Wednesday, Mar 18, 2009
O Rly?
Guardian: Larry Elliott: The case for green shoots are stronger in the UK than the US
"If anything, the case for green shoots is easier to make in the UK. The latest report from the Royal Institution of Chartered Surveyors showed that people were starting to window shop for property even if they are not yet ready to commit themselves to take out a mortgage (if they can get one). Spending in the shops has held up well. Unless this really is the final collapse of capitalism, the stimulus package will eventually work. And it will work all the sooner if we occasionally remind ourselves that even after the darkest night the sun comes up in the morning."
[Footnote: Larry Elliott co-wrote the 2007 book 'Fantasy Island' which accurately depicted Blair's Britain as a credit-junkie nation. I'm surprised to see him change his tune so soon.]
11 Comments
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1. drewster said...
Unemployment has a long way up to go. That's when people will really start feeling the pain of recession.
I don't think this is "the final collapse of capitalism", but nor is it a green shoot of recovery. Whereas America's economy seems to be mirroring Japan's lost decade, Britain is following in Argentina's footsteps (or even Iceland's). Our housing market remains highly overvalued and consumers are indebted up to the eyeballs. Our corporate sector is weighed down with debt taken on at the peak of the bubble, with negative consequences for both employment and profitability. This leads to a shortfall in tax revenues which, together with the bailout spending, is causing public debt to balloon. The total debt (public and private) will dissuade investors from buying gilts, especially as the BoE has demonstrated a willingness to inflate away the debt. Additionally many investors (domestic and overseas) have problems of their own and are investing less this year. Britain could yet easily go the way of Iceland.
2. sold out said...
I have started to look at houses in estate agent windows, just to have a laugh at the silly asking prices.
I have absolutely no intention of buying this year.
I do not believe there are any green shoots,only in the minds of VI's, but if their genuinely are they will be rapidly stamped out by the rising unemployment figures.IMO
3. Sybil13 said...
Oh please, " that even after the darkest night the sun comes up in the morning.. There is nothing wrong with positive thinking, and I have to admit it is hard in the face of what we are facing to feel "positive" but there is no point in pretending either. Property prices are about to fall 40 - 50% to make mortgages affordable not just to those that borrow but to those that lend. The country hasn't even begun to come to understand that things are not EVER going back to where they were in 2007 with irresponsible lending fueling an inflated property market that was about to break the banks and bankrupt the UK. 6 million people are going to have to wake up to the FACT that they are going to be in tens of thousands of pounds of negative equity for several decades, as property prices once they have fallen will only rise in line with wages. (They should have taken 40 years to go up 190% in line with wages, not a decade). I think we have a way to go before many will wake up an feel the darkest night is over, but that is no reason not to see the sum coming up in the morning, but let's not pretend is OVER .
4. growler said...
The silly fool does not realise that trying to talk up a dead donkey will only mean people lose credibility in the Really Irrelevant Consulting Society
5. uncle tom said...
Don't underestimate the yanks - nothing inspires them more than the pioneer spirit of their forefathers.
Their house prices did not get anything like as inflated as ours, and their real estate market appears to be slumping rather than crashing, and is probably close to bottoming out now.
I don't expect a sudden economic recovery in the US, and do expect further job losses, but by the end of the year their economy and house prices will probably be flat-lining, with a few, sickly, green shoots here and there..
Unlike the UK, I don't expect US house prices to greatly over-correct in general, although that may happen in some areas that have been particularly badly hit by the downturn.
6. Vindicated said...
Uncle Tom. I tend to agree with you and agree with the comment that some areas were hit worse. Florida in particular has been hammered by it (likely due to the vast number of vacation lets) and we have seen property prices collapse from highs of around $250k at the peak in 2006 to around $140k now.
As an ex owner in the States, I've been watching the market very very closely and I believe that we might reach the bottom in 2009 but that it will bump along there for a while longer.
7. cyril said...
In my view we are in the early stages of decline. The herd instinct of the general house-buying public means that trends take a while to establish, and in my view, people haven't yet fully cottoned on to the fact that houses are going down. But they will recover in 5-10 years I expect.
8. drewster said...
uncle tom, vindicated,
Actually things were pretty bad in the states. In the areas where construction is limited by geography or planning (e.g. New York, San Francisco) prices went through the roof. However in unrestricted areas such as Texas, Arizona, and Nevada, the prices went just as high because the builders added expensive options like marble staircases, granite kitchens, and swimming pools, and the square-footage increased dramatically. (Personally I think the buyers in the sticks got the better deal!)
In terms of declines, the following table from Mish is useful. It shows price data as of December 2008. Note that inland cities (Phoenix, Las Vegas) have fallen as much as coastal cities (San Francisco, Miami).
9. drewster said...
Sorry, the table isn't showing. Take a look at Mish's original post - it's the second-last table which is of interest (Case-Shiller Declines Since Peak Current Data). Mish's: Case Shiller and CAR [California Association of Realtors] Analysis February 2009 Release
10. japanese uncle said...
drewster
This picture of 'O RLY Bird or Owl?' is very funny indeed.
A new entry to COD:
greenshooter: noun, Person to be engaged in an exercise of propaganda with the particular purpose to promote/ferment/organize a collective illusion about economic recovery.
11. george monsoon said...
Japanese uncle - post 10
You pre-empted me with the greenshoot definition. I was going to look on t'interweb to find out what this "buzzword" actually means.
I prefer your observations around its meaning.. ;O)