'We see recent falls in mortgage rates as more about preventing a deeper correction in house prices than providing the fuel for an immediate lurch higher'

Ok but have we now found a floor in this correction? I am thinking we might be very close.

Spring will be here shortly and that will ensure renewed activity, spurred on by interest rates on the way down, much faster than expected. 

The huge property crash, predicted by many here hasn't eventuated, and in some areas prices have increased.

2 areas I monitor, Coatesville and Riverhead are amongst them.  

I predicted house prices to start rising by the end of this year, and the article states.."We remain of the view that a sustained upswing in house prices is a story for late 2024/early 2025."

https://homes.co.nz/map/riverhead/riverhead?lid=3a66j3amweil&utm_source…

The lower rates go, the pickier lenders are going to be about to whom and how much they lend.

They've just had a real time experience of what happens when interest rates inevitably rise. (no one knows if that's tomorrow or in 5 years time - interest rates are dynamic and respond to many variables, as we can see today). Those on new lower rates find themselves struggling with more repayments to make when rates rise from any level. Sure, more will 'qualify' at lower rate assessment levels, but it's what happens after that, that matters.

The lower rates go this time, the less lending there should be.

I very much doubt we will see a return of high house price inflation anytime soon and that is a good thing. Houses should only keep up with general income inflation unless there are other factors at play such as changing location desirability.

For example Hamilton and surrounding towns became more desirable as it was seen as more affordable and transport links to Auckland were improved.. Auckland became recognised as a Beta level global city with high immigration. Consequently even less desirable suburbs became sought after. Tauranga became a retirees paradise. Add into the mix high immigration from UK, India, China and the Philippines and recent high house price inflation was quite understandable all across New Zealand.

Plucked 7% out of the air and provides no basis for this.

So are we getting another covid type stimulus package?

Are they about to tax us again with inflation?

Be nice to know.

Well put.

"Thanks to recency bias, we assume what worked in the recent past will keep working. As a result, there is no incentive to look for alternative policies. Rather, there are powerful financial and emotional incentives to paper over signs of diminishing returns as threats to an emboldened status quo that has boosted everyone's prospects and hopes.



This is how the status quo ends up doing more of what's now failing. If loosening credit greased the remarkable expansion, then the solution to a slowdown is to loosen credit even more. If subsidies and stimulus boosted growth, then the solution is to expand subsidies and stimulus.



The problem is that once the mighty machine has reaped all the easy gains, throwing gasoline on the embers no longer creates growth, it generates systemic risks, as loose credit and subsidies encourage the moral hazard of high-risk investments gushing into marginal projects that soon become tottering dominoes in the financial system. "

https://www.oftwominds.com/blogaug24/success-trap8-24.html

It's worth adjusting those house price indices for wages. What drives house prices in a permanently supply-constrained + favourable-tax regime environment is how much people can spend and the interest rate they can borrow at. My view is that unemployment is not that relevant - it is young people and renters that lose their jobs in recessions. This pulls down on real rents but house prices are relatively well-protected (with some geographical variations). You also get markets within markets - for example, now is the chance for many families to move to an area with a better primary school. First home buyers are also waiting nervously in the wings.

If you look at mortgage money creation and real houses prices (wage-adjusted) you can see that post-GFC we did get a dead cat bounce in house prices as buyers moved at the perceived bottom of the market. However, to trigger this bounce, RBNZ crashed rates from 8.25% to 2.5% and that is almost certainly what will will be required to fire up the old ponzi this time. Look at mortgage affordability now - we need OCR at 3% or house prices down another 20% - 30% or so to get back in the zone.

Before anyone starts, no I don't think that firing up the housing ponzi is a good idea.

Well if there is anything I have learned on here, its the economists have always been wrong. Its not going to take until 2025 for a sharp turn around, all it takes is a few more rate drops. At this point its all dependant on how much and how fast the RBNZ drops rates, its as simple as that.

Social media's "Property Investor" forums are awash with "This is the time to buy !!!" sentiment.

(Just quietly - far too many posters on these forums seem woefully equipped to be lent money.) 

And if Trump wins it likely paints a very different outlook ....lol