Category: Property Market

Not All Bubbles Are Created Equal – The Jolly Swagman

In the latest podcast from Joe Walker, he discusses housing bubbles with Vernon Smith.

#99: Housing Bubble Week Epilogue: Not All Bubbles Are Created Equal — Vernon Smith
The chart below, from, the Nobel Prize-winning economist Vernon Smith, should be put on a T-shirt or a prominently-placed billboard.

It explains why the Great Recession was so ‘Great’.

It explains why wealth inequality widened in its wake. 

It may explain why the US and other advanced economies seem to be stuck in the swamp of secular stagnation.

And given that financial crises have been shown to drive political polarisation and an increase in the voting share of far-right parties, it at least partly explains why Donald J. Trump was able to ride a wave of popular resentment all the way to 1600 Pennsylvania Avenue.

In short, it explains why not all bubbles are created equal.     When a housing bubble bursts, like the one in the US shown above, things don’t just go back to normal. Asset values fall against fixed long term debt, and equity collapses disproportionately. 

In many cases, borrowers are plunged into negative equity. This was the source of damage to household balance sheets that haunted the US economy for 5 years. According to CoreLogic data, in 2011, 11 million properties (or homeowners in 1 out of every 4 properties with a mortgage) had negative equity.

Auction Results 26 Sept 2020

Domain released their preliminary results for today. They note that “From Thursday July 9 the Victorian government placed a ban on public real estate auctions as part of social distancing measures to slow the spread of COVID-19. The number of auctions withdrawn in the immediate weeks following the ban are likely to be higher than normal”.

Canberra listed 49 auctions, reported 40 results with 34 sold, and 6 passed in to give a Domain clearance of 85%.

Brisbane listed 52 auctions, reported 39 with 20 sold, 7 withdrawn and 12 passed in to give a Domain clearance of 51%.

Adelaide listed 6 auctions, reported 34 results with 24 sold, 6 withdrawn and 4 passed in to give a Domain clearance of 71%.

DFA Live Q&A HD Replay With Chris Bates Mortgage Broker 22nd Sept 2020

This is an edited edition of our latest live event. We had an NBN failure so the discussion with Chris was curtailed. Chris can be found at wealthful.com.au.

Original version with live chat here: https://youtu.be/HNAQtcT6TtQ

Auction Results 19 Sept 2020

Domain released their preliminary results for today. They note “from Thursday July 9 the Victorian government placed a ban on public real estate auctions as part of social distancing measures to slow the spread of COVID-19. The number of auctions withdrawn in the immediate weeks following the ban are likely to be higher than normal”.

Canberra listed 34 auctions, reported 34 with 27 sold, 1 withdrawn and 6 passed in to give a Domain clearance of 79%.

Brisbane listed 44 auctions, reported 39 with 14 sold, 4 withdrawn and 21 passed in to give a Domain clearance of 36%.

Adelaide listed 37 auctions, reported 28 with 18 sold, 2 withdrawn and 8 passed in to give a Domain clearance of 64%.