A question: Why are low rates having a bigger impact on the housing market here than in the US?
Today when I was peeking across a number of economics blogs, I noticed a post from the Rates Blog on the NZ housing market, and a post on the Big Picture on the US housing market.
They both had graphs for housing loan approvals:
Now, the New Zealand home loan figure jumped, while the US PURCHASE figure hasn’t.
My questions are
- if we take into account seasonal adjustment and refinancing, is the New Zealand purchase figure rising?
- if the New Zealand purchase figure is rising, why – especially when the US (where prices have fallen a lot more) is still struggling.
If the purchase figure is rising, I’d be tempted to put it down to a “supply” issue – US housing market is over-stocked, ours is looking a little light.
The short answer is that US rates aren’t actually “low” – the 30-year fixed rates that the US market favours have been in much the same range as they were when the Fed rate was at its peak, and as recently as October they were close to record highs. See if this link works:
http://www.bankrate.com/brm/graphs/graph_trend.asp?tf=1800&ct=Line&prods=1&gs=275,250&st=zz&c3d=False&web=brm&cc=1&prodtype=M&bgcolor=&topgap=&bottomgap=&rightgap=&leftgap=&seriescolor=
Very true. However, that is the 30 year rate – I wouldn’t expect that to move much.
Of course, moving through the rates we see that short-term rates have also risen. As a result I have to ask – why have rates fallen here and not over there? Sure we were on a higher base, but we are also more “risky”.
Between 2001 and 2006 usual residents increased 7.77%
but Private Occupied Dwellings increased 8.23%
USA 2001 2006 %change
population 285,226,284 299,398,484 4.97%
dwellings 117,858,349 126,316,181 7.18%
Is that relevant?
Hi John,
I agree that the underlying idea that they have an “oversupply” of property for their actual requirements is an issue – that is actually something we’ve talked about widely here.
Quick eg http://www.tvhe.co.nz/2008/10/16/housing-price-free-fall-on-the-cards/