REIA recycles negative gearing myths

ScreenHunter_01 Jun. 28 09.52

By Leith van Onselen

The Real Estate Institute of Australia (REIA) has today issued a media release (below) defending negative gearing and lobbying against any changes. Let’s examine the REIA’s arguments:

The Real Estate Institute of Australia President, Mr Peter Bushby, says the Government should retain negative gearing for property investment in its current form.

“Recent chatter suggesting there are changes in the wind is extremely concerning and would negatively impact on the supply of housing and the level of rents in an already tight rental market,” says Mr Bushby, speaking in the lead up to next week’s Federal Budget.

“It would adversely affect the most disadvantaged in our community, who are caught in the rental trap while facing a long wait for social housing.”

“We need to remember what happened in 1985 when the Hawke Government abolished negative gearing for property, only to bring it back in 1987. During that period rents increased by 57.5% in Sydney, by 38.2% in Perth and by 32.0% in Brisbane.”

It’s important to note that negative gearing was never “abolished”. Rather, from July 1985 the government quarantined negative gearing interest expenses on new transactions.  As a result, investors could only claim interest expenses against rental income, not other income. The old rules were restored in September 1987 after successful lobbying by the real estate lobby who wrongly claimed that the rule changes had caused rents to skyrocket.

Predictably, the REIA has recycled the myth that the “abolition” of negative gearing between July 1985 and September 1987 caused a rental crisis. So what does the data actually tell us? Well, according to the Australian Bureau of Statistics (ABS), inflation-adjusted rents rose in four capital cities and fell in four capital cities over the period that negative gearing was temporarily “abolished” (quarantined):

If it was true that the abolition of negative gearing caused rents to rise, as the REIA claims, shouldn’t rents have risen Australia-wide since negative gearing affects all rental markets equally?

Moreover, rental growth over the period that negative gearing was quarantined was not unprecedented, with rents growing by a greater amount on an annual basis in late 1982 and early 1983.

In any event, I suspect rising population growth in the mid-to-late-1980s played the major role in increasing rents nationally, not changes to negative gearing tax rules:

Back to the REIA:

“It is important to know that the 2010 Henry Review stated that any changes to negative gearing arrangements should only occur after reforms to the supply of housing and to housing assistance,” added Mr Bushby.

“Current arrangements, in addressing the supply of rental accommodation, are complementary to the Government’s goal of increasing the supply of rental property.”

“Negative gearing could be the difference between investing or not in rental housing in a subdued market, as is the case at present. Any tweaking to the current taxation arrangements could tip the balance against property investment.”

I love the way that the REIA uses the Henry Review recommendations to defend making changes to negative gearing, but conveniently ignores the same Review’s recommendation of a broad-based land tax.

As to arguments over supply, Reserve Bank of Australia (RBA) data clearly shows that the overwhelming majority of investors – over 90% – buy pre-existing dwellings, not new dwellings, and that the proportion of investors buying new dwellings has fallen considerably since negative gearing was re-introduced in September 1987 (see next chart).

ScreenHunter_04 May. 09 10.24

Moreover, the amount of investor funds going into new housing has barely shifted in 25 years:

ScreenHunter_05 May. 09 10.27

Because investors primarily purchase pre-existing dwellings, negative gearing in its current form simply substitutes homes for sale into homes for let. As such, negative gearing has done little to boost the overall supply of housing or improve rental supply or rental affordability.

In the event that negative gearing was once again quarantined and a proportion of investment properties were sold, who does the REIA think they would sell to? That’s right, renters. In turn, those renters would be turned into owner-occupiers, thereby reducing the demand for rental properties, leaving the rental supply-demand balance unchanged.

Ultimately, negative gearing has few policy merits. It does little to boost supply, yet the additional demand from tax subsidised investors places upward pressure on home prices, which might explain why most other nations – many with more affordable rental accomodation than Australia – do not allow negative gearing.

Negative gearing also costs the government billions in lost tax revenue, which could be used to fund schools, hospitals, housing-related infrastructure, or any number of other worthwhile endeavours.

Full REIA media release below.

[email protected]

www.twitter.com/Leithvo

REIA Defends Negative Gearing (May 2013)

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Comments

  1. Alex Heyworth

    Getting rid of negative gearing on shares would probably save quite a few people from margin calls they can’t meet as well.

    • thomickersMEMBER

      lol, the companies who spruiked margin loans are all out of business.

      • Mining BoganMEMBER

        Don’t worry, their names live on in courthouses around the country…

      • Every time I log into my ANZ account there is message touting to get a loan to buy shares.

      • thomickersMEMBER

        lol MB if they are in court they can’t afford to have a lobby group to represent their interests (ie. Margin Loan Institute of *insert state/country here*)

        rocketboy, ANZ calls in the loan before it goes to 75% LVR so no loss to them

        the spruiker loses their ongoing trail commission on the loan (1-2%pa of loan). its GG to them.

  2. LabrynthMEMBER

    The UDIA is pushing for Valuers to not discount new OTP units if there has been excessive marketing costs associated with the project. The average developer pays around 8.6% in commissions if using an internal team or 6% when using an in house marketer.

    Lucky the UDIA has no power. Think of all the leeches in the system for commissions to be above 2% when selling a normal residential property.

    The industry is hurting.

  3. The Patrician

    Bravo Leith.

    The revenue forgone argument alone is compelling.

    Limiting NG to new dwellings has to be the first step.

    • Agreed – need as many advantages as possible to increase responsive supply of new dwellings to turn residential property from a speculative capital gain non income earning asset to a truly defensive, income only asset.

      • @Ron 11.23: The pollies think any government that ends negative gearing will make life-long enemies of the ‘Gearers and their families. So they won’t.

        Instead, the market will provide the solution. As land prices retreat (coming soon to a neighborhood near you)this woeful investment strategy will munch up personal balance sheets. The banks will politely point to the ‘Gearers lack of an equity buffer and invite them to sell something. Then the retreat is really on.

        Don’t Buy Now!

    • The Patrician

      Enlisting the lobbying support of the HIA seems to be a key factor in kicking goals in other housing policy reforms.

      After HIA’s state-based FHOG reform successes, removing NG on pre-existing properties could lead their national agenda.

  4. The main myth that should be dispelled is that spending on housing is “investment.” It is not. It is a form of consumption spending. Frequently it is not much more than Commonwealth-assisted gambling.

    The negative gearing rules only create a tax shelter for spending on housing, and have led to the financial enslavement of well over a million middle-income households. This has not added to the productive capacity of the economy nor has it increased national prosperity. Rather, these things have been diminished by the existence of State subsidies for now vastly over-priced consumption goods.

    As an aside, I notice those supposed market purists at the IPA, among all their polemics, are silent on this most egregious policy-driven distortion of the Australian economy.

      • Mining BoganMEMBER

        I’m in camp right now. I dare you both to come here, stand up in the middle of the dry mess and repeat that.

        Say goodbye to your family before you do so. My fellow bogans take this seriously. You’ll be on the end of a damn good glassin’.

    • Briefly, have you read what Adam Smith had to say about “the value of a nation’s stock of dwelling places” back in the 1700’s?

      He had it right: housing is an “expense” item, albeit one that lasts longer than, say, clothing.

      If increases in the values are a gain to someone (i.e. a specufestor, not an occupier), they are an added cost to someone else. There is no gain to the economy.

  5. Excellent article. However, it will sadly fall on deaf ears as far as those with the power to do anything are concerned.

    Oh, for some sanity around property….

    • That’s right. Sadly, the misinformation camp has won the battle (for now). I can’t see negative gearing being tackled until at least the majority of baby boomers have cashed in their investment properties. Until then, there are just too many votes at stake for whichever party is in power.

  6. TheRedEconomistMEMBER

    This link should be sent to every finanancial commentator, shock jock and new rooms as essential reading

    These myths generated by industry bodies and then propogated on MSM without any detail investigation is a blight on the system.

  7. Since when is REIA representing the interests of rental tenants of Australia? Tenants Union should be worried at this blatant grab of their membership 🙂

    NG should be restricted to new builds only. Why isn’t the developers lobby such as UDIA, PCA and Bernard “demographer” Salt Inc actively involved in getting this done? They have been successful with the FHOG.. this should be an easy one.

    • Yet stand ready to fund the next investment property purchase. Guess we’re about to hear from Winchester on the evils of guns.

  8. I didn’t see the REI statement talk about “inflation adjusted” rents? Based on nominal rent data, what they say re rents from 1985 – 1987 is correct. They did rise, and really what needs to be looked at is how they rose in the periods before and after the changes, and then when the changes were reversed. But it’s complicated analysis.

    At the end of the day the problem with this whole issue is that the data is inconclusive either way, as the changes were not in for long enough to really determine what impact they had *directly* on the rental market. I thik this will be the case whatever level of analysis is applied.

    • and even if there were rises, arguably this was a temporary adjustment before downward pressures on prices kicked in to reduce rents. Not long enough to assess this. As outlined below, i favour grandfathering this in (ie claim 90% of loss first year, 80% second year).

  9. i would favour grandfathering it in as follows:
    – no neg gearing on new investments
    – existing ones gradually reduce the deductible amount over 10 years (ie 90% year one, 80% year 2).

    This gives existing landlords plenty of time to get their act together and decide whether a loss making investment is a good idea. Most importantly it creates an immediate disincentive for new investors to invest in loss making property. We would quickly see downward pressure on prices, not to mention more tax receipts.

    • Mining BoganMEMBER

      I like this idea too.

      That way the punters would be in for a slow, painful realisation of just how much money tthey’ve been throwing away over the years.

      • Oh… about that glassin’ … have you put this idea out to your fellow bogans out in the dry mess? How did it go?

      • Mining BoganMEMBER

        Not well I’m afraid Ino. I get treated with great suspicion with my views on NG and real estate in general. Every now and then they will send the most persausive bogan at me to change my mind but talking numbers confuses them long enough to give me a chance to run away…

        The tide is turning though. There is quite a few who have crunched the numbers and realised the sad truth. The dawning of the fact that they were not only losing money but cramping their lifestyle due to lack of cash flow as well woke them up. These are the older ones. They’ve realised it is better to live now.

      • drsmithyMEMBER

        The tide is turning though. There is quite a few who have crunched the numbers and realised the sad truth. The dawning of the fact that they were not only losing money but cramping their lifestyle due to lack of cash flow as well woke them up. These are the older ones. They’ve realised it is better to live now.
        This is the key. You need to present it in metrics they understand – Harleys that could have been ridden, Tattoos that could have been inked, Rum that could have been drunk, Asian prostitutes that could have been hired, etc.

    • That approach creates an instant vocal constituency of malcontents for one side of the political divide to buy votes from by promising fiscal relief

      How about taxing the NG ‘benefit’ at say the marginal rate less some flat ‘adjustment’ percentage to be withdrawn over the life of a parliament.

    • thomickersMEMBER

      yeah i like this idea too.

      But i think the most swift way to get rid of it is when an almost absolute majority of property investors are positively geared (ZIRP here we go!)

  10. i have to say I dont favour the neg gearing for new property. Why distort investment behaviour. Will subdivided property become “new”, what about knock down and rebuilds? This would also make a developer or builder less inclined to rent a new house out as they know it would be a less tax friendly investment once sold. Likewise an investor who buys a new property is less lilely to sell it due to its favoured tax status.
    Far beter to use tax savings to provide more public housing (NOT SUBSIDIES). 5 billion a year at average of 300k per year woudl supply 16000 new units per year.

    • The other thing you have to remember is that even in this scenario, the government would not actually *save* $5B. All they would be doing is deferring the tax deductions. Ie, if NG was wound back, it would simply mean that the losses would be carried forward into later income years, and would be deducted against future positive cash-flow and/or capital gains.

      There are no other possibilities within the fundamentals of Australian taxation law – it’s either NG now, or carried forward losses to be used as a tax offset in the future. So don’t be too quick to spend any money “saved” up front.

      • drsmithyMEMBER

        All they would be doing is deferring the tax deductions. Ie, if NG was wound back, it would simply mean that the losses would be carried forward into later income years, and would be deducted against future positive cash-flow and/or capital gains.
        …Assuming there are any.

      • gonderb. Your “tax neutrality” argument about quaranteening negative gearing assumes that all investors hold their investment properties into perpetuity such that future income gains offset past losses. But we both know that many investment properties are bought for capital growth and sold long before they ever become positively geared. Hence, government finances ARE worse-off under the current regime.

      • How many are sold long before they ever become positively geared? What percentage?

    • Squirell, you don’t NEED “public housing” in a market like THIS:

      In Austin TX: decent suburban house: $185,000

      http://www.trulia.com/property/3116284850-4501-Dorsett-Oaks-Cir-Austin-TX-78727

      Absolutely HAVE to live downtown on a budget? See what less than $100,000 gets you:

      http://www.trulia.com/property/3039999946-1800-Lavaca-St-205-Austin-TX-78701

      Bottom end of the market: would you rather be a poor person in an Aussie city, or HERE? Look for yourself at what you get for WELL UNDER $100,000……..

      http://www.trulia.com/property/3110047250-5914-Hidden-Valley-Trl-Austin-TX-78744

      http://www.trulia.com/property/3113538430-2318-Deadwood-Dr-Austin-TX-78744

      http://www.trulia.com/property/1093930854-6812-Pondsdale-Ln-Austin-TX-78724

      If you can only afford $28,500:
      http://www.trulia.com/property/3113382458-Branch-Creek-12609-Dessau-Rd-469-Austin-TX-78754

      And that’s Austin, far from the cheapest fast-growing city in the US. Atlanta’s prices are 2/3 that. Rust belt cities are, like, 1/2 that. And these actually show encouraging signs of employment re-growth, in contrast to, say, the UK’s cities that manage to be “rust belt” AND “unaffordable” due to bloodyminded urban planning.

      • Giordano Bruno

        This constant reference to Texas is mind numbing – especially when compared to England.

        I debunked the ideas regarding England VS Germany posted a couple of weeks ago, because what is NOT being taken into account is the population densities of these areas – simply locating some city and claiming it has low house prices without considering the population density is spurious.

        Hence when you look at the UK vs Germany on a population density basis they have much MUCH better housing than Germany – since almost 80 % of the UK is in England, which represents the smallest land area of the UK as well. Hence a much better comparison is England VS Germany, these are separate countries after all, in which case the previous thread was debunked.

        Again here – you are presenting Austin Texas which has a population of around 800k – now this state is ALWAYS brought up as the lone global example of cheap housing – Houston and Austin, however no one ever raises the fact that these cities are absolutely TINY compared to Melbourne (less than half the size in Houston and one FIFTH in Austin) – and are also in largest land mass of any state in the US –

        So in a large state, desert region, similar population which somewhere like Adelaide represents you are also going to find huge numbers of houses similar to yours

        And even plenty of houses at well below $100K exactly like the ones you have presented

        Trying to correlate Texas with Victoria, or England is absolutely, utterly, patently absurd.

      • Alex Heyworth

        GB, in your own mind you may have “debunked” this comparison. Others may consider you have merely put forward a different opinion as to its validity.

        Population density (IMHO) is only relevant if there is actually a shortage of land surrounding a city. Hong Kong would be a prime example. Melbourne is definitely not one.

        Obviously you don’t agree, as is your right.

      • Oh, for goodness sake, I don’t know where to start with Giordano Bruno’s assertions.

        The combination of density and unaffordability are parallel outcomes of urban growth containment policies.

        The fact that a city is both low density and affordable, is a legacy of an absence of growth containment policies.

        Your assertion that the UK’s housing is superior to Germany’s or anyone else’s is nonsense that actually does despite to the British people suffering the consequences.

        I could understand you arguing that Texas versus the UK was an invalid comparison because of the respective total land area per person, but even this would not be entirely true. The UK could easily manage affordable prices and lower urban densities and still retain food security. It shows how irrational their policy approaches are, that they would claim lack of land as justification for constraining urban growth, yet let hordes of low quality immigrants in as they have done – a malicious act of national betrayal by the modern politically correct Left elites.

        But your assertion that comparing Texas to Victoria is just as “absurd” as comparing Texas to the UK, is itself utterly absurd. The comparison between Australia and Texas is entirely appropriate, given the abundant spare land that marks both. It is the adoption of UK planning policies by land-rich nations like Australia and NZ and Canada and even some States of the USA; with the same scandalous consequences for affordability; that is absurdity “to the power of”.

        I partly agree that focusing on Texas makes our argument look somewhat selective. But I have pointed out repeatedly that there are around 150 affordable cities in 30 or more States in the USA for which the same sort of data I am quoting, could be found. Houston is merely a particularly good model on account of its existing size and growth rate and economic strength. I used Austin this time so as to give Houston a rest; Austin is less affordable and more “planned” than Houston and more of a favourite with the “high tech”, “vibrant urbanism” set.

        I simply don’t have time right now to collate another bunch of RE data, but next time I might use Atlanta; or Nashville, or Indianapolis, or Charlotte, or Des Moines, or Kansas City. Curious followers of this argument can easily do their own checking. BTW the elasticity of supply of housing in the USA is not actually highest in Texas – that honour actually falls to Kansas. And Texas is matched by dozens of other States – Texas is merely aligned with the “norm” for the States of the USA that have not adopted anti-growth policies.

        BTW, California’s cities grew even faster than Houston is now, back in the 1950’s and 60’s and their housing at that time was famously affordable. So much for the argument that all that matters is climate and desirability.

      • BTW there is a major difference between the population of a municipality in the USA, and the population of the urban area made up of multiple municipalities. You need to use this data for valid comparisons:

        http://www.demographia.com/db-worldua.pdf

        Austin TX is pushing 1.5 million. Houston TX is over 5.5 million.

        “San Francisco” would only be 800,000 too if you used the municipality of SF. The urban area is 6 million plus, which is more what everyone understands SF to be.

      • The obvious reason for using Houston, and Dallas-Fort Worth, is that they are so similar in size to Australia’s biggest cities albeit rapidly leaving them behind since their last 20 years or so of growth.

        Atlanta, 4.7 million population, is even more affordable. Detroit, 3.7 million, even more so – but this would not be a fair comparison – at the moment.

        Post-crash, I am warning you that Australia’s cities will act like the UK’s cities – that is, housing will remain unaffordable and falling in quality, there will be no grassroots recovery in industry of any kind, unemployment will become entrenched and cross-generational.

        The USA’s rust belt cities stand a chance of recovery precisely because of their lack of restrictive planning and the ability of their urban land prices to fall to the point where grassroots entrepreneurship and low workforce cost pressures can assist economic turn-around.

        http://www.wxyz.com/dpp/news/detroit-among-top-five-cities-across-country-for-job-growth

    • “what about knock down and rebuilds?”

      In the case of knock down and rebuilds, normally the rent on the rebuild is far higher than the rent on what it replaced. In this case the gearing is far less likely to be negative and if it is, it would be relatively much lower.

      So knock down and rebuilds don’t pose much of an issue. Of course, it’s better to just disallow in all cases but saying it can still apply to new dwellings has some political advocative appeal.

  11. Funny how governments fear repeating a mistake made almost 30 years ago (which wasn’t really a mistake).

    Yet governments all over the world are were piling onto the easy-credit, asset-inflating bandwagon almost instantly after the same things caused an epic financial crisis in 2008. As if not printing money before was the cause of the collapse lol…

    • It is FAR WORSE now because urban planners everywhere are trying to “save the planet”, hence urban land prices can bubble now, whereas elasticity of supply used to keep a lid on them.

  12. innocent bystander

    given that mortgage rates are so low and rents, generally speaking, are pretty strong then the financial benefits of NG are probably at a low so NOW is the time for Govt to bite the bullet and abolish it.

  13. General Disarray

    Excellent piece.

    Maybe it’s time for MB to start referring to the REIA as the TPIA. Let’s face it, they’re about supporting transfer payments from the young to the old. Isn’t that the end result of all the policies they push for and protect?

  14. So will the restriction/abolition of NG apply to incorporated entities or just regular PAYG taxpayers.

    The carry forward loss can still have value whether their is a capital gain or not.

    Moreover, when rental housing ends up being mostly owned by incorporated entities who can do as they please with the profits and losses within the entity – how will that actually impact prices and increase supply. More like the upper end of the owning class will just own more assets.

    Abolishing NG does not by itself change the amount of housing stock in circulation. Only increased land releases and lower costs to build will increase the number of dwellings.

    But hey attacking NG is the new black. Along with broadscale property taxes. Neither are going to happen so better to focus on what actually can happen – like increasing land releases and reducing the cost of trade labor via increased skilled migration from the US and Europe.

    Have any of you actually got a quote recently on building a 3-4 bedder in the Sydney region – not a McMansion – just a regular home for a family of 4-5 with 2 cars that’s built to last 10 years or more and fall apart in less than 2 years.

    • “….Abolishing NG does not by itself change the amount of housing stock in circulation. Only increased land releases and lower costs to build will increase the number of dwellings….”

      +100 to rocketboy – another addition to the forces of light in Australia, have you been on MB for long?

    • “Abolishing NG does not by itself change the amount of housing stock in circulation.”

      Some people have a talent for recycling logic upside-down. The logic normally is that NG has very little positive impact on the amount of housing stock but whatever positive impact it has comes at the expense of a very large cost in forgone tax revenue. It should be got rid of simply because it costs other taxpayers a lot of money for very little benefit.

  15. This thread is loading on my screen in a most peculiar way – anyone else having this problem?

  16. It’s looking very odd on Chrome for me as well.

    Regarding the press release, I wonder if this is a pre-emptive media strike, or if the REIA know something about future changes to NG that we don’t.

  17. Specially to address Giordano Bruno’s complaints:

    Let’s look at housing in grand old Philadelphia, population 5.5 million.

    Not even one of the “affordable” US cities by Demographia definition.

    http://www.trulia.com/property/3117339788-940-Herbert-St-Philadelphia-PA-19124

    $140,000 – what would a house like this be in any Aussie city? Much under a million?

    http://www.trulia.com/property/3109933385-1666-Wakeling-St-68-Philadelphia-PA-19124

    Scungy old house: $95,000. What would that be in an Aussie city? Under half a million?

    http://www.trulia.com/property/3637433-420-Unruh-Ave-Philadelphia-PA-19111

    $200,000: 5 bedrooms, 3 bathrooms, modern home. Under $1 million in an Aussie city? Fat chance.

    Look for yourself: knock yourself out:

    http://www.trulia.com/for_sale/Philadelphia,PA/0-200000_price/SINGLE-FAMILY_HOME_type/1500p_sqft/4_p

    • Annie Oakley

      Philadephia has some very dodgy areas. A friend of mine who used to live near there said it was a really scary place, if you took a wrong turn in your car and ended up on the wrong side of the tracks. Without inside knowledge of exactly where these houses are, it’s very difficult to compare the prices with Australian cities.

      • GunnamattaMEMBER

        Annie, I know the location of this place fairly well

        http://www.trulia.com/property/3032497016-4500-Higbee-St-2-Philadelphia-PA-19135#photo-11

        It is about 5klm from the city centre, not far from the river, and close to a large park. It isnt in an area festooned with gangs of any particular race. It is just a humble house in the burbs.

        To go with that, in a few weeks I am going to spend some time with a mate in Milwaukee. For those who dont know Milwaukee is about an hour drive up the expressway from Chicago – it would be far bigger than Geelong, and Chicago is far bigger than Melbourne. More to the point Milwaukee isnt reliant in government transfers and neither is Chicago, when I think you could make a case Melbourne and Geelong are.

        The mate I am going to see comes originally from Geelong (where I am now) works for SABMiller (beermakers). We yack all the time and often laugh about the fact that 500K AUD will buy nothing but a shithole in Geelong (and this baby is a personal favourite – having been on the market for circa 18 months now – http://www.realestate.com.au/property-house-vic-geelong-112455967) but that he has shelled out about 250K there (he is married to an American) and purchased something around the corner and almost the same as this. http://www.trulia.com/property/3113065443-3302-N-Bartlett-Ave-Milwaukee-WI-53211#photo-13

        Anyone thinking that Australian real estate is not insanely priced really needs to go and have a look around.

      • Annie, if you look further at the RE sites, you will find houses for $20,000. That is the scummy areas.

        Gunnamatta, thanks for the in-depth knowledge – I thought that but was not 100% sure.

    • GunnamattaMEMBER

      Good stuff Phil, I must confess that as far as I can make out the average punter here simply does not understand how insanely expensive housing is in Australia. It isnt just the States.

      • There are appalling myths surrounding “the US housing market”. There is almost NOBODY that understands that there are massive differences within the USA, or that housing unaffordability and bubbles and crashes there have been restricted to California and a few other cities around the US. There are dozens of cities where prices have remained affordable and relatively steady throughout, ALWAYS thanks to elasticity of supply of housing.

        The prevailing MYTH is that affordable housing in Austin or Philadelphia or anywhere is just the result of “the crash” and hence no different to prices in Ireland or Spain now. BS. In several dozen cities, they never bubbled.

        Even today, and in the US itself, we see aggregate analysis reporting that “house prices are recovering after the crash”, when in fact San Fran is going back into another INSANE price bubble, Phoenix and Vegas are following, and possibly NYC and Boston.

        Seeing there are so many places a young first home buyer can simply move to within the US, many of them doing quite well creating employment as well as offering affordable housing, you would have to be terminally ignorant to be a young person in the USA signing up to a $500,000+ mortgage “just because that is the new normal” – in LA or NYC or Boston.

        The thing that amazes me is how the prices can be heading so high again already in just a few US cities, when the flight of “once bitten, twice shy” FHB’s to AFFORDABLE cities is now a torrent. The whole thing has to be a specufestors playground totally detached from any sort of economic reality.

  18. Settle not into savagery of the intellect.

    “All government, indeed every human benefit and enjoyment, every virtue, and every prudent act, is founded on compromise and barter.”
    Irish statesman Edmund Burke (1729-1797)

    Are you afraid or in awe of the Pharoah’s today?

    We shall barter and compromise with all, for the benefit of all.
    Forget not, there is no pockets in a shroud nor luggage racks on a hearse.

    Arrows are simple, life is complex.

  19. M….. 600,000 boomers with an NG IP. I wonder how many will want that IP after they retire? I aslos think that NG will go once all th boomers are about rtired as they will no longer nned or want it. To me it is a dead issue as I think it will be gone this decade anyway.