Tuesday, May 22, 2007
A sign of the much predicted slump?
The Times: Surprise fall in mortgages raises fears of an imminent slowdown
Peter Newland, of Lehman Brothers, said: “All in all, leading indicators of housing activity – including approvals and the Royal Institution of Chartered Surveyors sales-to-stock ratio – have started to hint at a peak in housing activity, although it may take some time before this feeds into house-price measures, and it is unlikely to be much cause for concern for [monetary] policymakers.”
Posted by cautious browser @ 12:07 AM (311 views) Add Comment
11 Comments
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1. Realist said...
Jonathan Loynes, of Capital Economics, said: “April’s figures would seem to add to the growing likelihood that interest rates will rise as far as 6 per cent.”
Growing bandwagon behind rates rising to 6% now. Money is sloshing around the economy still and now that the housing market has sucked as much as it can like a bloated baby, it will find other homes. Because of this the BoE is going to have to keep a tight hold on interest rates in the meantime.
2. p. o. o. r said...
I have said for several months that I expect interest rates to reach 6% by the end of this year, I am now starting to think that we might see them go further. I have also been following the number of houses on the Market and over the last 2 weeks the number has increased by 5%, however since January the increase is now about 75% - There are certainly noticeably a lot more 'For Sale' boards around.
Yesterday Oil went over the 70$ mark, and fuel is back up to almost the 99p per Litre - surely this is going to lead to increases in utilitiy bills at the end of the summer (just as peoples consumption starts to increase for Winter), which is going to push inflation back up. The cost of goods is also increasing. Any USA company buying products from Europe is now faced with increased costs with the € approaching the 1.35 mark - This in turn is also going to push up the cost of Exports from the USA.
For the time being I am going to stick with my thoughts that Interest rates will reach 7.5 to 8% by the end of next year. The MPC acted way too late, and now I fear there is very little they can do to control inflation, unless they start to push through some significant increases of at least 0.5% increases.
Mind you I am sure that when house prices start to fall in price then they will start being included in the figures for how Inflation is calculated.
3. royston said...
The outrageous thing is that this 'Labour' government is controlling inflation (insofar as there is any control over inflation) solely by restricting wage inflation. They are watching CPI and wage inflation. Business owners and landlords can accumulate as much money as they can. But, as long as this group is not spending enough in aggregate to push the price of consumables up, the government is happy. However, if wage-earners, who constitute the majority in this country, accumulate money and spend at the same rate as business owners and landlords, then CPI rises, interest rates rise and wage demands get talked down. No wonder this society is becoming more unequal. (Thanks Gordon!)
The question now is how do we redress this imbalance? We need to find a way to redress it that does not require direct re-distribution, which would necessitate higher taxes and a bigger role for government, and which we most certainly do not want!
4. Boarder said...
Royston,
Look up GeoNomics.
5. tipping point said...
Royston. What's wrong with the government controlling wage inflation. I don't see why people should have the automatic right to salary increases every year. The result is a working mentality where people do the bare minimum not to get fired. Surely zero percent pay rises is preferable to organisations having to resort to redundancy. People need to take responsibility for themselves. If their employer undervalues them then they should find another job that pays more, and to counter any argument about the poorer members of our society, isn't that what the minimum wage was designed to protect.
6. sold 2 rent 1 said...
I am still not convinced about IR going over 6.50%
Real disposable income is falling. How can there be a wage-price spiral.
How about I explain my reasoning using fear and greed?
We know that all asset markets are driven by fear and greed. The tops are defined by greed and the lows are defined by fear.
We see this greed and fear not only in business cycles but also in secular cycles. The secular tops of 1929, 1966, and 2000 were defined by greed.
Greed and fear have a strange relationship too. In a property bubble one person may have greed in trying to buy many BTL properties and another has a fear of not getting on the ladder. Both fear and greed can drive the market up and down.
Let’s get back to inflation.
After the 1930’s and 1940’s k-winter everybody feared debt and deflation. After the markets topped in 1966 and we entered a secular bear we all feared deflation so much that inflation was allowed to rise and get out of control. The 1930’s depression was still fresh in our minds.
By the time 1982 came along, inflation was seen as public enemy number 1. We have been living in fear of inflation for 30 years now. This fear of inflation will cause us to fight inflation until we end up in a deflationary depression again.
We are now in a situation where we fear inflation and are completely relaxed about debt. The 1970’s still haunts us.
The fear pendulum swings from inflation to deflation in the k-winter. Just like in asset markets the pendulum always overshoots in both directions.
7. royston said...
TP,
The point is that the system as it currently stands is maximising the share of wealth accruing to capital owners and minimising the share of wealth going to the supply of labour. That is the structure of society that we had prior to 1900. In the 20th century, we got a society where everyone got a chance, albeit not an equal one. We had much greater social mobility. We are now going backwards.
As for automatic rights to salary increases every year, I entirely agree with you - rewards should be earned. What I disagree with is the automatic right to profit increases when salaries and wages are standing still. If you just reward capital for its own sake, you spawn dynasties of a useless privileged class who act like spoilt playboys and squander the success of their forebears. Like the pre-20th century, the difference between the landed class and the non-landed class quickly becomes absolute. Social mobility becomes impossible. Whether a worker is exploited and under-appreciated by employer A, or exploited and under-appreciated by employer B, is immaterial - he will never be able to make the jump to the lifestyle and social position of the capital-owning employers.
8. Orwell said...
Royston,
The question now is how do we redress this imbalance? We need to find a way to redress it that does not require direct re-distribution, which would necessitate higher taxes and a bigger role for government, and which we most certainly do not want!
Sorry much though I hate to admit my Marxist friend may be right... from each according to their means to each according to their needs...this usually ends in revolution. In 1905 there was the bread riot in Russia when the Czar opened fire on his own innocent subjects...then people not unlike you and I (a lawyer) thought the unthinkable could not happen and only 12 years later Lenin and Trotsky were drinking the Czars fine wines in the Kremlin.
Who would have thought it? Or, come to think of it that only in the later 1970's presumably because prices were rising so much faster than incomes, some union barons were saying that they could not contraoil their members? According to my friend, it is only ever the working classes (and that includes you and I even though I have a small business)) that hold themselves back!
9. mrmickey said...
Owning property in the 1970's was a good bet in that inflation was high but so were pay awards, a very large mortgage could be quickly slimmed down by your annual pay award of 10%. This is no longer the case with the crushing of the unions in the 80's and the effects of outsourcing and imigration the average working stiff has very little bargaining power when it comes to asking for a raise. As inflation kicks in those big mortgages will grind the middle classes to dust.
10. tipping point said...
Roston. The goal should be a fairer distribution of profits ie through pension funds. The problem is the corrupt practises of the financial institutions ensure that profits are channelled to the few. The solution to this would lie in simplification and tightening of financial regulations and heavier penalties for those that break them. This is what the government should be looking into.
11. Orwell said...
TP I am not sure that if you think that, you are just not understanding that according to my friend, this is normal behaviour for the financial institutions not greedy behaviour...one of the only ways to prevent it according to classical command control of a more planned economy is a publically owned central bank...and just as Hugo Chavas is withdrawing from the IMF it would seem the UK are at the height of their privatisation cycle...for now of course....