New homes: Project Housing contracts Sales edge up in April

New home sales have come off a first quarter downward spiral to show the sales slump may have bottomed. 

HIA economist, Dr Harley Dale said an April lift in new home sales of both detached houses and 

multi-units was an imperative result. 

According to the HIA the problem looms

"Even with this latest improvement, the aggregate volume of both new home sales and local 

government building approvals imply that in the absence of a rapid and sustained recovery, national 

new home building is heading to a recessionary level in 2012,” said Harley Dale. 

This solution is what I can't agree with

“That’s an unfortunate fact which everybody needs to face and which requires further interest rate cuts 

and immediate government action,” Harley Dale said.  

What's wrong with this statement

1. Nothing new here. We have heard same old song for 12 years. Give us an unfair advantage and give each customer a tax payer funded slush fund, and we'll build those houses for Australia.
2. It will ease the pain, but does not solve the problem. 

What about Retailing? What about manufacturing?

Retailing and manufacturing are much bigger employers, and both have serious problems right now. Do they ask the Government for tax payer funded handouts for their customers?

Yet the building industry has had the lowest interest rates in history, and been supported by Government handouts to their customers, directly or indirectly, for 12 years.

And they are stilling singing the same song?

Last time I checked low interest rates and tax payer funded handouts were not working for you, so why keep asking for things that do not work, and in the end a worse problem for your next customers? In other words. The housing industry has proven that tax handouts reduces demand. 

So why did it not work?

Well it did, but them everybody sucked the goodness out of the situation, 

and now we have people wanting homes the can't afford. So who sold them on that?

People don't want postage stamp blocks where you have to have a two story home. Who wants that?

They cost $20,000 more to build, have less usable space, are a health hazard,and have countless issues that will unfold down the track.

Clearly the HIA have never presented a solution to the problem.

I believe because they Have looked in the wrong places.

Its the cost of land Dummy

If land were half the price more people would build a new home. If interest rates were 12% that would not stop them, because it would still be affordable.

What the HIA can't see, is that selling homes that go on postage stamp blocks in Sardine City is not the Australian Dream.

Selling what State Governments and land developers want sell but people resist buying is no way to run a business.

Creating an abundance of cheap residential land with block sizes that people want is the way to go.

 My Story

I planned to build a home two years after this one I am in, and then five years after, but never did. Why not? But the land prices were too high and the blocks were ordinary, and the streets were too skinny.

So what chance have you ever got of selling me a new home? Buckley's. Even though I want to build. 

State Government and Federal Government grants only make things worse. they actually make homes unaffordable down the line and create a worse situation.

Sure if you wave money at people some will drop their pants. But the ones that don't won't when the grants are gone. They want more for waiting.

The HIA solution? More grants, bigger grants. Its pathetic.

What's needed is less whinging, less begging, and more working on the problem. The problem is the price & availability of cheaper land, and keeping homes single level.

Source: Mr Mortgage

Credit cards out of reach for 3 Million Aussies

Nearly 3 million Adult Australians do not have access to a cluster of fundamental financial services, including credit cards, bank accounts & car insurance

Australia's banks need to take a good hard look at themselves

    Got a $3,000 emergency? Save yourself the embarrassment of a decline of a credit card and don't ask your bank! Your family and friends are more likely to respond to your emergency than a bank.

Pay day lenders fill the gap

Payday lenders, who will charge much higher rates will fill the gap. And a little known source for smaller amounts can be Centre-link, if you are a client.
How can you operate without a bank account today? Move to Woollongong or the ACT!

Parts of NSW have the highest number of people without even a basic bank account, let alone a credit card.
But the Wollongong region tops the nation, with 7 per cent of adults without a bank account.
The number of adults in Sydney's southern suburbs and the ACT without a bank account is running at 5 per cent, with the National Australian average of 3 per cent of adults.

And that excludes Aborigines and Torres Strait Islanders. If you add those, then up to 43 per cent operating outside the mainstream banking system.
Why do people have problems getting credit cards or insurance?

Main issues in credit exclusion cited were:

1.     The cost of basic financial services remains too high.
1. The average annual combined cost of banking, credit card and either car or home insurance is $1794. 
2. The level of documentation needed to establish an account can often be a hurdle, 
3. Many banks won't lend less than $5000 as a personal loan, instead steering customers to credit cards.

National Australia Bank says Australia's banks need to lift their game

The National Australia Bank were part funders of this survey, and NAB chief executive Cameron Clyne says the banking industry needed to "lift its game" by providing affordable products to more people.

    "The absence of access to mainstream financial services does preclude people from advancing socially and economically,'' Mr Clyne said yesterday.

When the fridge, telly or car breaks down or someone needs to get to a job interview the banking system needs to improve financial inclusion and community spirit.

Access to credit is improving

While efforts to improve access to basic bank accounts & to promote low-cost credit products are being made, more needs to be done.
The Government has recently chipped in with Federal Treasurer Wayne Swan brokering an agreement with the banking industry to provide free ATM transactions for indigenous people in remote communities. That still leave millions left to help.

Source: Mr Mortgage

Home savings are what home buyers are buying

Home buyers want home savings

Home Savings has become the new investment. If you are buying a mortgage, that is what your should be looking for, and if you are a mortgage broker, that is what you should be selling and delivering today.

Home buyers spending money like there was no tomorrow is becoming a distant memory. I suspect that this behavior will return, but not anytime soon. So don't hold your breath.
Remember when the real estate frenzy drove everyone to buy, regardless of the price, because they assumed that prices would always go up? Well, that bubble burst years ago, and home buyers are beginning to see the light now, 5 years on. They are also getting angry with banks.

Real Estate Prices flat

Real estate will probably be flat [again] at least for the next year, so if you are buying a home, best to test the bottom of the market, rather than pay too much for a depreciating asset.
The RBA Drops mortgage rates .75% in recent months, but nobody is interested in new loans.

Interest rate have fallen, and will fall further

We have had two interest rate drops in recent months totaling three-quarters of a percent drop to the base interest rates, but nobody seems to care, because home savings have not been fully passed through. Not to shoppers in credit card interest and not home buyers in mortgage rate reductions. It's even hard to get duped bank customers interested. The idea in dropping interest rates was to give consumers a reason to open their wallets and use their credit cards more often, but the banks grabbed a big slice of that action for themselves. The result was disinterest by the consumer, and a little anger towards the banks.

Australia: Saving Nation Number one

The result is the spending switch is still locked in the off position. And Australians are becoming addicted to saving, instead of spending. Like all habits, they become addictive as having money in the bank and no debt on your credit cards can be very empowering.
It was not always the case. Aussies have gone from zero to hero in just twenty years, thanks to Paul Keating's push to have a compulsory superannuation plan.

A Change in consumer behavior towards interest rates?

Like well-trained flees, consumers know when they are being manipulated for someone else's benefit. Do they really care that retailers are suffering, and that business bankruptcies are up? When you use people's hip pockets to control their behavior, don't be surprised if that behavior carries the secondary gain trap.
People have been switched off spending so long that they are rusted on to home savings. And the savings habit can be become entrenched.

The second problem is that only people with big mortgages and credit card debts are interested in low-interest rates.
There are people who want higher interest rates. Oh yeh, who you might be asking? The savers. Savers get more for their money when interest rates are high.
And the savings epidemic is creating more and more people who want higher interest rates. Can you remember when interest rates were 12%? I can, and people with savings were easy to sell to.
That's what the ANZ bank CEO said recently, that more of his customers wanted higher interest rates, than wanted lower interest rates.

Mortgage shoppers give the banks no respect. Non bank mortgage lenders on the rise, because they offer savings

Instead of being milking cows for the banks, consumers are becoming interest rate shoppers.
They are paying out their credit cards and using only the interest free element.
At the height of the GFC, home buyers switched to big bank home loans in droves.
Australia's savings rock. The compulsory superannuation Scheme

There is a rock that is bolstering Australia's economic strength, that is growing and gaining strength.

Its called "super" and it will be the foundation of Australian wealth for the future.
Super has zoomed past $1 trillion dollars and will soon reach $2 trillion, simply on the basis that your first trillion is always the hardest one to make. When you then add of the magic of compound interest, let alone more people in the system, then higher participation of the population, and more people putting in extra cash, and than a proposed higher rate of superannuation contributions, you can see the snowball is becoming a mountain of cash to be invested in Australia.

    Savings in the form of Superannuation will be Australia's great stabilizer and provide the fuel for the investment engine to drive growth for the future. The big picture is looking wonderful for Australia, and it's because we are all forced to save for the future. That is catching on in a secondary saving boom, in direct savings of personal income, retaining of profits in companies, and budgets of surpluses by the governments.

How to sell mortgages in 2012? Sell savings!

Right now you might be thinking, how will that help me as a home buyer, or if I am a mortgage broker?
Well this will mean lower interest rates into the future, so that has to help everyone home buyers to qualify to buy a home,homeowners pay their mortgages, and mortgage brokers to sell their home loans. So if you are worried about the mortgage business in this climate, you would be right if you look at the big picture. The big picture is looking bright for Australia.
But what about selling mortgage loans today? Go with the flow!

The answer is if you want to sell anything, it's easier to sell what people really want. 

Selling money is what mortgage brokers have always done. Now they have to sell a different type of money. More money for you. Its time to sell savings.
People don't want a mortgage. There! I've said it. Right now people want savings. They are buying savings. So sell savings that are in your mortgage products.
Savings in fees and charges on their home loans. Savings on switching fees between mortgage lenders. Savings on home loan interest rates. Savings on mortgage broker commissions.

Whatever it takes to demonstrate you are offering exactly what the customer wants. Home buyers want home savings!

Mortgage brokers, like retailers should not be holding onto false hope that the cautious consumers will thaw out and will return to spending again anytime soon. Better to assume that this is new normal and prosper from that assumption. The assumption that home savings is what customers are looking to buy.
Hope this helps.

Rick Adlam Mr Mortgage