk of losing their homes. “Today’s jobless claim could be tomorrow’s delinquency or foreclosure,” Levitt says.

Homes are more affordable now, and that has brought more buyers to the market. But further improvements in affordability are dependent on prices continuing to fall, mortgage rates staying low and, especially, buyers having the income to support a major home purchase.

The brutal labor market is putting pressure on wages pressure that could persist for years, Hembre says. “You still have a pretty substantial headwind of weak employment conditions and weak income conditions,” Hembre says.

Several economists said they expect the supply of homes to finally match demand sometime in 2010. That would stop the slide of prices, but it doesn’t guarantee a rebound.

“Even after we hit the low, we’ll be bouncing along that low for an extended period of time,” says David Rosenberg, chief economist at wealth management firm Gluskin Sheff. “The bottoming-out process is [measured] in years, not quarters.”

Low End Closest to Hitting Bottom
Rosenberg believes many home buyers this summer are investors who are turning units into rental properties. As a result, rents are falling along with home prices, giving home shoppers less incentive to move from a rental unit to their own home.

According to Hembre and Rosenberg, the lower end of the housing market plagued for years by subprime and other foreclosures is closest to seeing prices hit bottom. But higher-end homes could have further to fall.

Like lower-income subprime buyers, many middle-class and upper-income homeowners also bought more home than they could afford, Rosenberg says. At the same time, demographics will hurt many baby boomers who would like to downsize to smaller homes as they age. “They’re going to be selling into a shrinking pool of trade-up buyers,” he says.

Despite the gloomy outlook for home prices, the most recent news is good. The housing market does show signs of stabilizing. The problem is that housing markets move much more slowly than stock markets, which often bounce back quickly after a sudden steep decline. While stock market players needed to wait several months for a rebound in equity prices, homeowners may be waiting several years for an improvement in the value of what is typically their biggest investment.