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Housing Finance Declines Accelerate in May

Posted by The Fundamental Analyst on Jul 9th, 2008

Data released by the abs today showed that finance approvals for owner-occupied housing declined for the fourth straight month in May, down a seasonally adjusted -7.9%. The chart above excludes refinancings, that number fell a seasonally adjusted -7.1% in May and is now down -27.1% from the peak in June 2007.

The value of loans for owner occupied homes excluding refinancings fell a seasonally adjusted -5.8% in May and is now down -28.8% from the June 2007 peak. Falls in both the number and value of loans for owner occupied homes has been accelerating in recent months. Year over Year numbers as shown below have dropped sharply.

There can no be argument now that the RBA’s interest rate hikes coupled with a tightening in credit conditions as a result of the global credit crunch have been successful in reigning in domestic demand.

Slowly but surely the Australian economy is following the lead of the US economy and more recently places like the UK, Ireland and New Zealand. Australia particpated in the global real estate bubble built on a mountain of cheap credit and it will not be immune from the fallout.

The fallacy that we are different down under because of our abundance of natural resources demanded by the developing BRIC countries will be shattered as we slow along with the rest of the global economy in the second half of this year and into 2009.

One Comment to “Housing Finance Declines Accelerate in May”

on 13 Jul 2008 at 5:47 pm1D. Volatility

Wow, interesting analysis. I believe you just have to watch the long term trend for the U.S housing markets. Housing stocks spiked from 04-05, and now we’re reverting back to the home price mean where we would’ve left off at 2002-03. Land will always keep it’s value, even if illiquid in the short term, keeping pace with inflation. The housing market just got ahead of itself and now the banks who were responsible for the easy lending will see the repercussions, and unfortunately, the credit markets have caught a cold and will trickle down into the economy as we’ve seen with low dollar/high oil, failing car makers, gov spons mortgage organizations, and lost jobs. The dow will see 10,800 in a little bit.

D. Volatility