“Not
a question of if but when there will be a mortgage crisis.”
Real estate
is local – until it isn’t. Cities have their own housing bubbles
that implode on their own time. But once contagion spreads to
mortgages and banks and infects confidence of real estate investors
and homebuyers alike, and once debt levels are so high that they have
become unsustainable and can’t be pushed higher, then a real estate
bubble suddenly becomes a national economic issue with terrible
consequences.
In
Australia, which has the highest household debt in the world, “homes
are so expensive that nearly half of all mortgages are
interest-only.” They’re offered by the biggest banks with
loosey-goosey lending standards. And “that is a red flag for
imminent disaster.”
“It’s
not a question of if but when there will be a mortgage crisis in
Australia,” explained Jonathan Tepper, CEO at research firm
Variant Perception, on the local 60-Minutes segment, Home Groans,
that aired in Australia on Sunday.
He’d
predicted the mortgage meltdowns in the US, Ireland, and Spain. And
the one word that best describes the Australian housing market?
“Insane.”
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