The Housing Market

ok, let me just say, this is entirely speculation (i know, when isn't something i post here -_-).

[speculation]
I was thinking about the housing market and it's current state, after seeing an American news article saying Forclosure filing rise rise 65%. Wow, sounds like they're well and truly in trouble. But then if 65% is an increase from 3% to 5%, it doesn't sound quite so bad. I don't know the exact figures, but it would figure for the media to try and get "maximum effect" out of the numbers they have available, to try and get their point across... But still, 65% in a single month is very high, and considering the number of forclosures has been out of control for many months now (causing the credit crunch), whis it probaly alot bigger increase than we would all hope.

Anyway onto the actual speculation. This article featured a picture of a house with an auction sign in front of it. That then in turn made me think about a comment made on the NZ herald website about the same topic. The comment in question was this; the reason the house market is in such bad shape all over the world is because people at the moment know house prices are just plain stupid at the moment (who would have figured >.>), with people (and their real estate agents) filling their heads with dellusions of super high sale prices. This in turn just causes people (like ourselves) to sit on what money we have at the moment and wait patiently for house prices to get more realistic. I thought this was a fair comment to make, and very true. However i would go one further: the reason why the housing market is in such a dilemma in the first place can be put largely down to the boom of "investment" or rental properties.

The pyramid scheme of our day. For yonks (ages for those of you who don't speak kiwi) the latest and greatest investment has been property. Anyone with any smarts has bought a couple of houses and done them up a bit, then slapped a nice big rent price on them to not only service their loans but actually turn a profit from. Fair enough too, goodness knows i'd have done the same a few years ago. Anyway i'm not speculating on why the house prices have gone up. There are a million different reasons, and that could be another 5 blog posts in itself (at least).

Basically the reason people can sit and wait patiently for house prices to come down (decreasing the value of people's investment properties) is because there is so much investment property around. Someone invests in a property, what do they do next? They rent it. With a flood of rentals on the market rent rates (although climbing with the house prices a bit) have not climbed at nearly the same exponential rate (at least not in the small town there i live; i pay NZ$60 a week for rent, and no i don't live in a chicken coop). So while someone could own their own (starter) family home for say $200,000-$300,000 and pay (at best) somewhere around 10% interest p.a. So $20,000 to $30,000 just to service the loan. Maybe my maths is screwy, cause that sounds like alot just sitting here. Ok so there's 52 weeks in the year, we divide that loan servicing down and we get.... $384 to $577 a week.

Anyway the point was, at least $400 a week just to service your loan. I currently get NZ$150 from the NZ goverment per week to live as a university student. This isn't free money, i have to pay it back (eventually), and it doesn't scale with inflation, rent prices, commodity prices, or any of that. So i'm living for $150 a week in the current climate, while some poor sods have combined wages of over $1000, but over half of that is going to servicing the debt on their home. Woot for owning your own home....
As you can see, right now you would be crazy to own your own home; with repayments say you're paying $600 a week. For a low-income couple that's a reasonable amount. For a single person that's even more. So the assumption people (myself included) are currently working on, is that why get a loan now, and be paying this much for the next god-knows-how-many years. We would all hope that house prices will drop by about 30-50% (to about what they were before the housing boom) and then we pay 20-50% less interest. In the meantime we can live on a much smaller amount of money (like my $150) and save the rest for a deposit, not only ensuring we pay less of that pesky interest when we do get into the market, but also that we increase our chances of being able to put a deposit down on a nicer house.

Ok that's enough of a rant for today.

Again, these are just my thoughts, prettymuch all speculation and opinion, so feel free to completely ignore them.
[/speculation]

On a non-speculative note (or less speculative) i've started writing a computer copy of a draft i wrote up on a few scraps of paper floating around my desk i've titled "Galaxy-like desktop interface: truly 3D desktop". I believe thisis the sort of thing that needs to happen if we are ever to move any closer to Virtual Reality and Ubiquitous Computing. Plus who didn't think it was cool when Tom Cruise was throwing video clips around on a projected screen using his hands (mice are old skool).

Keep thinking.