AMERICA SNEEZES – AUSTRALIA GETS A COLD

For as long as I’ve been travelling to and from the USA and across its many States I’ve seen trends, gadgets, ways of doing things, styles, fashions and music all impact on Australia one way or another.  Some of the impacts are immediate (especially today with the all pervasive internet) but many take a little time.

So it seems yet again.  Interest rates on the way down (seriously down) here in Australia and rates on the rise (dangerously so it would seem) in the USA.

The news is bad for Australia’s fragile economy.  Any hope for a recovery in house prices is gone as far as I’m concerned.  For one, as I’ve sprouted for years, we are still dangerously overpriced and have quite a way to go to rock bottom.  If our interest rates turn again, the market will be shot with a cannon.

In the USA, as reported today, the rate at which new homes sold across the United States in July fell 13.4 percent compared with the previous month, the biggest decline in more than three years, according to US government statistics.

Whilst we can’t get a fixed rate 30 year mortgage here in Australia, you can in the USA.  When I was there a couple of months ago, 30 year mortgages were on offer for 3.5%.  Today there are approaching 4.6%, a huge and frightening jump in such a short time.

USA May 2013

The rubber band is being stretched and it won’t be long before Australia finds itself in the same position as the USA.  Our diving interest rates have not been reflected in a rapid rise in house prices and the whole market remains in the doldrums.  Watch this space…

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