Last night I saw a story on one of our long running current affairs shows (irrespective of what you think of the show, the story was interesting – maybe not 100% unbiased and without judgment, but it still raised an interesting point or two).

The story was about the spate of mortgage foreclosures in the US and how that is going to hit our shores in the next year or two and that house prices could fall by 50% according to a leading (their description not mine) academic.

Now I am fairly conversant with the “Subprime crisis”, and most of you know basically it was loans to people with no jobs, incomes or ability to repay and surprise, surprise, they are defaulting on mortgages they could not afford.

Now that this is flowing through the markets, many experts are not surprised that this is happening and are telling us it is a portent of doom.

But let’s take a slightly different view.

If this does hit Australia, how bad is it? Well as far as I can see we don’t have the same loans with the same types of interest rate resets that the US has – maybe that might shield us. The story about the Australian family was very sad, but from what the reporter said, this person also had a nasty accident that left him unable to earn an income for 3 months and in all honesty no income for 3 months will probably do more damage to a family than all the interest rate rises we have seen (and herein lies a very important message for all Australians – talk to your financial adviser about your income protection insurance).

None of our kids can afford to buy homes and are doomed to be renters all their lives according to the press and anecdotes – maybe a 50% fall in home prices might help allowing those with good incomes and savings ability the opportunity to now purchase homes that were previously over priced to them – one of the people interviewed on the show said he wished he had the cash to buy a large number of homes – to him it was a great opportunity.

Is this the silver lining to this cloud, maybe there is hope for your children after all, even if it means your neighbor will be homeless.

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