Australia Housing Bust Spreads, Accelerates. Prices in Sydney & Melbourne Fall Below Year-Ago Levels, Sales Plunge

Biggest monthly drop in national home price index since 1983.

By Wolf Richter for WOLF STREET.

Home prices in Sydney and Melbourne – among the world’s most glorious housing bubbles –– are tanking, after inflation in Q2 hit 6.1% and is expected to go higher in Q3, and after the Reserve Bank of Australia hiked rates by 175 basis points since May, including 50 basis points in August, to a still minuscule 1.85%. And look what housing is doing: It not only failed as the much-hyped hedge against inflation, but it’s tanking.

In Sydney, home prices plunged by 2.3% in August from July and by 5.9% over the past three months, according to CoreLogic. Since the peak in January, the Home Value Index has dropped 7.4%.

And shockingly, home prices are now down by 2.5% from August last year. I mean, what kind of horror show is this?

In Melbourne, the Home Value Index dropped by 1.2% for the month, by 3.8% for the past three months, by 4.6% from the peak in February, and shockingly, by 2.1% from August last year.

Nationally, CoreLogic’s Home Value Index dropped 1.6% in August from July, the biggest monthly decline since 1983.

This chart shows the price changes on a rolling three-month basis for the big five capital cities (chart via CoreLogic):

“It’s hard to see housing prices stabilising until interest rates find a ceiling and consumer sentiment starts to improve,” CoreLogic said.

On a month-to-month basis, home prices fell in seven of the eight capital cities. Only Darwin hung on with a gain.

Over the three-month period, five capital cities have now booked declines, including Brisbane, which joined the club in August.

“It was only two months ago that the Brisbane housing market peaked after recording a 42.7% boom in values [since the beginning of the pandemic]. Over the past two months, the market has reversed sharply with values down 1.8% in August after a 0.8% drop in July,” CoreLogic said.

Home prices, Aug 2022


3 months


Median, A$










































Sales plunged.

In Sydney, sales plunged by 35% over the three-month period through August compared to the same period last year; in Canberra sales plunged by 19%, and in Melbourne by16%, according to CoreLogic estimates. Across Australia, sales dropped by 15%.

Going into the normally busy spring and summer season, “we are expecting to see less buying activity as higher interest rates and low sentiment continue to weigh on demand. Should this scenario play out, the net result will be an accumulation of advertised supply that could further weigh down values,” CoreLogic said.

Suddenly plenty of inventory.

And suddenly there’s plenty to choose from: “Sydney and Melbourne, where the housing downturn is more advanced, are already seeing total advertised stock rise to above average levels, and there is a good chance the other capitals will follow suit as listings rise through spring and demand continues to taper,” CoreLogic said.

Across the eight capital cities, the number of homes listed for sale was up by 11% from a year ago. New listings over the past 28 days in the capital cities where well above the prior three years, but down from 2018 (chart via CoreLogic):

But not panicking yet.

This downturn comes after ridiculous price gains, driven by the RBA’s QE and interest rate repression. Price spikes from the beginning of Covid to the respective peaks earlier this year, according to CoreLogic data:

  1. Adelaide +45%
  2. Brisbane +43%
  3. Hobart +38%
  4. Canberra +38%
  5. Darwin +31%
  6. Sydney +28%
  7. Perth +26%
  8. Melbourne +17%

Home prices are down year-over-year in Sydney and Melbourne. But in terms of negative equity, most homeowners in those two markets who bought before August last year, and most homeowners in other markets who bought before 2022 still have positive equity in their homes, given the huge price spikes.

Across the eight capital cities, “a 15% peak to trough decline would roughly take CoreLogic’s combined capitals index back to March 2021 levels,” CoreLogic said.

In addition, buyers made down payments and paid down principal with their mortgage payments, which further increases their equity. And “the risk of widespread negative equity remains low,” CoreLogic said.

So no biggie – if the home-price declines stop magically at 15%.

Not everyone is so sanguine.

Shane Oliver, chief economist at AMP Capital, a global investment manager headquartered in Sydney, told ABC News that this downturn may be the end of a 25-year housing boom.

“Residential property price downturns in the last 25 years have mostly been mild, with prices falling less than 10%, and brief, with prices quickly rebounding to new record highs as rates fell to new lows,” he said.

“This cycle may be different – both in terms of being deeper and taking longer to recover – thanks to a combination of high household debt levels, high home price to income levels, and an end in the long-term downtrend in interest rates,” he said.

If the RBA’s policy rate is raised to 4%, as the money market is projecting, he said, “this would more than double household interest payments and push total mortgage repayments to record highs relative to incomes and likely drive a 30% or so fall in prices.” But OK, it sure was fun while it lasted.

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  154 comments for “Australia Housing Bust Spreads, Accelerates. Prices in Sydney & Melbourne Fall Below Year-Ago Levels, Sales Plunge

  1. MiTurn says:

    “And “the risk of widespread negative equity remains low,” CoreLogic said.”

    Is Australia similar to Canada, where a typical mortgage is 5 years fixed, then variable-rate after that?

    • Bearwolf says:

      Yes. Although before Covid, most home loans in Australia were variable, not fixed. Fixed found new favour in the past 2 years due to fixed rates falling below variable. Fixed rates spiked here late 2021 before variable rates rose in May this year with the RBA hikes.

      • WA says:

        So it looks like all Developed capitalist economies (US, Europe, Australia, Japan, Canada) played by the same playbook in pandemic.

        Our central banks and administration clearly boxed themselves in without an exit strategy. Our symbiotic relationship with financialization of housing has yielded a parasite (asset bubbles) bigger than the host (real prosuctive economy) and there is no way to sustain it.

        We can pretend to bleed this parasite slowly (deflate bubble with tiny rate hikes), but the host may not survive (economy will collapse as markets will keep lacking price rationale causing productionand businessesto remain unprofitable).

        Or we can blow the parasite (Raise rate to Inflation + 2% instantly to kill financialization) and while host will suffer pain (all paper money would be lost, assets will correct 75% and many entities will go bankrupt), the host will survive (free markets will start working making production and businesses profitable again).

        • Slavkk says:

          Happy Labor day weekend in the USA. This is the incorrect perspective. They did not box themselves in they boxed in everyone else. The plan is a plan and you ain’t executing it. It’s deliberate to crash the world economy. I know my views are inconsistent with the the nature of this article but … I am still correct and the sooner everyone wakes up the better. Stay in your home and do not leave if forclosure occurs. Tell the banks to take a hike down to Uluru. The banksters will not be sleeping in a duffel bags in San Francisco, so it’s time to make sure they did and that means we do not obey.

        • Greg Hamilton says:

          There’s an exit strategy alright. I don’t think you are going to like it however.

    • Wolf Richter says:


      Yes, similar. From my article a month ago:

      In Australia, the most common mortgages for owner-occupied homes are mortgages with a “variable rate” that adjusted with changes in the market and mortgages with a “fixed rate” that are fixed for only one to five years.

      The share of “fixed rate” mortgage origination of total originations peaked between July and August 2021 at 46%, according to the housing finance data by the Australian Bureau of Statistics, cited by CoreLogic.

      “Due to record high levels of debt, indebted households are more sensitive to higher interest rates, as well as the additional downside impact from very high inflation on balance sheets and sentiment,” CoreLogic noted.

      “Borrowers who locked into a fixed term mortgage rate through the pandemic growth cycle will be facing a significant refinancing burden next year,” CoreLogic said.

      “RBA analysis is forecasting a surge in fixed loan expiries throughout the second half of next year,” CoreLogic said. “Many of these borrowers could be moving from mortgage rates around the high 1% to low 2% range to a mortgage rate closer to 6% or higher.”

      • Nathan Dumbrowski says:

        Wow. Read that twice. That means that some of these economies have a hidden whammy coming to them. Any thoughts on if the government will intervene and change their mortgage lending operations to avoid catastrophe?

        • Augustus Frost says:

          Their day of reckoning approaches. It doesn’t matter what the government does or doesn’t do.

        • Wisdom Seeker says:

          @AF: That there will be a reckoning is inevitable but of course it does matter greatly what the government does about that! Governments are always tempted to reassign losses that markets would normally process in other ways…

        • Augustus Frost says:

          My point is that no government “can kicking” gimmick is going to work. If the interest rate cycle turned in 2020, it’s game over.

          No way to paper that over without essentially given money or houses away. Stupid as US government policy has been, that might happen on a small scale but it’s not affordable at a large one.

          It would be one thing if a declining housing market occurs in isolation, but it won’t. A housing crash is going to occur at the same time as part of a global asset crash, including stocks and most bonds.

          The economy is going to sink with it meaning tax revenues are heading much lower and deficit spending much higher, again. Maybe a major war (of choice) for the US in the near future with it.

          Whatever government support is going to be provided will have to compete with many other political constituents and it’s not even close to being first on the list.

          The cheapest most effective option is large scale moratoriums, slightly more than $2.5B for every $1T of mortgage debt per month @ roughly 3% previously borrowed rates. That’s why I’m confident it’s the option the government will choose it, but it won’t be enough.

        • Jim Spriggs says:

          @Nathan Dumbrowski
          USA has “enjoyed” the Greenspan Put supporting markets.
          By contrast, Australia seems to have a Government Put supporting housing. It’s a thought crime down under to think it is a good thing for house prices to fall. Perhaps no coincidence that many Members of Parliament have appreciable real estate portfolios.

          The government always find ways to support the housing market, and nobody would dare to bet against them succeeding again. First tactic: The Australian government has just announced its intention to turbocharge immigration even above the irresponsible levels previously pertaining. There have been periods in which Australia’s population has grown by over 1.6% a year – just crazy. The population boost has been demanded with vehemence by industry leaders, including people involved in the construction of high rise apartment towers, who see guaranteed custom coming their way.

          Housing cost needs to fall considerably for the health of Australian society, but the government will do its darndest to prevent it happening. We will have to see what other tricks it can pull, but traditionally it provides first home buyer grants which act to increase house prices by the value of the grant within days.

        • Maxwell says:

          What catastrophe ?
          Its only recent new home owners who have problems. People who bought their homes more than 5 years ago are facing the same interest rate they had back then, AND they have increase equity given home increases from pre 2020….
          On top of that, many older home owners are probably mortgage free (or very close to it).. Just ask your parents/grandparents!

      • Hans Brink says:

        Don’t worry if you own your own house and it is viewed as a place to live and not as an investment, what is the panic?
        The only people who are freaking are investors.

        • phleep says:

          > The only people who are freaking are investors.

          Or people whose balance sheets will feel a rapid rate hike of five percent on the loan balance. Or people who rely on the previous ones to spend money to keep their own businesses going. It all spells a cascade of less spending money, in order to make the payment on an existing loan for the (same) house.

        • RepubAnon says:

          If you’re still paying a mortgage loan, and the rate triples, you may not be able to pay the higher rate – forcing a sale. If enough people are in similar situations, the housing prices fall – putting them underwater. This forces more sales, pushing housing sale prices still lower – and we’re re-playing the Great Recession.

          Pity Alan Greenspan decided that a bubble-based economy would help get Republicans elected. Another gift from Ronald Reagan

          The “Greenspan put” was a monetary policy strategy popular during the 1990s and 2000s under Greenspan. Throughout his reign, he attempted to help support the U.S. economy by actively using the federal funds rate to aggressively lower interest rates to fight the deflation of asset price bubbles.

        • gametv says:

          At these prices, homes ARE the largest investment most people make and they are leveraged. In the US, we can walk away from mortgage debt, which allows the market to clear itself faster and tends to reduce bubbles. In Canada, those poor homeowners can be sued for the loan value when a home has negative equity. So those suckers bought homes where the interest rates will reset and they cant just walk away.

          Very ugly situation. I’m not sure if Australian homeowners can walk away.

        • Wisdom Seeker says:

          @Phleep, it’s not so simple as saying that money redirected into mortgage payments drops out of the economy. Someone is receiving those larger mortgage interest payments, and they now have a chance to spend extra money. So the question is, who gets those payments and is suddenly going to be a lot richer, at least until the homeowners default and stop making payments altogether?

        • Natalie O Judge says:

          Yeah and people having to buy

      • andy says:

        do you by any chance have data on China’s “first tier” cities? GF says prices in those “never go down”. She’s from one of the bigger cities.
        I think to myself that’s like home prices in the US before GFC “never go down”.

        • Chinahand says:

          Same here. My Chinese wife has the same view! Prices can never go down in the first tier cities. We own in second tier city, the price increases in the last years were only modest! On the other hand we own the home debt free. In Shanghai, I could only pay 30 percent down on a similar property and take out a hefty loan. Now, I have an half hour train (50 Min. door to door) ride if not WFH. My SH colleagues have about the same commuting time on average.
          I will never understand why a crappy apartment in Shanghai center should be worth 3 Mio. US$ and beyond!
          It seems many Shanghainese are also doubting and try to run for the doors – Australia could be a destination!

    • keppered says:

      they bet on their housing market like a pony race? sorry i cant realize the time to understand this.
      surly although there is a banking institute spreading its wings and laughing.

      • phleep says:

        > there is a banking institute spreading its wings and laughing

        Except if it goes far enough, it is sitting on a bunch of non-performing loans: its basic business gone bad. Maybe it laughs if it has a rich public bailout. I am still waiting for that magic hat someday to come up empty.

    • The Real Tony says:

      Before Covid about 80 percent of all mortgages were fixed rate usually 5 years in Canada then after Covid that fell to 60 percent as the only way people could obtain a mortgage was through a variable rate mortgage.

  2. Lucca says:

    Thank you for another great article on the worldwide housing busts. It sounds like Australia is headed for a major housing crash when their fixed loans expire next year. By the time it’s all said and done, I wonder which country will have suffered the worst housing crash.

    • Augustus Frost says:

      The major cities in Australia and Canada are among the most overpriced to my knowledge, relative to median incomes. England isn’t exactly cheap either.

      China has the biggest housing bubble in the world. Maybe Japan was bigger in the late 80’s but I’m not sure about that. An outsized proportion of China GDP is tied to housing,

      Chinese buyers have also been big buyers at the margin in numerous other countries: major cities in Australia, Canada, parts of the UK, and US west coast.

      In the US, government is going out of its way to make as many enemies as possible.

      The Chinese housing market is headed for a crash. Government can’t prevent it forever.

      Many Americans think that Chinese won’t repatriate assets out of the west by selling houses in big volume but don’t be surprised if US foreign policy at some point motivates them to do it anyway.

  3. Nick says:

    Syd prices still 70% over fair value.

    • COWG says:


      How on earth can anybody determine “fair” value anymore…

      I think that’s going to be tough metric going forward….

      • gametv says:

        I think that generally “fair value” is related to mortgage payment versus income levels. My guess is that for a doubling of payment, the number of households that can afford a given home price has dropped by 75%.

        It appears to me that most of the new housing sales are people who are trading equity from one home to another.

        Once home prices have fallen for a year straight and are down 30%, then the psychology will change and people will expect another large downturn, which will result in homeowners demanding a very low price to put their money at risk.

        I just wonder if the central bankers will be able to lick inflation and then bring mortgage rates down, because otherwise, home prices will not have a safety net under them and could really get hit hard. I think 2016 prices could be seen again. In worst case scenario, it goes back down to 2008 levels.

        • Augustus Frost says:

          Depending upon the country, that’s where mortgage and foreclosure moratoriums come in.

          It won’t solve the problem of spiking interest rates from the end of the 1981-2020 bond bull market which will eventually crush demand at anywhere near current prices, but it can alleviate supply to some extent.

    • saraskinas says:

      Afaik a lot of houses are bought as tax relief in Australia and new Zealand. As long as this sillyness continues, people down under will suffer with housing prices

  4. DawnsEarlyLight says:

    How much of the DownUnder bubble is associated with Chinese investments of RE?

    • Bearwolf says:

      Like every other western country, it’s part of the story, but it’s not the whole story. Biggest single contributor, often noted here, is of course free money and zero interest rates. Both of which are fading rapidly in the rear view mirror.

    • WakeUp says:

      You people amaze me.

      For the better part of the past 2 1/2 years there has been very little if any immigration into Australia as a result of the lock downs here.

      In fact the population of Melbourne has decreased as a result of all the nonsense going on over the past several years.

      That means that there has been very little if any purchase of real estate by Chinese with permanent residence permits who are allowed to buy established residential real estate in this country.

      • DawnsEarlyLight says:

        ‘… very little if any purchase of real estate by Chinese with permanent residence permits who are allowed to buy established residential real estate…’. Thanks, that answers the question. Good luck the lock downs.

  5. phleep says:

    I am so glad (here in SoCal) I switched to a fixed rate in 2010. I expected inflation to surge then, never imagining this interest rate suppression would go so far, so long. I wondered show I could seemingly be so wrong, so long. Now the backwash is a global wave. How steep and fast and deep and quick to recede though, is a next interesting question.

  6. ramAustralia says:

    Australians have never seen a genuine real-estate crash. The media here continues to pound on how Australian real-estate only goes up. The bubble here is tremendous, far greater than anything in North America. Even remote farm land is absurdly expensive.

    The crash will likely be breathtaking. Probably will be greater than the Texas real-estate crash of the mid 1980’s.

    • phleep says:

      Maybe Xi will show up with a bail-out bucket and a contract or two in hand.

    • Augustus Frost says:

      Didn’t Australia go 29 years without a declared recession, from 1990 to the pandemic in 2020? That’s what I heard.

      Australia also avoided the worst of the Great Depression in the 30’s from what I read.

      It’s called the “Lucky Country” for this reason and a few others.

      My opinion is that, for a variety of reasons, their luck is about to run out.

    • Iona says:

      I’m a seppo that has lived, worked, and gone to school in oz over the past 4 decades, with my last visit being in 2016. Even back then it was obvious there was a massive bubble – everywhere I went RE was the topic of conversation. It would be interesting to calculate how much of GDP is related to RE – building and remodeling by the trades, plus sales and advertising. Has to be a huge percentage of their total compared to the US. Other than that, the economy sells it’s raw materials to Asia, primarily China. Aussies recognized this back in the mid 2000s, telling me they dig holes and sell the contents to China. If the west is moving towards a decoupling from China, then Australia will finally take a hit and with all the leverage things could get sporty.

      And NZ is even worse. They have very little of an economy. Plenty of sheep though, including the kind that walk on 2 legs!

      • Auld Kodjer says:

        Kudos for the “seppo” reference Iona. You really have gone native.

        [Seppo = septic tank = yank].

        I wonder if you also reflect on Dean Wormer’s famous line when thinking about Australia: “Fat, drunk and stupid is no way to go through life”.

        Fat on iron ore and coal exports.

        Drunk on economic success generated from such exports … and endless booze.

        And Stupid for thinking luck is competence that will last forever.

        [Declaration of a vested interest: I am Strayan]

    • Jon W says:

      I wish this were the case, but in my eyes, everything points to a crash in real terms, but only a blip in nominal. Unlike after the GFC, the central bankers have huge inflation pressures to help them deal with the debt overhang this time around.

      Perhaps if they hike enough to convert our present inflationary environment into a deflationary spiral caused by a global depression then I’d change my mind. But if we ever fell into that, I believe the printing presses would be started up immediately and money poured back into asset markets like never before.

      Unfortunately I don’t see an easy way to protect deposit savings vs the inflationary onslaught, so I think the actual benefits to potential buyers will be marginal at best. There will be some opportunities, but whether they are as beneficial as the situation for those who have bought and are now having huge chunks of their mortgage debt ripped off by raging negative real rates, I’m not so sure.

      IMHO, it pays to be a debtor when there is too much debt around – as the only option to maintain society is ultimately some sort of debt relief paid for by those with savings.

  7. RP says:

    You can add New Zealand to the housing bust club. Extraordinary bubble popped by rising interest rates

    • Volvo P-1800 says:

      Same thing in Sweden. I expect prices to fall more than they did in the last crisis, 1989-1991, when they were down by 50%. Additionally, all debts here are personal, so handing the keys to the bank is not an option.

      • gametv says:

        The issue is that we have had a 30 year rally in bond rates and so the real estate markets have always had lower interest rates and lower payments to goose the bubble higher. Now that it has reversed dramatically, the home prices will plummet.

        Real estate takes a long time to fall because sales prices are always built on comps. So if comps fall by 5% in a month, that is used as the new measure for a sale. It just takes successive months of comp declines to decrease the prices.

        Anyone looking to buy a home should instead look at affordability of payments for a neighborhood versus the incomes in that area. You want to be buying a home at a price where other people can afford to purchase it, because is not what YOU can pay that matters, it is what others who want to live in an area can afford to pay that matters.

        I notice that inventory on market seems to be falling as owners just pull homes off the market. This is the type of stupid psychology that prevents people from selling at the top price they can get. As comps fall, the price people will pay for a home only goes down from here. Unless the Fed lowers interest rates, which seems unlikely.

        • Augustus Frost says:

          Bond bull market 1981-2020, almost 40 years.

        • Cas127 says:

          Get your point…but Phoenix active listings have tripled since March (from an abnormal low base…but soaring fast).

          Simultaneous “bizarro” Phoenix moves (that actually make sense) – class C apt occupancy has collapsed from 98% in March to about 93% now (that is very, very fast). Asking rents are following.

          Realpage is treating this like a huge mystery but things are pretty simple – at least 33% of the population is financially wrecked (20 years of employment/wage stagnation, 3 false booms leading to 3 implosions, and a moronic 30% post-pandemic rent hike…as stimulus money stopped).

          People are busted-ass broke, and 30% rent hikes are…impossible.

          So class C renters are doubling up and moving away.

          Class B soon to follow.

          Look it up…those soaring listings and collapsing occupancies are something to behold…the rates of change are unprecedented.

          But so were the attempted rent hikes…you can’t get blood from a stone and people will not martyr themselves to live in…Phoenix. You need to go to NYC for that level of cultural economic self-delusion (“But we’ve got Broadway!!”)

          20 years of Fed stupidity has turned housing mkts into a fibrillating casino of the insane and created a whole new generation of economic refugees.

        • Jon says:

          We all think we are spcial and this time is different to justify abnormally high home prices which are absolutely lost touch with realities and fundamentals.

          So it is normal for prices to increase by 30 to 40 percent in last two year but it can’t go down this much

      • RP says:

        Wow! If that happens it’ll hurt many people. But the flip side is cheaper housing for those who buy. This is what we need in my country, a reset of house prices to be affordable.

  8. Bearwolf says:

    I should also add that in Australia, being on a fixed rate invariably means the borrower is also paying interest-only, not principal and interest. Not sure if that is the same as Canada. So the sticker shock on repayments is magnified when the day finally arrives. In the current environment (rising rates, falling house prices), most borrowers will be forced onto principal and interest by their banks. Ouch.

    • The Real Tony says:

      In Canada a fixed rate mortgage is principal plus interest.

      • Bearwolf says:

        Big difference then. In Australia, most “investors” take out an interest-only loan at a fixed rate to pocket the cashflow on the way up. Even owner-occupiers do it to get into the housing market at all costs. With falling house prices and rising interest rates you can imagine how that is going to turn out for both groups.

  9. Ray says:

    The press here is spruiking “a severe skills shortage”, and it was just announced that they will be increasing the immigration cap by around 35000. I think the so called skills shortage is just a cover for getting some more of that sweet Chinese money, to try and keep the bubble inflated.

    • Bearwolf says:

      Mmmm. I think we are done with the yuan. Looks to me like we are now going after the rupee in a big way. I suspect that a lot of Indian immigrants have been suckered into the Great Australian Dream in the past few years by the big Australian banks (one in particular comes to mind) and will be over-represented in the casualty count.

  10. OzBloke says:

    The other ‘fun’ thing about here in Australia compared to the US is that you have to pay the full loan back personally even if you return the keys to the bank. If the property resells for less than the loan amount, the bank comes after you for the balance. Garnishee’d wages, seizure of other assets, even force you into bankruptcy. No such thing as jingle mail in Australia, and so people with big mortgages on recently purchased homes start to get very worried when rates rise and prices drop.

    • Wolf Richter says:

      This is a misconception about the US that even many Americans have, to their own detriment. Only 12 states in the US have non-recourse mortgages. The rest of the 50 states and DC have full-recourse mortgages where the lender can go after all assets and income of a defaulted homeowner:

      • elbowwilham says:

        Both me and my brother went through foreclosure in Illinois in 2009, which is a full recourse state. The bank just took the houses and never came after us, probably because there were just too many foreclosures going on at that time.

        • ramAustralia says:

          Same thing happened to me in Texas. My lawyer said it would take 2000 years for the courts to get through queue.

          Besides, as they say: “You can’t squeeze blood out of a stone.”

      • Nate says:

        Not sure that is accurate. There are states where deficiency judgments sometimes happen, or happen with certain property but not others, or are unavailable for non-judicial foreclosures (faster, cheaper) but available for judicial foreclosures.

        Here’s a list done in 2010 on deficiency judgments.–state-by-state-guide—how-to-avoid-a-judgment They are all over the place and states like Maine are known as recourse states but the recourse sucks as it’s fmv of home. Also it’s a 12 year chart.

        Point being — I think the real question is how many states commonly have deficiency judgments as part of the actual foreclosures for owner occupied homes? I think the answer is likely less than 38 plus dc.

        • Wolf Richter says:


          You’re confusing recourse mortgages with the difficulties in some states to actually collect from the borrower anything beyond the collateral (the house).

          It’s always difficult/impossible to collect bad debts, except from people with some wealth: What are you going to collect if they don’t have anything?

          When you lose your job, and you burn your cash, and then you cannot make your mortgage payment, the collateral (the home) may be the only thing the bank can actually get because you no longer have anything worth going after. And if the bank goes after your other (non-existing) assets and income anyway, you can file for bankruptcy protection, and the bank will spend lots of money collecting nothing or nearly nothing beyond the house. That is the reality.

          So, if there is a trickle of foreclosures, banks will go after people to harass them and to set an example, even if they don’t collect much or anything.

          But if there are waves of foreclosures, such as during an unemployment crisis, banks will just go after the collateral but won’t go after the borrowers’ assets and income because it doesn’t make sense and banks don’t want to waste the resources.

        • Cas127 says:


          I’ve wondered about this myself…I’m fairly sure that lenders can keep deficiency judgments alive over time…waiting for the day when defaulters rebuild assets.

          But despite 8 million foreclosures in Implosion 1.0, very little was heard about deficiency judgments (all the way through 2020).

          Perhaps it was just easier for screwed lenders to pass the screwing on to taxpayers (er, debauched dollar holders via Fed printing).

          But it is possible there are still millions of deficiency judgments hovering in the legal ether out there.

          Of course, the US as a whole doesn’t have much of a financial future for anybody to collect on.

    • rojogrande says:

      In addition, loans in the 12 nonrecourse states mentioned by Wolf cost more (slightly higher interest and/or points) than loans in recourse states. Banks know when a loan is not recourse and charge accordingly. There’s no free lunch.

      • HowNow says:

        I’m in a non-recourse loan state but there’s a wrinkle: it only applies to the first 1st trust deed. If you have second TDs or more, or you refinance your first TD, you lose the non-recourse status.

        • Shiloh1 says:

          Yes. And if one buys a house for cash/no mortgage and then later finances a mortgage it is considered by the lender as a ‘refinance’.

        • Nate says:

          Yes but then the lender has mortgage cramdown concerns in BK Chapter 13.

    • phleep says:

      This adds up to the mother of all nutcrackers. Sure does a lot to dampen to COVID era housing frenzy.

  11. Cas127 says:


    Looking at those goofy-high median (median!!) values for cities that likely make up the vast majority of Australia’s entire population, I cannot but reflect upon the fact that the *whole point* of central bank gutting of interest rates is to stimulate *primary investment* (like *building* of houses, among other investments in asset *creation* – which increases employment) and that valuation spiking in “secondary investment” (in *existing* assets, such as already built houses) is simply an unavoidably prod and byproduct (and one that doesn’t raise employment).

    (It would be really great if you could do a primary v. Secondary investment post, explaining these different channels of interest repression effects).

    But since there is no universe in which the true production cost to build big wooden boxes in the empty *continent* of Australia, come anywhere near those median values (unless *insanely* inflated by outside forces – building codes, gvt taxes/regs, union minimum wages at nosebleed levels) there is clearly some massive artificial restraint on increased housing supply in Australia.

    At those stratospheric medians (medians!!) for the majority (majority!!) of the population, everybody and their dog (er, dingo?) would be going into the homebuilding industry.

    Unless there is some massive artificial impediment to new *supply* (which is really the sole basis of interest rate cut legitimacy – higher employment, higher production, etc. Diddling speculators – entirely – is not much of a legitimate reason to expropriate savers. Let alone for decades on end).

    Australia is gigantic and empty – it is the exact opposite of Hong Kong.

    There is no sane explanation for production costs at those levels (how much did it cost to build an Australian house pre-ZIRP? One-fifth? One-seventh?)

    • No1 says:

      Building a house in Australia is indeed absurdly expensive.

      “In April 2022 the figures from the ABS suggested that, on average, building a home cost around $473,000 (including houses and unit data).”

      Of course, the land is also insanely expensive.

      • Cas127 says:

        Yes, but the question is *why*?

        Australia is a friggin *continent* – huge…and with very few people for its size. Population density nationwide is tiny compared to many other less expensive locations around the world.

        Does Australia have no wood? Lack the technology of the “nail”?

        I am exaggerating…but the broad point is accurate…none of the standard cost inputs seem to remotely justify the cost to build a new house (which directly affects the possible sale price of existing homes).

        Do three people own the entire continent? Not that I’m aware of (but there may be hugely concentrated ownership…perhaps even by the governments themselves…Aussies let us know.)

        Do 75% of the workers go for into programming/gender studies activism/blogging/etc, so there are only six construction workers on the continent? Again, I don’t think so – at $750k *medians* (possibly *nationwide*) there are likely no industries more profitable than homebuilding…so construction workers should be pouring in to the industry. If not, why not?

        When you see price distortions on this scale, in a central industry, there are always a *lot* of impediments to competition…and therefore supply.

        Aussies…let us know.

        • No1 says:

          I would recommend you the book Game of Mates by Cameron Murray if you want to know more about the practices pushing up Aussie house prices.

        • Bearwolf says:

          The simple answer to your question is that housing in Australia is essentially a racket run by the various interest groups – government, builders, unions, real estate agents etc. It’s not that different in most western countries, it’s just that in Australia, we are at the apex. I’ve seen figures that suggest 10% of the population (the whole population, not the working population) in Australia are employed directly or indirectly in the housing/building/real estate machine. Wages are also extremely high here.

        • ramAustralia says:

          Although the other commenters have valid points, I think it is the speculation in land has been the main driver of Australian real-estate “values”. Even remote “farm” or grazing land has been bid to totally unrealistic prices. Far higher than any stream of earnings one could derive from any enterprise on that land. They are all counting on selling to a “greater fool”.

        • Cas127 says:


          Just sum it up for us…top 3 reasons.

          (I will look up the book, though…but it will take time…maybe I can Google for a summary).

        • Jim Spriggs says:

          Australia IS BIG. Approx the same as the US 48 states.
          However, 40% is desert, and most of the rest is pretty tough going. Everyone hugs the coast, living in a few large, expensive cities. You might compare this to Canada, where everyone lives within a hundred miles of the US border, because its just too damn cold!

    • Augustus Frost says:

      In PHX, AZ, there is no shortage of land either. Houses are still overpriced and most housing lots are small or tiny, especially on newer homes.

      I always assumed it was infrastructure costs and resource constraints. It isn’t viable to build housing just anywhere in AZ due to water supply if for no other reason. I suspect this is equally true in Australia. Most of it is at least as much of a desert (semi-arid), to my knowledge.

      • Cas127 says:

        See below for the tax treatment that helps badly distort the Aussie mkt.

        When home “values” (medians!!) get that hugely far out in front of incomes, there is always some latent factor involved (and at these levels, resource constraints don’t make a lot of sense…why would only *housing* be so badly distorted…it is the home price-to-income ratio I’m considering…the Aussies ain’t Kuwaitis.)

        • Gattoardo says:

          Cas127, I think comparing median incomes to median home price can be misleading. Well, like all stats can be.

          Just because the median value of a house that sells is X, that doesn’t meant that the buyer had median income. Could be that buyers of median homes have 2x median income.

          Lots and lots of homes don’t sell every year, because they weren’t for sale. And lots of those houses could be owned by people with incomes way way below the median. IOW, pulling median income down, making it so that those who are buying median homes have incomes way above the median.

          To really draw conclusions, we need to know the income of the buyers vs the homes they buy. Anything else is just muddled. Maybe directionally right, since n = millions, but not very precise.

    • Boneidle says:

      Average tradies wage on construction sites in Melbourne are $124.00 per hour.
      That’ll give you a clue.

      • Cas127 says:


        Why isn’t there massive political blowback? Rioting in the streets in full Ned Kelly kit? (Aussies are not a shy lot).

  12. ru82 says:

    Housing sentiment has changed. Everything I read says housing crash and at least a 20% drop.

    I would probably say a crash would be defined as 30% or more?

    Bring it on.

    I would like to see the stock market drop at least to pre covid values before going long.

  13. BS(ini) says:

    Fascinating report. I have a friend that had been buying homes in Perth (5) since 2010 and kept looking in Sydney but never could pull the trigger. He used those as his savings and investment for retirement with 4 of them empty for years. So there could be even more supply that becomes available as investors try and beat the price drop.

    • Bobby Dale says:

      Empty homes as an investment?

      I am struggling for the words here…bewildered, gobsmacked, confused…
      Why would he leave them empty? He is in Perth, so maybe he was the one being shorn, not the sheep down the street.

      • Boneidle says:

        Tens of thousands of empty (non rented) properties in Australia.
        China is not the only country with ghost cities.
        Many city apartments are owned by foreign investors – land banking.
        I worked in facility management for a large property group. One of our major problems is unoccupied apartments in large high rise buildings. Besides the fact that property deteriorates much quicker when not occupied, many of the foreign owners have stopped paying the monthly maintenance fees

  14. SomethingStinks says:

    The somewhat real stock market price was around mid 2014. It’s been bubble ever since. Housing market true values were the ones briefly seen during the depth of 2010. That’s where it needs to be, and then any upswing justified by local economy’s productivity. Pensions for government employees need to be scrapped and everyone needs to be in the 401k wagon.

    • ru82 says:

      The median family income was $45k in 2008 and it is now over $65k. That does support some house appreciation. Of course, daily living expenses are higher too. Mortgage rates are also lower now than in 2008.

    • Augustus Frost says:

      The US stock market has been in a mania this entire century, with temporary periods (2002, 2009) of “reasonable” valuation but not even close to “cheap”.

      US Housing in 2010 was a lot more “fairly valued” than US stocks at any point this entire century, at least outside the more/most expensive markets.

  15. ru82 says:

    I say a local store that used to advertise starting pay at $12 about 4 years ago is now advertising $20. That is over a 70% increase.

    • Depth Charge says:

      And when you factor in the inflation in rents and everything else, they are worse off than 4 years ago.

      • phleep says:

        The only thing that saved me is locking in a good mortgage and avoiding frivolities and debt. I could not rent the home I now almost free-and-clear own. I would be sleeping on the sidewalks I now look upon peacefully, but for the harsh discipline of saving up for that down payment long ago. No new granite countertops, no new truck in 2007! No trips to wherever.

        I love my job but it pays nominally flat for ten years now. That means down 20+ percent in real terms. My retirement account is a joke. So much for all the popular myths about government job free rides.

        The scariest part: I am 80th percentile in household net worth in the USA. 80 of every 100 households are below me. What did Lenin say? “Every society is three meals away from chaos.”

  16. ru82 says:

    QT will be interesting as they reduce Treasuries by 60 billion and MBS by 35 billion. I would not be holding stiocks right now.

    Bank of Amer­ica eq­uity strate­gist Savita Sub­ra­man­ian says QT alone could lead to a 7% stock price drop as the boost from QE is re­versed. Steven Ma­jor, global head of fixed-in­come re­search at HSBC, thinks the in­ter­ac­tion of QT and the plumb­ing of the fi­nan­cial sys­tem is too com­plex for any­one to pre­dict prop­erly. “The truth of it is that no one re­ally knows,” he says, in­clud­ing the Fed.

  17. SeppoInSydney says:

    Glad to see Australia get a bit of coverage on WolfStreet! I’m an American who has lived in Australia for 15 years and bought here in Sydney in 2020 putting our 15 years of savings down as a 50% deposit (our 1 bedroom unit we were renting drove us nuts during the first lockdown).

    There are a couple Australian peculiarities that might not be clear to Americans.

    First – there is no ongoing land/property tax. Instead you pay all the tax upfront as the “Stamp Duty”. In our case in NSW it was 4.5%. But once you have paid that you never basically pay tax on the house again. You instead pay “council rates” which are like the fees to get your trash picked up – and they are a few hundred a quarter. This also dis-incentivises selling/buying houses (including downsizing as a retiree) as you pay this big upfront tax on the transactions.

    Second – the government excludes the value of your house from any asset tests on your eligibility for benefits/entitlements in retirement. So if you have a multi-million dollar house fully paid off but little other assets/income they consider you as poor as if you didn’t have the house and you get all the benefits like the full pension etc.

    So, the system incentivises buying the biggest baddest best located house you can afford before retirement. And if you don’t get it paid off by retirement our version of the 401k (Superannuation) lets you take a lump sum payout of that at retirement age to pay it off. Thereby removing all the assets you have rolling them into the “we don’t look at your house” blindspot to then qualify for the pension etc.

    Basically the deck is stacked here soo strongly in favor of your house being your main asset that it is pretty nuts…

    • SeppoInSydney says:

      I forgot the other big one – there is no capital gains tax on your “primary residence’s” increases in value either.

      Like I said it is like every policy lever you can imagine is favorable to putting your money into your house…

      • phleep says:

        Sounds to me like the Aussie government is begging for a fiscal crisis somewhere up the road.

        An interesting USA tangent on government subsidizing stuffing money into housing: I’m told Texas and Florida have an unlimited homestead exemption on one’s primary residence. So, there is an open invitation for anyone thinking of future adverse judgments to settle there and, say, buy a palace on the beach. A pal in debt collections said it was always hard to get anything out of there.

        But I think those places have low income taxes but make it up in property taxes? Not sure.

        • Paul says:

          Texas homestead exemption is not that generous. With the homestead exemption, your taxable value can’t increase by more than 10% in a year, and some taxing authorities reduce your value by an amount/percentage before applying the tax rate (e.g. $25k for the school district). The 10% cap is useful in a crazy year like 2021, but your taxable value will probably catch up to market value eventually given a downturn or some years of slower growth.

        • Bobby Dale says:

          Clarify the homestead exemption:
          The portion of value on which you are exempted from taxes or the part which is shielded from non mortgage holding creditors?

        • Augustus Frost says:

          You’re confusing a homestead exemption (a property tax benefit) with state bankruptcy laws which allow the person to keep designated assets (not secured by a loan included in the filing) from creditors.

        • bemused says:

          I live in Florida. Homestead exemption is $25k off of the assessed valuation of your primary residence. We bought in 2013 when prices were still in the toilet, and they can only increase the assessed valuation by 3%/year (or something close to that) so our 2100 sq ft house after homestead exemption is assessed at $43k and we pay around $600/year in property tax (that includes about $80 for a second adjacent unimproved lot, I think about 1/4 acre in total for both). And it can only creep upwards over the years. As a retiree, I *love* Florida! This is in a small town 90 min N of Tampa.

          Now for new buyers, our house is now rated by Zillow at about $235k (for what that is worth) and that $25k homestead exemption, while nice, isn’t near as beneficial. Property taxes would be at least a three thousand dollars a year I think even after the exemption. Small change to those in the NE, but still a lot to a retiree!

    • Mak says:

      Nice summary…

      And lets not get stated with all the cash handouts to home buyings in terms of first home owner grants etc….

      The Australian share market mostly looks pretty sane compared to the US share market and its irrational exuberance. But we make up for it with our property market.

      I have the popcorn out and will be watching the housing market implosion with interest. I did stop renting in 2021 and bought which would normally put me in high risk category, but I bought something fairly modest for my income and that was well below market price so I am safe. I could pay the entire mortgage off before my 4 year fixed period ends if I have to.

      • No1 says:

        How did you manage to buy a property well below market price?

        • Mak says:

          Luck. Nobody else had inspected it and my offer was the only offer on the table when COVID a lockdown occur banning further real-estate inspections for an unknown extent of time.

          Other than that you’ll just have to take my word it. My property is fairly commodified in the area and like for like comparisons can be made. It isn’t anything special I did say that it was a modest home.

    • Cas127 says:

      Thank you…that explains some of the insanity.

      Tax preferences have hugely distorted the housing mkt by granting “homes as an asset” insane advantages.

      And now the politicians are too terrified/cowardly to even dial back the doomed madness a bit.

      Add in the leverage almost always used, and you have a recipe for a madhouse mkt.

      What about restrictions on supply? Are there any? With these huge tax shelter biases, people should be building homes for dingos, koalas, and kangaroos.

    • Willy2 says:

      – But there has started discussion that states want to switch from “Stamp Duty” to some sort of a “land tax”. That will increase the (yearly) financial burden on households but at the same time it will make state’s income more stable. The latter is why I am in favour of such a “land tax”.

      • bemused says:

        Ireland has both. When we bought our house we paid a stamp duty, then a few years later they introduced property tax on top of it. It is still very modest — we pay 104 euros/year currently in a remote village in Donegal — but once that camel’s nose is under the tent….

  18. Willy2 says:

    – Even at the peak of the housing market (think: last year, 2021) there were some 800,000 to 1 million of empty dwellings in Australia. And this (hidden) inventory is now also coming out of the woodwork.
    – Australian banks are putting their borrowers under gentle but increasingly more pressure to put their (investment) property up for sale. These banks have noticed that the financial position of a borrower hadn’t improved in the last say 12 months.
    – 42% of australian households are in “Mortgage Stress”. I.e they have a mortgage and the household’s expenses are larger than their income. No wonder, more and more households want to sell their house.

    • Old Ghost says:

      16 Million Empty US Housing Units in the 2020 census.

      16 million

      “At a time when household units are forming faster than homes are being built and many Americans can’t find a home at all, it may come as a surprise that nearly one in 10 American homes — more than 16 million in all — were “vacant” when the 2020 census was recorded.Mar 10, 2022”

      • Cas127 says:

        But unless you are really, really rich, an empty, unrented/unoccupied SFH is a huge cashflow drain.

        Property taxes are actually a wealth tax (usually on leveraged debt…) so from a cashflow perspective, SFH ownership pretty much blows…*especially* if you keep the sucker empty.

        (I tend to be a bit skeptical of the “hidden illuminati” of an army of empty SFH, cash bleeding billionaires keeping falling assets off mkts for years for kicks…there are plenty of cash flowing assets in the world for them to own.)

        • Lynn H says:

          Some of it is big scale money laundering for foreign billionaires. Foreigners, unlike US citizens, do not need to account for the funds they throw into US RE. Australian and London and BC and US RE have been very popular world wide. If you are a Nigerian prince, a Chinese mayor or a Saudi Royal who has embezzled a good portion of your government’s cash, then you don’t care so much how much it costs you to launder that money.

          Some of that RE is just passed around and around and around for private and offshore corporate debts without ever hitting the market. Like chips floating around on a gambling table in Macau.

          Slightly less of that is happening now in the US with the new FINCeN proposals and rules. I wonder if in addition to the Chinese pulling back there have been any anti- global money laundering laws or regs enacted in Australia?

        • Lynn H says:

          Oh, and big scale money laundering is not just mansions and yachts.

          It is also, for hypothetical instance, X 100’s of millions poured into an LLC in the canary islands who owns an LLC in Delaware that owns an LLC in Nevada which hires straw people to buy up tons of housing units- both SFHs and condos and register each unit once again as it’s own separate LLC.

      • Bearwolf says:

        Similar. Australia 2021 census showed about 1 million empty homes on census night in a country with a population of 25.4 million people.

        • WakeUp says:

          Yes, and that means if you were traveling away from your home, in the hospital, working interstate, staying overnight at a family member’s or friend’s house, or for some other reason not at your home, the census counted the house as vacant.

          So a lot of those “vacant houses” are in reality not really vacant.

        • Old Ghost says:

          Bearwolf wrote: “Similar. Australia 2021 census showed about 1 million empty homes on census night in a country with a population of 25.4 million people.”

          I know nothing about how other countries conduct their census. But I did work for the USA census for 2 years a millenia ago (when the USA still had a competent president). Empty residential units here were given extra attention. Neighbors on both sides of an empty SFH were quized about the empty unit.

          Landlords of apt complexes (or their managers) also got extra attention.

          Since the career criminal who was our immediate former president ran the 2020 census, things may have changed.

  19. JoAnn Leichliter says:

    If anyone in the U.S. over the last decade purchased a house using a variable mortgage, it was because he wasn’t thinking straight. If you got a mortgage at, say 2 or 2 1/2%, where did you think the rates would go? But the U.S. had mind-bogglingly low interest rates long enough for an entire generation to think that they were the norm, when, of course, they aren’t. Smart buyers locked those low rates in for the duration, which, if you bought the house as a home, rather insulates you until you decide to downsize.

    • COWG says:


      Very true…

      This “gotta buy a house” psycho mania has yet to play out but will soon…

      I was severely chastised here ( Depth Charge) for saying that prior to the pandemic, if you didn’t have a house already, you either couldn’t afford it or didn’t want one…

      Those of us who had been around a while knew that rates were bound to go up sometime and got while the getting was good…

      Getting financially neutered by social media and fear should be a very painful lesson for the participating losers who should have absolutely no gripe with the winners… after all, you gave it to them…

      There is a time to do and a time not to do…

      These past couple of years has been a time not to do, just sit in the corner, eat your popcorn and watch the show…

      • David Hall says:

        This summer Robert Shiller predicted a housing downturn is likely in America, only not as severe as in the 2007-2011 Great Recession.

        Yahoo quoted him:

        “However, 10% declines, like Shiller suggests, are very rare. Only the Great Depression and the Great Recession have seen price cuts of that magnitude.”

        With 6% real estate commissions and other buying and selling costs, it may be a good idea not to attempt to do short term trading in real estate. I will keep my home, I live here.

        • Lynn H says:

          If Shiller is predicting 10% declines then IMO that means 20% declines and possibly 30% in places with highly inflated prices.

          My area went over 50% declines in the GFC.

      • Depth Charge says:

        “I was severely chastised here ( Depth Charge)”

        What, for being a house-horny, gloating speculator?

        • COWG says:

          And the Chihuahua flies out of the house chasing the school bus again…

          Knew that would get ya fired up…

          Ya know, brother, some fish steadfastly refuse to take the bait…. )

        • Depth Charge says:

          Fired up? I was just trying to recall what exactly caused you to have an emotional reaction that you’re still clinging to months later. Let me guess – you’re still harboring grudges against people from high school, right? The term “get over it” comes to mind.

      • Cas127 says:


        But how about the 16% of mortgage holders who got zero’ed out by foreclosure in 2008-12? (8 million families, out of 50 million with a mortgage)

        I’m sure they had realtors telling them in 2004-2006 they “had to” get while the gittins’ good.

        And now, *nationwide* (unlike Bust 1.0) median home “values” are significantly *higher* (although, thank god, on lower volume).

        Fed ZIRP cycling has turned the housing mkt into a schizophrenic madhouse and *guessing* when it is a good time to enter the door will determine financial survival/destruction.

        That doesn’t make for a healthy, stable society.

  20. BS(ini) says:

    Canada Australia US and I’m would not doubt EU is experiencing the same phenomenon with raging inflation yet falling home prices. Interest rate suppression and the QE from the worlds central banks have created a mess . Speculators and miss allocation of free money lending across the globe. First the ridiculous implosion of Wolfs famous list of companies starting in Fed 2022. Now globally housing which takes years to unwind. China of course is in the same category. Well done. Do Australia and Canadian home owners have the same cash out refi like USA?

  21. Nicko2 says:

    Shit got real:

    “Bed Bath & Beyond’s chief financial officer commits suicide by jumping from New York City skyscraper, days after announcing job cuts and store closures”

    • Wolf Richter says:

      Suicide of middle-aged men is a HUGE problem in the US. I personally knew two guys who did that, early 50s one, 60 the other. It’s a terrible issue. It’s often associated with years of deep depression. The brain-dead click-bait media is using personal tragedy to get clicks, and some morons then turn this click-bait media shit into viral headlines by spreading it.

      • Wisdom Seeker says:

        So Wolf, you’re confident that it had nothing whatsoever to do with all the bizarre market shenanigans going on with BBBY’s meme stock, the company’s desperate financial straits, or its impeding bankruptcy? More than plenty to distress a CFO, there. Especially if he got tempted to playing the “meme stock” game himself, and came out upside-down…

        • Cobalt Programmer says:

          Actually this is for wolf and also readers,

          I heard about wallstreet traders jumping from the roof (see the movie Timecop starring JCVD). But I agree with the readers here. Not with Wolf. Because men always take the pride of their work. Here the CEO or CFO took pride in his work. (Shenanigans and conspiracy theories aside). The BBBY called affectionately as “babby” by WSB reddit might be one of the reason why he was forced in to this act. Japansese call this “Mapouka”. But I am certainly believe, men commits this self-deletion due to ritual reasons forced upon them by society or corporate. Rather than financial. He might have more money or side chicke

        • COWG says:

          Unfortunately, the thought of being wiped out and poor after many years of high flying and success is more than a lot of people can ( or will ) take…

        • Wolf Richter says:

          Wisdom Seeker, Cobalt Programmer, COWG et al,

          What is going on at BBBY is routine. Brick and mortar retailers have been cutting staff for years, they went bankrupt and let everyone go for years, all reported here for years. Shenanigans galore too, in cryptos, meme stocks, SPACs, IPOs, etc., as reported here.

          CFOs don’t commit suicide over this, they collect their bonus and move to the next job.

          You people are freaking ignorant about long-term depression among middle-aged men — and the consequences of it after years of depression: suicide.

          46,000 people committed suicide in the US in 2020. Another 1.2 million attempted but survived, often in bad condition.

          Depression is one of the most tragic problems the US has. Depression is a terrible thing. It’s something that afflicts people for years. You people are making fun of this tragedy!

          CDC: The rate of suicide is highest in middle-aged white men. White males accounted for 69.7% of suicide deaths in 2020.

          Wisdom Seeker, Cobalt Programmer, COWG et al, your comments here are among the most sickening, thoughtless crap I’ve read here in a long time.

          I’m horribly disappointed. I will now go and vomit.

      • Valerie from Australia says:

        I don’t know how anyone could not have compassion for a person who commits suicide. These poor souls are completely without hope. It is a myth that suicide is “the easy way out.”

        • Wolf Richter says:

          Thanks, Valerie. I cry for their loved ones. It’s a terrible thing to happen.

          And the fact that middle-aged men, often fairly successful, are disproportionately hit by depression that leads to suicide, and the fact that our society brushes this under the rug, shows just what kind of society we are.

          A middle-aged man who goes through this depression becomes isolated here because no one wants to listen to him, day after day, year after year, to help him hang on as he spirals down. He’s got to fight this battle all by himself. It’s a horrible place to be. And it only takes 10 bad seconds, after three years of successfully fighting the daily urge to kill himself, and he’s gone – or maimed for life.

          The kinds of reactions we see in the comments are common, and they are driving these men even deeper into their depression.

  22. TimSE says:

    Where do fixed-rate mortgages leave lenders, as their own cost of capital rises?

    Policy and market rates could easily go above what mortgage providers are charging fixed-rate borrowers.

    Is this very bad for lenders – and offering long-term fixed rate deals will turn round and bite them – or am I missing something?

    • Wolf Richter says:

      “…or am I missing something?”

      Yes. Most fixed-rate mortgages are securitized into MBS which are then sold to investors, pension funds, bond funds, insurance companies, and central banks around the globe. Lenders have thereby offloaded most of the risk of home mortgages to investors.

  23. Nate says:

    Things not looking good for the price decline deniers.

  24. KoolKat says:

    Aussie here who’s lived in the US for 10 years, and now back in Australia. Own our home outright in Melbourne. Back in Feb we bought another house closer to the city for $1.2M AUD. Not really a house but more of a block of land with an old 1940’s shack that is going to be knocked down. Cost to build a new house will be ~$700k AUD once all costs are taken into account.
    Did we time it well? Probably not, but we need a bigger house. We didn’t buy at the peak and the market had softened by the time we bought. We had been looking for a new home for a while and the availability for what we wanted wasn’t really out there. We had a specific area in mind and wanted a decent sized block that allowed us a larger home.
    One thing to know here in Oz is that it’s all about the location and the land. Many people buy a home and live in it for over 20 years on average, so turnover is quite low. This effects availability and also makes it much of a long term commitment. People generally do major renovations during their ownership too. Close to trains, freeways, and good schools is key, along with proximity to the city centres.
    Did I see a fall coming in the market? Yes, but we factored in potential rate raises and knew what we were doing. The market will soften more, but it’s not uniform. Each suburb is slightly different and the first home buyers are the ones most likely to hit severe stress first. Note that most people put a 20% deposit down so they have some wiggle room. Rates were super low and the smart ones locked in for 2-5 years, unfortunately we missed the boat on the juicy sub 2% lock in.
    Checking the market, the prices for what we bought haven’t really moved and the availability of good stock isn’t quite there. People have adjusted their spending to account for the higher mortgage costs, but many people didn’t overcommit and there’s plenty of jobs in the market for anyone looking for work.
    Australia is good for houses and holes, and based on the spend across infrastructure and resources at the moment, this isn’t going to slow down much in the next few years. Companies are all screaming for people.
    If mortgage rates start to creep above 6%, it’ll start to get more ugly. But historically 6% was the norm, and the banks stress test all home loans during their approval process.

    • WakeUp says:

      Yes, and people from outside Australia commenting on the market as if they know everything about it. The Australian real estate market is very different from the USA real estate market.

      So you bought a house for A$1.2 million which limits the areas that you bought. Care to share the suburb you bought in?

      The median prices of Melbourne suburbs vary quite a bit and even in the suburbs themselves.

      Inventory in some areas has been increasing and other areas it is still scarce as you stated. The stamp duty on purchasing a property is a real disincentive to sell and buy again.

    • No1 says:

      This comment says it all about Aussie housing really. KoolKat will have spent probably about $2 million when all is said and done in order to have a house, taking into account the considerable stamp duty (tax) owing on a $1.2M purchase and the new build. Then he will have to pay interest on the debt he owes for decades.

      That’s not a big deal over here, reasonably prosperous upper-middle class people do it all the time. Only a true financial disaster will be able to send housing down hard in a country where this is normal.

      • WakeUp says:

        One of the things mentioned in his post was “location”.

        If you work in or near the CBD and live close to that location your travel time and costs are much less than living out in the suburbs.

        About the only thing that the state labor government has done well here is building some new infrastructure related to transportation.

        That includes new lanes on some of the freeways and getting rid of what we call level crossings (railroad tacks that cross streets) to improve traffic flow, but saying that these projects have all been over budget by billions of dollars which we will pay for in higher taxes for years on end.

        Prior to the pandemic and improvement in the roads it was not uncommon for a trip from the CBD to the outer suburbs to take well over an hour during the afternoon rush traveling at something like 30 kilometers an hour average speed……

        Throw in an accident and that time could go up to 90 minutes.

        The trains weren’t much better either with delays happening all the time as a result of switching breaking down, track problems, level crossing breakdowns, trees falling on the power lines,too much, wind, too high temps and you name it.

        It would happen at least once a week or more often in summer and your 50 minute train trip would end up been 2 hours or if unlucky waiting for a replacement bus that never showed up.

        Then there were level crossings where people would wait for 20 or 30 minutes to get across the tracks during the morning rush hours.

        So living near the CBD or your work, even if it means paying a high price for a house, was/is prudent from a time and cost perspective.

        What is that extra time worth to you not having to spend 3 hours a day commuting to work back and forth and do it every day for 20 years?

  25. Kurtismayfield says:

    It is almost as if the entire housing shortage was caused by central banks..

    • Willy2 says:

      – Also blame tax incentives (in e.g. Australia).

      – E.g. “Negative gearing” allows an “investor” to deduct all “investment” related costs from one’s taxable income.
      – “Capital Gains tax Discount”. When one sells an investment property then one doesn’t have to pay the full amount of Capital Gains Tax on the profit. This has lead since the year 2000 (when this was introduced) that people would buy an “investment property” not for the (rental) income but in the expectation that the dwelling would continue to go up in value in a few years time.
      – The result was that A LOT OF australian investors became “gung ho” for Real Estate.

      • Valerie from Australia says:

        Yes, I agree with this and am glad you brought up negative gearing. My husband and I wanted to move closer to Adelaide for his work but kept putting it off thinking the market would cool. It didn’t. It seemed that whenever we went to an auction, which was most home sales in Adelaide, some investor – either out of state or out of country – would sail in at the last minute and outbid the rest of us who just wanted to buy a home to live in. As I understand it, the taxpayer is actually subsidising the negative gearing strategy because an investor gets a tax break on the difference between the mortgage obligation and the rent received. Apparently, there is so much investing in RE that politicians are afraid to rein in negative gearing.

        • Willy2 says:

          – What A LOT OF people fail to understand is that all these tax incentives (for real estate) are actually an incentive for the banks. Take e.g. Negative Gearing. It enables an investor to take out a higher (mortgage) debt. And the higher the mortgage the larger the interest income for the banks. But these tax incentives are paid for by the Joe Taxpayer. Similar story for the Capital Gains Tax Discount.
          – The higher the mortgage the higher the price of property goes.
          – Negative Gearing: I read somewhere that 50% of the NG benefits are “collected” by the top 10% of income earners. But as said before NG is a subsidy from the tax payer to the banks. So, these “poor” schmucks think that they benefit form NG but they actually subsidize the banks.
          – Capital Gains Tax Discount: Up to the year 2000 renting out a property was – on average – a profit making business but after the year 2000 renting out a property became a deeply unprofitable business. The owners were only focussed on the appreciation of the property. It didn’t matter in those days that renting out a property was a loss making “proposal”.
          – Politicians don’t want to touch these incentives because they themselves also have “investment properties”.

      • WakeUp says:

        Nothing new there. Capital gains tax discounts are in place for all assets across the economy not only houses. Shares, land, gold, businesses, art, you name it.

        The biggest “capital gains tax discount” in Australia is for the person’s own home: no taxes are paid on any appreciation of your own home.

        So there is a big incentive right there that favours one’s own home over other investment types.

        Furthermore, there is no inheritance tax in Australia at all. (The Green Party and the extreme left wing of the Labor would love to implement one so that they could their hands on more of your money to spend as they wish.)

        And this tax free regard for capital gains carries over for two years if you inherit a house and sell it before the two year window disappears.

        This is a huge source of funds or wealth for people who end up getting their parent’s house. In the better inner cities and near CBD areas in Melbourne that can mean several million dollars or more of tax free wealth.

        If they inherit the house and keep it as their own principle place of residence then they enjoy the same tax free status on any appreciation as well and they avoid the huge stamp duty on purchase of another house as well which will now run into six figures here in Victoria.

    • Willy2 says:

      – Also blame women entering the workforce in the last say 70 years. It means that a household now has a larger income and is able to afford a larger mortgage ==> higher real estate prices.

  26. Gilbert says:

    Most sane people understand just how insane the real estate market is. The coming months will be very interesting to those who own their house outright, or have lots of equity. Everyone else will suffer.

  27. Jon says:

    I have close relatives in Australia.
    Like southern California .. in Australia real estate is like a religion.

    People think come what may home prices can never go down here.
    These small drops are noise.

  28. Valerie from Australia says:

    A lot of these loans are based on two income families. With little in savings, I wonder if there will be a glut of sales if there is a recession and people start losing their jobs. I have noticed when talking to people that Australians think RE will only go up in value and that Australia is immune from a real recession. I’m not so sure. It feels like a house of cards to me – but then again, I’ve been expecting a big correction for years and I have been wrong.

    • WakeUp says:

      Well the RBA just increased interest rates again and by 50 basis points.

      The commercial banks won’t be far behind in passing along the increase in rates in order to pad their bottom line.

      Funny how that when the RBA last cut rates not one of the big four banks passed along ANY of the cut in rates though.

      Some people have been preaching a real estate crash in Australia for years and years and years. Prices go up and prices go down. In popular areas the prices go up more and in areas that are out of favour they fall or don’t go up as much.

      It seems every time something bad happens here something comes along and bails the country (not the people out).

      Iron ore prices are falling, but thermal coal just hit a record high. The world needs more LNG and just like magic Australia has more LNG coming on line at historic high prices for international (not domestic) buyers.

      The pandemic threatened to make real estate fall like a rock and then all of the sudden everybody wanted a house and not an apartment and they wanted a house with a yard, an office, and far away from Melbourne and Sydney so prices exploded upwards in the coastal areas and in Queensland.

      Wages finally started to go up a little and the unemployment rate fell as a result of a lack of immigrants (permanent and temps) and some 400,000 to 600,000 international students not filling jobs.

      And what is one of the first things the new labor government going to do?

      Yep, increase the number of permanent immigrant visas to something like 195,000 a year from the 160,000 per year level.

      (Not much of that immigration in the last couple of years though).

      And finally, inflation is set to increase in September.

      The previous government’s 22 cent per litre gasoline excise tax reduction is going to be reversed on 29 September.

      The previous inflation numbers were reduced by the decrease in tax as well as increased by the ending of a number of grant programs which caused prices to increase.

      And I think there will also be a big increase in the tax on tobacco this month which is indexed to prior months’ inflation numbers so that will also push up inflation.

      And for those of you that still smoke (WHY???), the cheapest pack of cigs here now costs A$27.95 at the supermarket. Marlboro, a pack of 25, will set you back A$49.50.

      And no, you can only bring in two packs of 20 tax free into the country anymore.

      • Valerie from Australia says:

        Thanks, WakeUP, for that comprehensive summary on the Australian economy and things to come. You really nailed it.

        Just something to think about – Nicotine is a really strong addiction. My brother is an alcoholic who hasn’t had a drink in years. Nicotine is calming. So when he used to turn to a drink (or three) and a cigarette to wind down – or deal with stress – he now just has the cig (or two). I used to ride his case for smoking because it was expensive and was wrecking his lungs. Now I leave him alone. He told me he would love to quit and I know for a fact he has tried many times over the years – as I said, it’s a hard addiction to beat. Honestly, I’d rather he smoke than drink. When I’m stressed, I reach for a Cadbury bar or something sweet. So who am I to judge? Most people have some kind of external coping mechanism – when stressful situations are impossible to avoid.

        • WakeUp says:

          “Most people have some kind of external coping mechanism – when stressful situations are impossible to avoid.”

          Try exercise – even walking.

          It costs nothing and is good for your health.

    • Willy2 says:

      – Australia had already 3 recessions since the year 1990 but then one has to look at the GDP per capita, not only at GDP.
      – Just guess what happens when A LOT OF households lose one of their two incomes.
      – 42% of australian households with a mortgage are already in “Mortgage Stress”. A household in “Mortgage Stress” has 1) has a mortgage and 2) the expenses are larger than their income.

  29. TaxHaven says:

    “This downturn comes after ridiculous price gains, driven by the RBA’s QE and interest rate repression.”

    Yet, the economics profession and central banks staunchly refuse to consider house prices in inflation calculations. They term housing, stock and bond prices “asset price increases” instead of as a part of the CPI, which is where they *should* be.

    • WakeUp says:

      Of course you know about the huge range of grants in Australia that pop up for “First Time House Buyers” with all of their little restrictions and rules, don’t you?

      Last month’s inflation figures were higher in the housing area because the latest first time housing buyers grant ended thus pushing up housing acquisitions costs.

      (That grant also did the usual of just pushing up the price of the tier of houses that could qualify for the grant too.)

  30. JC says:

    Cause the times they are a changing…. greed will have to find an alternative path…….

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