New Now Know How

Or so an article at the NYT argues.

If this is true, and it certainly seems truthy, the coming decline (that some commentators have mentioned) in Australian house prices will not be evenly distributed. Instead, inner city suburbs, and those within the central ring of public transport will either remain at the prices they are or will even increase beyond inflation. As the distance from the CBD increases, and public transport is less available, values will fall.

It will be easy to dismiss this decline in the value of the homes of people who are over-mortgaged as their own fault but this decline in the value of people’s homes will be deeply regressive. It will be the people on the lowest incomes who had to borrow most of the cost of their house who will be worst off. And, unlike the United States, if you end up underwater with your home-loan (i.e you owe the bank more than the house is worth), you can’t simply walk away — you are still on the hook for the total amount borrowed and the bank will insist that you rapidly get back to a state where you own them less than the value of the house.

I’ve seen some anecdotal evidence of this recently with people mentioning on the Twitter about inner-city prices remaining high and with real-estate agents in my middle-ring suburb either hinting (“it’s a buyers market”) or coming right out (“the market is going to keep going down in the coming few months”) and saying that there is a real decline, or at least stagnation, in values.

As further evidence, in the real-estate section of the most recent local newspaper, there were quite a few “mortgagee in possession” sales and more than a few others that hinted at some kind of financial difficulty requiring the sale at a low-ish price.

The revolution, like the future, will not be evenly distributed.