The Economist on the Housing Bubble

I've been banging on this topic for sometime now (is it cause I still rent and don't own...naahh), and the Economist tackles this problem head on this week. The bubble will pop, the only question is how quickly and how much pain will it create. The 50% of new mortgages from quarter one of this year that have ARM's will probably feel the most heat. Good luck to those folks...

The drop in house prices in Australian cities undermines a popular argument heard in Britain and America that even if house prices do look frothy, they are unlikely to fall unless there is a big rise in interest rates or a jump in unemployment. Neither has been needed in Australia. Interest rates have risen by only half a percentage point during the past year, to 5.25%—less than half the level during the previous housing downturn in 1990. Meanwhile, unemployment is close to a 20-year low.