What do you think would happen if we all woke up a year or so from now, only to discoverthat the value of our home had dropped by 40 - 70%?
That's almost unthinkable isn't it but believe it or not that's exactly what one fairly prominent industry expert is predicting. He predicts a financial crash, possibly within 12 months, where one of the casualties will be the value of the family home.
I certainly don't want to be a doom and gloomer, but given all the signs, that's a bit hard to do. Speaking for myself, I'd have to say that even without any expert knowledge, such an occurrence wouldn't surprise me. After all, it's not as if we haven't seen such things happen in the past, just think back a few years to what happened in the US when people were walking away from their homes because they simply couldn't afford to keep them.
Add to this the fact that for a long time now, we've all been encouraged to buy, buy, buy, even when we haven't had the money to do so and now, as I understand it, Australians generally are in more debt than ever before. In business, they consider a business that owes more money than it has in assets, to be trading insolvent and when this happens, it's often a sign that the end is near. I wonder how many Australians owe more money than they have in assets? That's where this industry expert's house value prediction gets a bit scary. If the value a home drops in value by 40 - 70%, my guess is that an unthinkable number of homeowners with a mortgage would find themself owing more than their house is worth. It's not hard to imagine that US situation happening here is it?
I've headed this comment "Life's a gamble!" because that's exactly what people who think like me are faced with. My biggest problem is getting accurate or reliable information, in other words who do you believe or trust when you hear information or predictions from so called "experts".
Take the expert I referred to. If I had a massive mortgage to contend with, heard what he predicted and had absolutely no doubt about his genuineness, knowledge or ability, I'd be extremely foolish if I didn't take steps to make sure that if such a crash occurred that I was in the safest possible position. That could mean selling my house now before any possible crash, putting the money in the bank and renting another home until the predicted crash occurred. After the crash dust had settled, I'd then use the money I had in the bank to buy another home 40-70% cheaper than it was valued at before the crash.
If on the other hand, I viewed this expert's opinion as just another typical prediction, similar to those we hear every other day and basically took no notice of it, what if he's right? I'd hate to even think about that scenario if I had a huge mortgage.
You see what I'm saying? Very few people would sell their home and rent etc. simply "in case" that expert was right. Most would do nothing, even if they thought he could be right, it'd be an extreme, massive and brave step for anyone to take. My guess is that most people would choose to take the "gamble", believing it could never happen here or, if it did, we'd all be in the same boat anyway, or things will soon get better.
If only we didn't have to gamble on such things.