Wednesday 7 April 2010

"most prominent global bubble in generations" ?

"The house price bubble, the most prominent global bubble in generations, was caused by lower interest rates but...it was long-term mortgage rates that galvanized prices, not the overnight rates of central banks, as has become the seeming conventional wisdom," Greenspan on Bloomberg, 07 Apr 2010

... "Imagine all the people" , 98% to be precise of all Finnish mortgage are linked to variable interest rates which are at historical low level, what kind of bubble we have currently at hand...

Following the same line as ex-Fed president Greenspan, we may be observing the biggest bubble ever created and witnessed in generations...

oops I feel the earth trembling under my feet...

7 comments:

JD said...

Seriously - when will you cease your rambling? Listening to you, people will have lost a ton of money in lost rent and lost opportunity of capital gains over the last three years...

thankfully I did not heed your often conflicting advice, bought a house two years ago at what you claimed was the height of the bubble. Today I can sell this same house for a 15% increase, pay next to nothing in interest, and do not have to worry about increasing rent costs.

Seriously, end your continuous rambling and try to formulate a coherent sentence and thought not around what a huge bubble we live in...

HousingFinland said...

JD,

I accept you view, but unless you are a speculator, I suppose you are in for the next 20-30 years paying for it.

Now, being a renter is all about paying a premium for not taking a risk over current inflated price (by any measure) at a time of unbelievably low interest rates.

On top of that a renter, have the flexibility to move whenever he likes and does not have to maintain the property and with all the hidden cost surrounding it.

And as a bonus, the renter is banker free i.e the worse landlord.

Now my advise to renter, since you brought the subject, is that today risk for downside for the Finnish housing price are greater that the upside...and the danger to ruin ones's life for a poor quality property or getting very heavy debt burden is far too great.

Having said that, I hope you are happy about your property but I surely warn you that interest rates will probably shoot up (pretty violently within 2 years) to level not seen in a generation in the next years (> 8% or more)...Start to build some cushion, being a property owner hold many risks, so don't forget to read the small print.

Anonymous said...

JD, Have you made the huge money already? If not, you don't have the extr 15% yet at all, while you have at least paid the hudge down payment already. I bet you need to pay the monthly fees for owning the property... You see, here is the attracting gme.

Go ahead to buy more if you like. No one would stop you, I guess.

HousingFinland said...

“Asset bubbles are hard to recognize in real time and each asset bubble is different. However, these challenges cannot be an excuse for inaction.”

At the moment , Finnish economist, politicians play exactly that card to ignore and play at their advantage each asset bubble, be it in the past or in the future (believe it doesn't take long before people forget the last bubble 15-20 years for housing, 4-5 years for stock market)

Billpete002 said...

Peter Schiff predicted the housing bubble in the states back in 2004 it took 4 more years till it popped.

Tons of people, like yourself JD, said it was utter nonsense and that Peter Schiff was an idiot. Yet, look at what happened.

Austrian economists, like myself, know for a fact that Finland is in a "bubble" with housing - it doesn't take a genius to realize that if the price of housing is skyrocketing during a world-wide bust period with strikes, falls in exports, increased debt, and rising unemployment that something is dreadfully wrong.

I found it amazing when OP and a minister came out and said the reason for the price increase (happened a few months ago, and it was the largest increase EVER in Finland's housing market) was due to lack of supply...

I find that shockingly irresponsible.

The numbers have been coming out and so far 2009 was the worst year for Finland since it became a nation - if even Helicopter Ben (US Fed Chairman) says the US isn't out of the woods yet - and the sovereign debt crisis is just starting in the EU - that house you bought may not have a 15% much longer.

Heck as an experiment try to sell it now with the 15% increase plus normal asking markup - I wonder if anyone would buy it.

Andrew said...

Nobody in their right mind is going to hold large euro deposits right now. The fact is Heliben, tricky trichet and Nordea and co are working together to support their customers thru a difficult experience. Lower rates are not impossible.

People in Finland with deposits have to buy something and houses for many is as good as anything else.

I think Russia is going to do quite well so they will be buying some property. NZ commoditity prices are doing well and Australia is booming with mining and commodities from coal to iron ore and gas.

NZ is doing quite well with logs and i know UPM is beginning to get more confidant.

Anonymous said...

I thought this was worth pointing out if you google it you can read several articles on the matter - JP Morgan & Chase have been price fixing the gold and silver markets (probably along with other banks and Federal Reserves for that matter).

Meaning that the price of gold this last year would have gone MUCH higher had JP and cronies dumped the market.

They also have the gaul to demand more money from Americans while at the same time demanding that the US government not forgive defaulting housing.

While I do agree with JP on the last point - people who cannot pay should default on their loans and have the market clear, but JP should also never have received money in the first place - and if that happened they wouldn't be in existence today along with most of the other corrupt banks (like Goldman Sachs, Bank of America, and others to name a few)

All this site or any of us can do is report on what is published and speculate - what should also be considered is what on earth is going on behind the scene.

I think if people have bought houses in the last few years they are suckers and the 'pain' is about to begin.