"Worst housing market for 30 years" as estate agents admit to "overpricing". House price crash on the way ?

I doubt it'll go as far as "nobody" (though something very close to that can't be ruled out entirely) but I believe it will be the end of the very modern phenomenon where absolutely everybody can have it just for the asking.

The evidence is against this. Almost everyone will survive by cutting their spending to match their income. It's true that many will be in debt so deep as to mean bankruptcy, and their bankrupties will mean yet further limits on available credit, but a new equilibrium will be found eventually.

I think not. Anyone who has low debt on their property or a chance of completing their payments without further borrowing should have no reason to sell. After all, if their house was worth having at the price they paid for it, and its value falls, it's even more worth having from their point of view since the utility gained versus opportunity cost of ownership rises as the price falls. It's only those in for speculation purposes who need out, particularly when they've bought using credit.

Any feedback loop amounts to that, both on the upside and the downside of a bubble.

Where people have bought on credit, there'll always be at least one forced sale once the shit hits the fan.

Remember when I got laughed at for saying that housing trouble in China would be the harbinger of the denoument?

Well, it's started:

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Not yet, but it's as well to be on high ground before the wave hits the beach.

That should be fine if it's not held for investment purposes.

With China's bubble going into reverse and Fannie and Freddie out of the game, the dominoes are now stacked. Let's see if I'm right about the bowling ball coming from the derivatives markets.

I know I've always said that one can't time these things, but the signs are all there and my gut says that the brown stuff has left the runway and is fast approaching the rotating object.

Next up: all these investment shows on TV will be quietly pulled and we'll start to see lifestyle advice based on making do and getting out of debt. Eris willing, we might finally see the back of Reality TV too...

FoFP

Reply to
M Holmes
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no , 'flat' is the code for 'flat'.

Reply to
Tumbleweed

..or if a large asteroid hits us, we'd be in serious trouble as well. Both situations are possible but unlikely. The fact is, the spectrum of who can get credit, and how much, and under what circumstances, is a wide and changing one. Silly (indeed idiotic) 'what ifs' such as "if nobody can get credit" are just, well, idiotic and silly.

Reply to
Tumbleweed

How can they follow flat prices *downwards*? By definition, they'd follow them, flatly :-)

Reply to
Tumbleweed

Not in "estate agents code" it isn't.

Reply to
Crowley

Here's a little-known vignette:

After the "Wall Street Crash" in 1929, stocks recovered to within 91% of their mid-29 all-time high by the Spring of 1930. Even the President declared that the problems were now behind the US. By 1932 though, stocks had fallen to 11% of their peak and that's when trouble really started.

Markets don't rise monotonically in a bubble and they don't fall monotonically afterwards. In fact the markets between 1930 and 1932 were later noted for their savagery just because a number of rallies meant that many of those who'd escaped 1929 unscathed were brought in later and ended up losing their shirts too.

This being the next buble in the cycle from the 1929 one, I wouldn't be surprised to see something similar occur.

More a Kazoo of Doom than a Trumpet of Doom then?

Watch the retail and banking sectors. When they're losing folks hand over fist, it's all over.

Interestingly one other thing noted about the end of bubbles is said to be realignments and changes of leadership in political parties. I still can't see the direct connection, but it's certainly happening again.

FoFP

Reply to
M Holmes

My prediction ..you'll still be posting here this time next year, and nothing much will have happened to prices over that period, which you will use to prove means a crash is now imminent. Or if they have risen, that means a crash is just about to happen. Or if they fell, that means a crash is just starting.

Come to think of it, I cant imagine any circumstances under which you'd agree there wasnt a crash happening or about to. Can you?

Reply to
Tumbleweed

How many folks do you reckon were able to get credit to buy stocks by 1932?

If you'd suggested in 1929 that the number would be as near zero as made no difference, you'd have been laughed at. Just about everyone could get loans of 90% of value of the stocks they wanted to buy.

That wasn't a normal circumstance and it changed very quickly when things went awry. Everyone being able to get 100% loans on the value of a house is not historically normal either.

FoFP

Reply to
M Holmes

You're right.

Though there's increasing signs of credit tightening which *may* lead to a credit crunch, credit will always be available to some extent though not on the reckless scale of the past few years.

Markets continue to operate, albeit on a slimmed down scale, even during recessions, depressions, and house price crashes.

Reply to
Crowley

If house prices retain roughly their current value while credit outstanding returns to historical norms. Get there and the crash is off.

FoFP

Reply to
M Holmes

My prediction........I expect them to be significantly lower, but let's see.

I can't see anything to suggest that a major correction downwards is avoidable. Can you ?

If so please tell me what it is that is going to keep house prices at these record levels (relative to p/e ratios) or make them go even higher as another poster suggested.

Reply to
Crowley

Different situation entirely, unless you can show that a very large percentage of people are using the equity from their houses to pay their mortgages (rather than buy consumer goods). And houses have an inherent value to them, eg people need them in a way they dont need shares so there will be a market from them, unlike the way there neednt be a market for shares or tulips. Not to say prices couldnt fall, but there are other factors at play in houses than just fashion. -- Tumbleweed

email replies not necessary but to contact use; tumbleweednews at hotmail dot com

Reply to
Tumbleweed

So who said it, and what statistics were they using to base their 'flat' statement on?

Reply to
Tumbleweed

Eh ?

There's been plenty of press releases in recent months from various estate agents and their reps. mortgage lenders, brokers, etc to the effect that the market's "flat", "plateaued", "levelled off", "stagnant", "in a soft landing", etc. You must have heard it ?

It's all sales spin to me, the markets going down from where I'm sitting though I wouldn't expect the vested interest's to start admitting it just yet. Better to try to suck in the last of the fools before it goes pop.

Reply to
Crowley

In message , M Holmes writes

MM! But, presumably, people will need to rent if they cant buy, and wouldnt demand assist in maintaining rental levels, or would you expect rents to fall dramatically? (I'm obviously thinking of my own situation, where I am 43% geared, and loan payments are 33% of income).

We are already seeing this.

Make me Rich, and Pay off Your Mortgage in 2 Years.

I doubt it - It's one of the cheapest forms of TV production.

Reply to
Richard Faulkner

In message , Crowley writes

But, (behind their closed doors), agents see the market in terms of sales volume, rather than sales value. For them, a static market with few sales is a disaster, which they would spin as a flat market.

Reply to
Richard Faulkner

In message , M Holmes writes

Not too sure about this:

Kennedy has gone because he is a bit of a drinker, and should probably have gone a while ago.

Cameron replaced Michael Howard, who was only a caretaker, and the previous 2 leaders, were definitely not fit for the jobs, (not that any of them are truly fit for the job, but you will know what I mean).

Blair is going to go because he has had enough.

Reply to
Richard Faulkner

It's certainly *avoidable*; eg if the BoE reduces interest rates. Alternatively if the next budget introduces relevant changes to things like stamp duty, inheritance tax, incentives to build [or otherwise] on brown-field sites, etc. It depends on how important the govt thinks it is to avoid the fall.

I'm not sure what "house prices" are [see below], but whatever they are, more than anything else they should really be thought of as "house affordabilities". These are more decoupled in the case of houses than in the case of anything else [clothes, food, computers, books, ...], because of the way houses are commonly bought on a 25-yr loan. You don't buy cars or hi-fi systems on the basis of, or even with thought for, what your earnings might be [say] ten years hence, and only marginally on the basis of current interest rates. So house prices will go [relatively] higher if interest rates go lower, or if long-term confidence improves.

Genuine question: what is meant by "house prices"? Are the figures based [merely] on average prices of houses sold, or are they something more sophisticated? Eg, suppose a developer buys a house for #300K, splits and sells it as 3 flats at #150K each. Does that represent a rise or a fall in the local value of property? Suppose every house stays at the same price, but, for whatever reason, the number of high-end sales increases as a proportion of the total, so that the average transaction has a higher value. Is that "no change" or will that be presented as an increase in house prices?

Reply to
Dr A. N. Walker

Obviously if I'm right, best advice is to get your gearing down as much as feasible, but that's good advice in almost any circumstance currently imaginable (I.E no inflation at a multiple of base rate).

The rental markets could get interesting if it plays out as I expect. Of course right now, where there are Sell-to-Renters around (how many though?) then that's good for supporting rents.

As I see many people defaulting or being foreclosed, that would seem to support rental markets and there will likely be some effect there. However I also see many folks being so financially wrecked that they won't be renting either - they'll be moving it with relatives. Added to this I anticipate family breakups will reduce considerably and so a driver of the rental markets for flats and small houses will vanish.

Basically fewer people will be able to afford a split and I forsee more conservative times where families will be more together as brash consumption vanishes. Also expect that the vogue of "we're splitting for the children's sake" will be seen for the parental selfishness that it is, and warring parents will be socially expected to hang in there until the kids have flown the nest, perhaps even to the extent of theree being welfare sanctions to encourage the behaviour.

Longer term I think the government is going to be faced with dual calls from effectively bankrupt pensioners (because they didn't save or because their pension fund went south) and welfare claimants. The pensioners will win because they've already paid in and have a valid claim, where welfare folks have been a net drain and don't. Plus folks who are fit but don't work are in a better position to remedy their situation than those who are old and retired. Welfare claimants are going to be by and large told to get on their bikes and find work even as the unemployment rolls are rising.

A third set of claimants will arrive on the scene: unemployed and bankrupted debtors and foreclosed homeowners. The government is in debt too and with the coffers already depleted with the welfare versus retirerees fight, they'll have to find a solution that doesn't make state coffers any worse and doesn't cramp the economy and those still solvent with yet higher taxes.

They'll take a look at all those empty houses the banks and building societies have been landed with and think "Hmmmmm". So what we'll see is a pseudo-nationalisation of reposessed properties as they're rented to ex-welfare folks and the repossessed at capped social rents. It'll be justified by ssaying that properties shouldn't be left empty at a time of national crisis and they're effectively doing the banks a favour by earning them rents.

That's going to throw a monkey wrench into the rental markets even before they start to think they can do some favours for private landlords with empty houses while they're at it. Expect the folks with second homes to get walloped by tax too - they're going to be seen as bad guys who made the bubble worse.

In the end, there'll probably be a political consensus that says that free markets in rents went too far (and I'm a libertarian remember, this is not something I want to see happen) and that the experiment failed. Landlords will again be scapegoated and regulation against "profiteering" will make a comeback.

How far it'll all go is inherently unpredictable. Recall though that stockjobbing was outlawed for nearly a century after the last great British credit bubble and that short-selling was all but outlawed for individuals for half a century after the Wall Street Crash. Those were the scapegoats of those bubbles. People who've been congratulating themselves on their financial acumen do not tend to blame themselves for their recklessness after the fall. Nor do politicians tend to be overly introspective regarding how much they might have been responsible. Scapegoats will be found and they will be very publicly punished.

It's a sad fact that free marketss do not tend to survive bubbles with their reputations unscathed. This probably says more about the faults of people tha the faults of free markets.

Hmmmm, you may have a point here...

I feel I have to be optimistic about something though.

FoFP

Reply to
M Holmes

It really kicked off because he lied about rather sizeable donations though. The drinking is just cover because the Libs don't want to draw too much attention to that.

I'm beginning to think they might have accidentally elected a winner.

Don't bet on it. I don't see him going until he's certain that Brown has sunk without trace.

In fact I have a bet outstandding that Brown will never be eelected Prime Minister.

FoFP

Reply to
M Holmes

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