Many New Zealanders consider purchasing a house to be a rock solid investment, and assume that house prices will continue to rise steadily, having never seen a bear market or experienced rapid rises in mortgage rates. Over the past 25 years, however, many wealthy countries have experienced periods of substantial decline in house prices. Falling house prices erode homeowners’ equity, while mortgage lenders experience losses on their loan portfolios. The resulting stress in the financial system can have long lasting adverse effects on the economy. For borrowers, it can mean years of spending cut-backs to rebuild ... (full story)