There are two major housing crashes underway – one in Australia’s marginal big city seats that could decide the next election, the other in the US where it could decide whether global economic growth remains happily strong.

The immediate local problem is highlighted by SMH property editor Jonathan Chancellor who trots out examples of western Sydney properties selling 40% below their purchase prices three years ago. The mortgagee auctions are indeed happening and they’re very painful. The SMH tracked 16 properties in western and south-western suburbs listed for auction over the weekend and found 60% of them either sold for less than their previous purchase price or attracted a top bid that was less. The story mentioned three that were mortgagee auctions. The worst case was a three-bedroom brick-veneer in St Clair that sold for $260,000 after being bought for $450,000 in 2003. Second worst, a townhouse near Penrith purchased for $257,000 three years ago and sold for $156,500 on Saturday.

The failing of official housing figures is that they are averages. The mansions being snapped up by the ever-richer CEO class aren’t part of the same world as the people falling into negative equity in the mortgage belt. The blow is also softened by the fact that people tend to keep paying their mortgage as long as they’re employed despite having negative worth.

The Reserve Bank’s plan to slow the economy means higher unemployment in Sydney and Melbourne forcing people to move to the boom states where labour is scarce. That means more mortgagee auctions which spill over into dismay for the still-employed neighbours who realise their house has crashed in value. John Howard has to run hard and fast to distance himself from the housing bubble he helped create and the interest rate rises that are bursting it. 

Meanwhile, in the main game, the bad news just keeps on building about the US housing industry. On top of massive oversupply, home sales there dropped last month to a two-year low. That is not unrelated to the University of Michigan’s consumer confidence index diving to a 14-year low, excluding the September/October hurricane shock.

As Macquarie Bank economist Mark Tierney writes this morning, the dive in the homebuilder survey hints at a significant fall in US personal consumption and the consumer confidence downturn is being complicated by rising inflation expectations. It’s become a messy and unattractive picture.

The bottom line is that if the consumer of last resort tightens his or her belt, the world will feel that housing crash.