Source:  ReutersAn Australian academic who lost a bet involving housing prices now has to pay up and trek to the country’s highest mountain peak.

University of Western Sydney Associate Professor Steve Keen began a 225 kilometer, (140 mile) nine-day trek Thursday from Canberra to the top of 2,228 meter high Mount Kosciuszko after wrongly predicting a housing market crash.

At the height of the global financial crisis in late 2008, Keen predicted house prices in Australia would fall as much as 40 percent, mirroring crashes in the United States and Britain.

But Keen’s prediction was questioned by Macquarie Group’s top interest rate strategist Rory Robertson, who said the collapse would never happen and challenged the loser to trek to the top of Mount Kosciuszko.

Since then, house prices have rebounded and were more than 13 percent higher in December 2009 than a year earlier. They were also 14.5 percent higher than their low in March 2009.”My call was always over the longer-term when house prices fall, they fall a lot slower than share prices,” said an unrepentant Keen. “The government has simply delayed the inevitable by engineering this latest bubble.”

Not in the U.S.
Australia’s housing market may be moving faster toward a recovery than anyone expected, but that’s not case in many parts of the U.S.  The folks who purchased high-priced upper Nyack New York homes, or took out second mortgages on their homes to pay off debts, are struggling to make ends meet as home prices slowly begin to limp toward pre-2003 levels.  Lenders who backed mortgages on that expensive Piermont real estate, as are most all lenders across the U.S., are operating under much stiffer requirements for home buyers, and getting that loan today won’t be anything like it was before our own bubble burst.

The government doubled a generous grant to first-home buyers in response to the global financial crisis, while decade low mortgage rates saw buyers flock to the housing sector in 2009.

Australia’s central bank is concerned about a housing market bubble and rising inflation and has raised rates 125 basis points since October last year, with more expected to come.

Keen, who sold his inner-Sydney home in 2008, will wear a T-shirt during his trek printed with the words: “I was hopelessly wrong on house prices; ask me how.”

But Keen has not given up his cause and dubbed his trek a walk “against Australia’s property mania,” while predicting that a housing market crash is “only a matter of time.”

“To humor Dr Keen, I’ve said that if Australian house prices fall by 40 percent from any new peak in my lifetime, I will follow in his footsteps,” said Macquarie’s Robertson.

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My Take: Foreclosures across much of the United States are still a central part of the country’s real estate story.  Many troubled borrowers are waiting months to find out if they qualify for a home mortgage modification to get out from under, particularly those who are considered ‘up-side down,’ meaning their loans are now higher than the value of their homes.  Others are reported to be simply walking away from their mortgages, thinking foreclosure is the best option they have.  Australia’s market may be healthy again, but that doesn’t mean we here in America are seeing the light at the end of the tunnel.  Small business owners in particular who bought homes in the market’s boom are struggling to stay afloat, threatening to break the backbone of the nation’s economy.  That includes shops selling everything from model trains, aviation gifts, Carhartt clothes, and Key West Florida sport fishing trips to tourists.

The only consolation is that we are beginning to see jobs opening up again, which is good.  Now the maker of wood propellers or model locomotives may not be seeing customers banging down their doors yet, but consumer confidence levels are rising again.  More and more people are apt to spend money now on extraneous things, like those fancy Carhartt work boots or a Key West charter fishing tour with their families.  But the days of getting a mortgage loan with a wink and a nod and a sticky note documenting your income and expenses are over, which means the housing market, when it does finally rebound, will strengthen to pre-2003 levels once again and this time around buyers and lenders alike will likely be more reputable and certainly more accountable.

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