Michael Gracie

We hear a bit about home prices falling in the UK, and then the government pulls a tax rabbit out of the hat to spur more demand. Read SocietyGuardian.co.uk | Society | The change that will make some grin up north.

I wonder what politicians in the US could do to make home ownership more advantageous. Make mortgate interest a tax credit instead of a deduction? With interest rates on the rise, there isn’t much else left to subsidize the market.

It begs the question (again). Can residential price increases hold their own, without the persistently low cost of money advantages they enjoyed in the past?

With regard to my comment yesterday on housing prices “already beginning” to correct, here is a report from across the pond: Guardian Unlimited Money | News_ | House prices fell in December.

Note that interest rates in the UK crossed the trough before those in the US. Rates started climbing in Australia round about the same time, and the lines at open houses Down Under have long since disappeared. Also keep in mind that the UK is densely populated, and is loaded with real estate speculators (those buying properties with no intention of moving in and/or investing in developments), much like many of the areas in the US which have see the biggest price increases. Those speculators will go running for cover first. Then the games begin.

I may be way off base, but these three countries (the UK, Australia, and the US), have something else in common too, trade deficits. Wealth being sucked out of the systems, some (like the US) at an alarming rate. With price driven by indebtedness, and liquidity on shrink, I say…

Welcome to the global economy.

I sold my house a while back, and right now I rent. I have heard every reason why I should be buying again, but still I rent. My friends and colleagues continue to invest in real estate, continue to say how their area is different than the rest of the country, and that appreciation is inevitable. My reasoning - house prices have been acting like bonds - interest rates went into a long decline, and Newton’s Third Law kicked in. And the external force that causes Mr. Gravity’s First Law to take affect are now on our heels.
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