subject: How house prices affect our everyday lives [print this page] As always, you can skip straight to this weeks property deals by clicking on our special offers to your right.
There are still excellent units remaining in our fully finished and tenanted development in Orlando - one bed apartments start at less than $50,000 (35k / 30k). With a high (and effectively guaranteed) net rental yield these units are worth serious consideration. This has been by far our most popular Orlando development.
Golf enthusiasts may want to have a look at our discounted Spanish development in Almeria (pictured above) - this is a real quality development that meets all my selection criteria.
Encouraging House Price Stats
After a (very) long winter, spring seems to have brought a touch of sunshine to American house prices. The latest Case Shiller indices were released last week and they showed that average prices continued to fall in April 2009: the ten city index was 0.7% lower the 20 city index was 0.6% lower than the previous month. What's interesting to me is that these are the lowest falls since June 2008. The case for those declaring the worst is over continues to gain momentum.
Despite continued pessimism in some quarters of the market, the statistics point to similar turning points in the UK; with Nationwide reporting price rises of 0.9% in June and the Bank of England announcing four months in a row of rising mortgage approvals in May.
Shouldn't we be concentrating on something else?
Many people (although hopefully not too many readers of these newsletters) can be forgiven for wishing journalists and commentators would simply shut up for a while about the trends in the housing and mortgage markets and concentrate on more important things like reducing unemployment and improving healthcare.
I am also particularly worried about the crazy tax burdens in Ireland - 13 billion was collected via income tax in 2008 (it will be less in 2009) but the government is about to pay 50-70 billion for the bad assets in our banking system. You know what they say - 10 billion here and 10 billion there and before you know it, we're talking real money.
Link between house prices and consumer spending
However, and whether we like it or not, the focus on the housing market needs to continue because it has direct links to many other industries and house prices directly affect consumer spending. Simply put, if people know that their house is increasing in value, they will tend to spend more money (and vice versa). In economic jargon, this is referred to as the Wealth Effect and it is very influential. The economic policy models of the Fed Reserve assume that a person whose house appreciates by $100,000 will increase his spending by the same proportion as a person who receives an extra $100,000 in stocks, shares and regular income.
Declining house prices also limit a banks willingness to lend money - not just for houses but also for cars, business start ups, holidays and general investment. Far too many people who should have known better lost sight of these forces.
