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Where do you have your numbers for increasing household debt from? I'm a young Norwegian looking to buy real estate around a major city. Rents are ridiculous wh

by marvin 11y ago

Where do you have your numbers for increasing household debt from? I'm a young Norwegian looking to buy real estate around a major city. Rents are ridiculous when compared to an equivalent mortgage (rent is always higher than interest + principal on an equivalent owned property, and that's before withdrawing the interest rate expense on taxes). But it's very unsettling to have seen real estate prices climb twice as fast as the average increase in salary, and three times faster than inflation for the last 20 years. 2012 numbers put out average household debt at 213% of net disposable income. If you're young and buying a home for the first time, you're looking at ~350%, and that's a conservative number. It's disturbing.

adventured 11y ago
Norway is of course one of the few countries that can afford to carry a 200%+ household income to debt ratio and get away with it (not to say it's desirable granted). That ratio hasn't increased much the last couple of years, so it may have stabilized. I know there is still broad concern about it: http://www.thelocal.no/20141104/high-household-debt-in-norway-shaking-economy http://www.thelocal.no/20141104/high-household-debt-in-norwa... http://www.reuters.com/article/2014/02/04/norway-debt-idUSO9N0JH02P20140204 http://www.reuters.com/article/2014/02/04/norway-debt-idUSO9... The sort of bright spot to that, is debt levels can't climb perpetually. The most likely trajectory for Norway's housing market is a reduction in real housing costs. Oil is going to be relatively cheap (in my opinion) for the next ten years. That will reduce Norway's growth, remove some of the froth in assets caused by the oil boom the prior ten years; and the government is already on top of managing the consequences of that: financial belt tightening will be the longer term outcome. Unless Norway does something stupid, it seems most likely that the housing market, and household debt levels, are close to peaking. Norway's situation is quite similar to Canada and Australia's natural resource driven real estate bubbles. If I were a young professional in Norway, I'd rent, build up wealth, and wait to see how the oil industry gets hit (not to mention what the total fallout of Scandinavia's debt binge is over time, with local knock-on effects from surrounding countries). A house is mostly an expense, a place to live, unless you're starting a family. I'd wait to see how this shakes out. The odds strongly favor that very large gains in assets backed by a commodity boom, will have a down swing once that boom has ended. Worst case scenario, unless oil goes back up, housing in Norway is unlikely to move a lot higher. In the meantime you can work on building up your own balance sheet, and not overpay for a place to sleep at night. When it comes to buying assets, I've always liked Warren Buffett's adage: be fearful when others are greedy, and be greedy when others are fearful, aka don't chase bubbles, time is on your side, be patient and buy when assets are on the cheaper side - for now, put your capital to more productive use.
- marvin 11y ago
  Thanks for the insights. I definitely understand your thoughts on waiting things out. It's a difficult call since the immediate expenses are higher when renting and hence it's harder to build up savings, but OTOH is's very possible to get "wiped out" (go underwater) in a downturn. And that's certainly not a way to save money. Out of curiosity, is economics a hobby of yours or is it part of your profession?

by marvin 11y ago

adventured 11y ago

Norway is of course one of the few countries that can afford to carry a 200%+ household income to debt ratio and get away with it (not to say it's desirable granted). That ratio hasn't increased much the last couple of years, so it may have stabilized. I know there is still broad concern about it: http://www.thelocal.no/20141104/high-household-debt-in-norway-shaking-economy http://www.thelocal.no/20141104/high-household-debt-in-norwa... http://www.reuters.com/article/2014/02/04/norway-debt-idUSO9N0JH02P20140204 http://www.reuters.com/article/2014/02/04/norway-debt-idUSO9... The sort of bright spot to that, is debt levels can't climb perpetually. The most likely trajectory for Norway's housing market is a reduction in real housing costs. Oil is going to be relatively cheap (in my opinion) for the next ten years. That will reduce Norway's growth, remove some of the froth in assets caused by the oil boom the prior ten years; and the government is already on top of managing the consequences of that: financial belt tightening will be the longer term outcome. Unless Norway does something stupid, it seems most likely that the housing market, and household debt levels, are close to peaking. Norway's situation is quite similar to Canada and Australia's natural resource driven real estate bubbles. If I were a young professional in Norway, I'd rent, build up wealth, and wait to see how the oil industry gets hit (not to mention what the total fallout of Scandinavia's debt binge is over time, with local knock-on effects from surrounding countries). A house is mostly an expense, a place to live, unless you're starting a family. I'd wait to see how this shakes out. The odds strongly favor that very large gains in assets backed by a commodity boom, will have a down swing once that boom has ended. Worst case scenario, unless oil goes back up, housing in Norway is unlikely to move a lot higher. In the meantime you can work on building up your own balance sheet, and not overpay for a place to sleep at night. When it comes to buying assets, I've always liked Warren Buffett's adage: be fearful when others are greedy, and be greedy when others are fearful, aka don't chase bubbles, time is on your side, be patient and buy when assets are on the cheaper side - for now, put your capital to more productive use.

marvin 11y ago
Thanks for the insights. I definitely understand your thoughts on waiting things out. It's a difficult call since the immediate expenses are higher when renting and hence it's harder to build up savings, but OTOH is's very possible to get "wiped out" (go underwater) in a downturn. And that's certainly not a way to save money. Out of curiosity, is economics a hobby of yours or is it part of your profession?