Saturday, Feb 16, 2008
Fair do's. Well done Assetz.
Assetz: Winner of 2007 house price prediction
Based on official DCLG, Assetz were the most accurate of all major forecasters, predicting growth of 8-10% in 2007 against the eventual 9.1% rise.
Cue lots of self-congratulations by Ztuart Lawz.
"All I can say is consider buying now whilst the opportunities exist and sentiment is negative enough (whether you are an investor or a first-time buyer) as you won't see these price opportunities around later in the year"
Assetz predicts growth of 5% in 2008.
Posted by little professor @ 08:06 PM (898 views) Add Comment
14 Comments
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1. little professor said...
God, it sticks in my throat to say it, but he got it right. Other sites confirm it:
http://www.citywire.co.uk/Blogs/Entry.aspx?VersionID=101079&re=2480&ea=23630
http://www.theratandmouse.co.uk/weblog/archives/2008/02/market_report_o.html
And the predictions for 2008:
2. crash bandicoot said...
An easy mistake to make is to let what you want to happen influence your predictions. We have been a little guilty of this to a certain extent (although we are in it for the long term). It will be Stuart's turn next.
3. Driver said...
Anyone can get lucky - just look at some of the lottery winners.
4. new user 2007 said...
Getting a forecast right can happen. I was not convinced about a crash until the second half of 2006, even though many have said there would be one since 2003.
Does that mean my thinking was in line with that of Mr ASSetz? It was, but for different reasons. He was most bullish and the market had one last surge before beginning to die.
http://uk.biz.yahoo.com/21092006/389/higher-rates-trigger-market-slowdown.html
"And Assetz, another house price monitor, is standing by its original prediction of 5 - 7% growth by the end of 2006, followed by an average of 5% growth per annum over the next three years.
It believes that the imbalance between supply of and demand for housing, and the overall lack of property on the market, will mean that prices continue to rise regardless of rate movements.
Stuart Law at Assetz said: "Homeowners can expect to experience continued positive growth for the foreseeable future. A further interest rate rise, however, would deliver inflation by shocking the consumer into demanding higher wages, causing price growth and creating inflation."
This was what he was saying in September 2006. The fundamentals he mentoned did not change by the time he did his 9.1% forecast, so what made that happen?
When did he make his 9% forecast? And what have his previous forecasts been compared with what actually happened?
Getting lucky deserves no credit. He already has an ego backed up by nothing, so lets not give credit where it is not due. Even a donkey flies (temporarily) when it is thrown out of a plane.
p.s. "A further interest rate rise, however, would deliver inflation by shocking the consumer into demanding higher wages, causing price growth and creating inflation."
This sums up his dodgy economics better than I have managed to say. I am not sure what planet this economic theory is from, but it not Earth. So interest rates actually work to raise inflation. The link could not get any more thin...as ever, the truh is twisted to sound reasonable but is actually ridiculous.
5. Stuart Law said...
We seem to have rather a lot of traffic on our website at present coming from this site so I thought I would come over and have a look.
New user - take a look at my blog for a full history of our predictions. Many say that forecasting is a mug's game as you will get some or even many predictions wrong but we do it in order to try to guide people to what we truly believe will really happen based upon analysis of fundamentals (and sentiment) so we are happy to put our reputation on the line and leave it in print. You'll find there is a rather high correlation to the actual outcomes.
As for the interest-rate rise actually causing rising inflation rather than falling inflation comment, this was made as a time when this was genuinely what was happening. It is not a 100% inelastic relationship between interest rates and inflation - a further modest growth in interest rates would indeed have significantly driven up consumer wage demands and could have pushed up inflation in the short term rather than held it back - for once this was a view agreed with by a number of commentators at the time. Of course massive interest rate rises would eventually have effect on inflation and a lot of other things for that matter. The sad fact is that interest rates are nothing but an extremely blunt tool for controlling inflation in today's world.
My forecast of 8% to 10% growth for 2007 was made in December 2006.
Basic fundamentals of supply and demand are all well and good but forecasts come from more detailed and up-to-the-minute interpretation of many factors and entering 2007 was clearly a lot stronger than entering 2006 hence our higher forecast - I do agree that if you read the house price crash forum you wouldn't have agreed the situation for house prices was better in 2007 but in truth the fundamentals said that it was.
As I have commented in the past, if you want prices to drop substantially by 35% in a housing crash there is a very low likelihood outcome of this, if you want to buy a property at 35% off or more than just pop down to an auction and buy a repossession or distressed sale. What's stopping everybody as this situation won't last forever.
6. Stuart Law said...
**updated comment, replaces previous unapproved posts**
We seem to have rather a lot of traffic on our website at present coming from this site so I thought I would come over and have a look.
New user - take a look at my blog for a full history of our predictions. Many say that forecasting is a mug's game as you will get some or even many predictions wrong but we do it in order to try to guide people to what we truly believe will really happen based upon analysis of fundamentals (and sentiment) so we are happy to put our reputation on the line and leave it in print. You'll find there is a rather high correlation to the actual outcomes.
As for the potential interest-rate rise referred to in a previous comment actually causing rising inflation rather than falling inflation, this was made as a time when this was genuinely what was appearing to happen. It is not a 100% inelastic relationship between interest rates and inflation as some economists in the press are commenting at present but neither is it the obvious 100% elastic relationship - a further modest growth in interest rates would indeed have significantly driven up consumer wage demands at that time and could have pushed up inflation in the short term rather than held it back - for once this was a view agreed with by a number of commentators at the time. Of course massive interest rate rises would eventually have had a downward effect on inflation and on a lot of other things for that matter. The sad fact is that interest rates are nothing but an extremely blunt tool for controlling inflation in today's world.
My forecast of 8% to 10% growth for 2007 was made in December 2006.
Basic fundamentals of supply and demand are all well and good but our forecasts come from more detailed and up-to-the-minute interpretation of many factors and entering 2007 the house market was clearly a lot stronger than entering 2006 hence our higher forecast for that year on apparently the same fundamentals - I do agree that if you read the house price crash forum back then you wouldn't have agreed the situation for house prices was better in 2007 but in truth the fundamentals including general sentiment, house price trends and interest rates said that it was.
As I have commented in the past, if you want prices to drop substantially by 35% in a housing crash there is a very low likelihood outcome of this, if you want to buy a property at 35% off or more from original asking price then just pop down to an auction and buy a repossession or distressed sale. What's stopping everybody (other than very limited numbers of repossessions) as this situation won't last forever.
7. Letthemfall said...
Well, just as they say predictors of price falls will be right at some time, so with the predictors of prices rises. The difference in this case is that this character will be predicting rises until he goes out of business, then maybe beyond.
All this is just plucking numbers out of the air. What no one tries to explain is where the money will come from to support prices. If there is one solid law in economics and prices it is reversion to the mean. Predicting exactly when this will happen after a boom is not possible; however, one can say it will happen. None of these VIs ever pause to think of the consequences of permanently inflated house prices, assuming it is even possible - a permanent distortion to the wealth of the country with large amounts of capital inactive. The logic of substantial price falls is compelling. In the meantime the VIs will never stop talking price rises, just the same as in 1990.
8. it_is_going_with_a_bang said...
By his reasoning everyone should set their base rates to 0% and then we'll have no inflation.....
His prediction said nothing of the real events of 2007 and the reasons behind the house price changes.
So he came up with a figure and was right - he rolled a dice. That's about it.
As for telling everyone to buy now or they will miss an opportunity ... when has ever not said that?
9. converted lurker said...
LOL this is outstanding, very important that you don't over rate the assetz prediction, they take all the usual surveys; HBOS, Nationwide, Rightmove etc, mix them up and come up with an average for monthly house price data. That is exactly the formula they used for their prediction, looked at all the others' predictions and came up with an average ...you've been had they actually forecasted nothing...simply took an average of everyone elses, statistically this would always put them in front, barring a seismic change.
10. quiet guy said...
One of the more cutting criticisms of this site I can recall is that 'even a stopped clock is right twice a day' i.e. if we keep calling a property crash long enough, we will eventually be proved correct. Mr Law has been relentlessly positive on the crest of one of the biggest asset bubbles in history. He simply says isn't this great - property prices will rise forever. We say look at money supply, IVAs, indebtedness, market in US and Spain ...
It's easy to look good in a bubble and hard to go against the flow. Jonathon Davis got some stick for calling the peak in 2005, along with many others. As far as I'm concerned, those who called the market in 2005 underestimated the greed and stupidity of the buyers and sellers. Perhaps sometimes being wrong isn't so bad?
In Assetz Speak:
"There are modest numbers of great buys at auctions where you can buy at prices similar to a couple of years ago - unfortunately the volume is not very high and, contrary to press comment, we don't expect repossessions to grow significantly in the future either once the market firms up and interest rates continue to fall. Make hay whilst the sun shines and take advantage of some remarkably good prices around."
Downplay the news about rising levels of repossession and auction. Talk up the effects of lowering interest rates (somewhat dubious but let's not digress).
I'd love to know if Mr Law really believes his sales pitch or is he just a hardened cynic waiting to relieve some more suckers of their cash?
11. denzil said...
converted lurker said:
>>HBOS, Nationwide, Rightmove etc, mix them up and come up with an average for monthly house price data.
I've little time for Assetz and believe they are well off the mark for their predicion this year. but to give them credit I really cannot see the correlation between you comment above and their prediction. Just working it out in my head suggests the average is significantly lower than their actual prediction.
12. new user 2007 said...
He does not care which direction the market goes now methinks. He has already fleeced the money of most people able or stupid enough to enter the BTL pyramid scheme. The issue for him is about being proved right? I agree with converter that he usually does just average, but with Denzil that he cannot have averaged this time.
As I said above, he was quoted as saying growth in 2007 would be 5% in September 2006. When was the new forecast done? What fundamentals changed to result in the 9% number? And was this the first year they did this forecasting award?
He is just bullish for his own purposes and as he is a VI "hay whilst the sun shines and take advantage of some remarkably good prices around"...the only people I have heard speaking like this have been on top of pyramid schemes or selling get quick seminars costing huge amounts of money to attend.
Of course some people have made money along the way, pyramid schemes can go on for a while and a rising sea lifts all boats. But that is about it really. The mugs are the ones who think his interest rate causing inflation thory sounds plausible. Sadly, get enough of them and we have a self-fulfilling prophesy.
13. new user 2007 said...
Stuart Law.
I had no opinion either way until 2006...I thought it was getting overpriced as early as 2004-05, but could also see why the market could carry on going up. However, the price rises in 2006 and 2007 have no connection with fundamentals in anyway and nothing sustained that other than stupidity.
In Econometrics one would look at certain variables and run regressions. Removing one simple variable, BTL, out of the model leaves prices in the FTB market considerably lower than they are now. That group has therefore knocked another group out and mispriced the market.
They have mispriced by having access to more funds (paying too much) from their own equity and as liquidity had rocketed. The issue therefore goes back to liquidity and them. This was not driven by a shortage...greed and bad advice (although the self-fulfilling prophesy indeed worked for many temporarily)..
There are no people asleep in the streets and most who live in substandard housing could not afford to buy the new stock even if it was built. I would give the advice that prices will be dictated by silly multiples and sentiment. If the former is not forthcoming the latter will finally collapse. Hence my gloomy belief.
I have looked at the fundamentals and cannot agree with prices growing into infinity. I have moved from suspicious over the housing market to very pessimistic over the last two years. Meanwhile watching idiots take on ever more amounts of debt because they believe VIs, who have their own interests at heart.
Everyone gets lucky with forecasts sometimes. But markets turn. They always do when the party is over. If one looks at cross-sectional data (other countries) or time series data (us) the same VI optimism has been evident, until it goes wrong BUT by then they are rich so they do not care about who is left paying.
My forecast remains no month on month changes (on average) over the next 6 months and then small year on year falls toward the end. Of course, if the credit problems suddenly fix themselves I have no doubt I will be proved wrong, but I will not accept it is being driven by fundamentals, just more stupidity.
But my assumption is that the credit issue has just started, not approaching the end. With regards to the new interest rate theory. There has been no wage pricing power for several years..one of the reasons inflation remained (relatively) low. There was wage bargaining power in 2005.
Just more subjective theory. The RPI index used for wage bargaining (where it does exist) excludes mortgage payments so that has not had the power to aid such bargaining. The govt is fairly good at tweaking reality/prices too....the best tool for controlling inflation is to change the goal posts.
I am looking at low inflation not eating up debt or allowing wage growth. Spending and house purchases have therefore come from debt. That is the most unsustainable economic model around. What will the cause and effect be this time? Recession to falling house prices or the other way around.
14. new user 2007 said...
There was NO wage bargaining power in 2005.