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Has The RBA Greenlit Home Price Falls?

The logic I hear all the time is the RBA won’t let home prices fall too far because of the financial stability risk consequences. But that view might be plain wrong.

First the RBA has lifted rates by 2.25 percentage points since May, and markets expect the cash rate to reach 3.3 per cent by the end of the year, before peaking at 3.9 per cent in April next year.

RBA governor Philip Lowe said last week there was a “narrow path to a soft landing” for the Australian economy, which would be difficult to stay on if global economic conditions deteriorated.

And reflect on this. Within a 24-hour period this week, there will be 16 central bank decisions including the US, UK, Japan, Switzerland, Norway and Taiwan. Cumulatively, we could see over 500 bps in rate hikes across the globe this week.

In addition, Westpac came out yesterday with a revised forecast for the RBA Cash Rate, saying “We now expect the Reserve Bank Board to raise the cash rate by 50 basis points in October for a terminal rate of 3.6% by February (revised up from 3.35%)”.

It seems the RBA is giving the green light to home price falls. Because if prices fall you would need a smaller mortgage (even if the interest rates were higher). Let that sink in. Those who are arguing the RBA won’t be prepared to let home prices fall very far, take note!

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Written by Walk The World

Comments

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  1. Every time the RBA falls behind the Fed with hikes the dollar falls causing an increase in inflation as most stuff is purchased in USD. They are in a bind. They either increase to match or better which will impact house prices or plod along behind causing more inflation. There is no choice left. Inflation is now spiking faster as they have fallen behind in the past couple of hikes. Yes I know this is a simplistic view. But in the high inflation environment currently it is tracking.

  2. No Mr. North, they didn't greenlit house price falls. They engineered them. They knew this would be the outcome. They have known this for a long, long time. They just didn't tell us, we liked the construction boom and the wealth effect. We voted for it, election after election. Barbecues across the country were full of bombastic boasting by property geniuses; streets were cluttered with neighbours watching auctions that implied they were now millionaires too.

    Now the Manadarins couldn't run around the country waving a big latex dildo could they? They are just doing what they were always going to do, what Macfarlane told you, they are going to try and ease it in. But going in it is, straight up our Aussie, well … you can guess the word to insert here.

    Forget the AFR and their stunning analysis – they exist to obfuscate the obvious. Try and picture it this way Mr. North, it helps to understand the real relationship on display here: Powell is the dominatrix, Lowe is the gimp. The gimp is dancing, and we are all trying get into the groove so we can bask in the glory of telling everyone else what is coming out of the gimps stuffed mouth.

  3. The RBA have stated continuously that house prices are not their mandate or concern. They weren’t concerned when prices were shooting to the moon and they shouldn’t be concerned when they fall back down to earth. Their role is to keep inflation under control, a role they are failing at abysmally.

  4. Having sat in cash for since feb 2020 I was becoming more than a little salty until Martin's predictions finally started to become reality (maybe not quite yet but getting there) this year.
    As the moronic spruikers of bitcoin and gold have been smashed and disappeared from the free advice list I pray the Housing bulls will be shut down as well.
    John Adams and Leith Van adams have gone silent on their Fed pivots. Happy days.

    So let a cash rate of 4% plus become reality and too bloody bad for the indebted fools who never stopped bleating on about "Houses only go up".
    They had zero sympathy for conservative savers getting screwed by the the government funded housing ponzi.
    The favour will now be returned.

  5. The ending east savage Mr North..I can feel your frustration…all this time you kept on educating with real data…but all these property lunatics were making fun of you..it is time for them to face the music in coming months.

  6. I've been watching you for so many years now, I do feel this is different this time. They can't pull any more rabbits out of the hat to dis credit the facts you share anymore. (never say never though right)

    They can't possibly re do money printing without a seriously good reason. Everyone is rich for nothing, no one wants to do anything. China is collapsing, given geopolitics that suits America for a recession because they know they won't be seriously overtaken in this downturn.

    Those elites holding up America will want to sell all their US bonds at some point while interest rates rise at a rapid pace, increasing demand to a point they can offload. Then allowing them to buy back when interest rates go negative to save the whole US economy while also having the ability to buy loads of extra debt to sustain the ridicules story they sell. That debt can be handled with more debt.

    I choose carefully who i follow. People like yourself who show value. Not just in facts, but also in self-respect of telling the truth to the best of your knowledge based on your desire to simply help others. I never really understood it all, I just knew you were the real deal. Until finally i found out about your lovely wife. I wish you all the best in life martin, thanks for everything.

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