US households underwater on their mortgages


This chart is from a US Federal Reserve survey of household financial wellbeing. Remember, negative equity in a house can only happen in other countries. It has never happened in New Zealand, right?*

Imagine for a moment if a similar situation arose in New Zealand.

Given what some investigations have found about marginal propensity to consume any increase in housing “wealth” through additional household borrowing, what would be the impact of tens of thousands of households facing this sort of situation?

Of course, this is New Zealand, where the only literature that matters is this week’s copy of Property Press, so move along, there is nothing to see here, house prices always go up, right?*