From ‘Secretly Broke in Australia’, at Mike Shedlock’s Global Economic Analyst blog, 8 Aug 2011. Transcripts from a ’60 Minutes’ TV feature (‘The Big Squeeze’) on the personal consequences of moves in the Australian housing market. [hat-tip to ‘bubbly’]
ALLISON LANGDON: To the world, Tracy and David Dodd are the very model of Australia’s relaxed and comfortable middle-class. They’re living the dream – three kids, a mortgage and a suburban family home on an acre block. But Tracey and David have been keeping a secret from their family and friends – they’re drowning in debt. No-one to look at you would think that you are struggling.
TRACY: It might look like we have got everything but you don’t see the mortgage, you don’t see the loans. You don’t see everything and nobody wants to talk about it you know, because it is embarrassing.
ALLISON LANGDON: Has it taken a toll on you both?
DAVID: Oh it has – it has taken its toll but you’ve just got to do it.
ALLISON LANGDON: Like most young couples, the Dodds invested their heart and soul and every spare cent they had into the ideal of home ownership – the biggest mortgage their double income would allow. But last June, Tracy lost her job in the construction industry and David was made redundant. Just to keep money coming in, he’s taken a lower-paying job. Ever since, the Dodds, like tens of thousands of middle class families have been going secretly broke in the suburbs.
TRACY: We went from having a really great income including a company car, fuel card, phone – things like that – to basically losing all of that.
ALLISON LANGDON: So do you have more money going out each week than what you’ve got coming in?
ALLISON LANGDON: How much difference are we talking about?
TRACY: Probably – it’s getting very embarrassing – probably about 400 bucks…$400.
ALLISON LANGDON: This is the outskirts of the Gold Coast. When you look around and see the big, shiny new houses, the nice lawns and two cars in the driveway, you can’t help but think, ‘life must be pretty good here.’ But this version of the Great Australian Dream is just a facade – nowhere is mortgage stress being felt more keenly than right here. And the figures are staggering – one in 50 families are at risk of losing everything. The number of Australians behind on their mortgage repayments by more than a month is at an all-time high. Areas of mortgage stress can be pinpointed right around the country. Mostly in areas, that just five years ago, were booming. Families who borrowed to the limit in the real estate gold rush are the ones who are now struggling to pay their bills.
MISH’s comment: “The story continues with Phil and Sandra Box who claim they never did anything wrong. Of course they did. So did Tracy and David Dodd.
Not only did they pay too much for a house, they had no cash cushion if one or more of them lost their job.”
Another extract from the 60 minute piece:
“A generation ago, buying a house was a rite of passage, bricks and mortar were as good as money in the bank. Not any more. Nowadays, renting might just put you ahead of the game.”
Note that for the “figures” to be “staggering”, just “one in 50 families” need to be at risk of “losing everything.” What will the Vancouver area numbers be at 10%, 20%, 25% RE price drops (and with the resultant effects on our RE-dependent local economy)? – vreaa