Friday, Sep 18, 2009
The can has just been kicked down the road
MoneyNews.COM: Whitney: Home Prices Could Drop 25 Percent
Video and summary - Bank analyst Meredith Whitney says home prices have another leg to drop, perhaps 25 percent.
“Fourth quarter, then you see another leg down,” she told CNBC.
"No bank underwrote a loan with 10 percent unemployment on the horizon," Whitney said.
"I think there is no doubt that home prices will go down dramatically from here, it's just a question of when."
Posted by mountain goat @ 04:21 PM (2037 views) Add Comment
27 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. will said...
and the UK housing correction is lagging the US.
2. 51ck-6-51x said...
Damn Will beat me once again. I was going to post, "...and that is Stateside!".
3. 51ck-6-51x said...
Whitney has a very good track record too.
4. techieman said...
Yes - 666 she does - respect to all those with the initials MW (even those that post here!).
5. fubar said...
I may be missing it but she doesn't actually say House Prices could drop another 25% in the piece, does she? Listened to it twice now and didn't catch any such number.
6. titaniccaptain said...
You lot do realise that there is another tidal wave of shiiit about to hit the housing market don't you?......
Expect an article on it next week...
That which was behind the bank of Mum and Dad is walking away.....seriously there might be a huge shift in this crash that without hyperinflation nothing will stop.....the price falls could get very steep.
Could be wrong but I have had a good run for 3 years at being Mr semi clever clogs without being actually that clever with the mechanics...so I hazard a guess that we are at a precipice Ladies and Gentlemen...from here on there be dragons....
DO NOT BUY A HOUSE YET!!!!
The real crash hasn't even started....
7. mystie010 said...
titaniccaptain I totally agree, I have no hard facts or figures to back up why I think prices are going to go into freefall but I've just got a feeling that they will. I remember an article not so long ago about how the banks were hanging onto repos to lessen the supply of housing. After keeping a close eye on my local estate agent I have recently noticed that the only properties coming onto the market are at the much higher end. If this happens around the country then this will skew asking prices, which in turn will paint a false picture. Also there are lots of these high end properties hanging around doing nothing. There's one I know of has been there for over two years. I seriously think that we are being 'played with' or maybe should I say we have been inadvertantly caught up in the game. A few weeks ago I was feeling quite depressed that prices were back on the up. But today I'm feeling strangely optimistic that they are going to be on the way back down sometime soon.
8. will said...
Tc
I totally agree. There are many who believe we are on the road to a recovery in the housing market. I owned during the 1989-96 crash, and yes houses really did fall 25%. During the 90's we had wage inflation, as well as high interest rates, so each year houses became more affordable. We have had no such wage inflation over the past few years , so prices must fall to meet the earnings. I don't think the estate agents or RICS are doing vendors any favours at this time. I have seen many homes remaining unsold on the market for several years now in Devon.
9. 51ck-6-51x said...
fubar
- yeah it seems to have been cut out!
here is a (poor) transcript. See the last Q.
Pretty sure it's real - the WSJ picked up on it too. She did not seem to say "25%", but here is a quote from the WSJ blog:
"""
“I think there is no doubt that home prices will go down dramatically from here, it’s just a question of when,” Ms. Whitney, known for accurately predicting troubles for Citigroup Inc., told CNBC Thursday.
"""
10. phdinbubbles said...
I'll make a dubious contribution to the debate based on examining the feelings in my guts: For the last couple of years I've been of the opinion that prices would fall over a few years with the greatest falls in the initial period. This would then be followed by stagnation and relative decreases due to inflation over a few more years - basically cos that's what kind of happened last time, so something similar would happen again this time but on a bigger scale because it's a bigger bubble. I always thought the dead cat bounce thing wouldn't happen in the housing market because of the slow moving nature of the beast and the overwhelming downward pressure from the fundamentals - well unemployment and reduced incomes combined with over-indebtedness mostly. However I was wrong, and it's become clear to me that either I'm completely barking mad or the majority of the people in this Country have turned into raving loonies when it comes to the wisdom of throwing everything you have at purchasing a house so as not to miss out when prices start rising again in the middle of a goddamn recession. The level of cheery, it’ll all be over by Christmas, denial in the UK seems to be rather high. For this reason, I'm changing my stance to imminent price adjustment alert.
The positive spin is dying a death - just look at the headlines from the last two days - soaring public sector borrowing & future spending cuts, energy bills unlikely to fall, mortgage lending and high street spending effectively stagnant - it'll get through to those optimists looking for signs of recovery - even smiling seems to have gone quiet. As soon as the HP indices turn negative then I think that portion of the BTL brigade that still have some equity and are clinging on in the hope of future price rises are going to run for the exit and the great sell off will begin. Of course I'm probably wrong - I've been predicting a HPC or fall since about 2002 - but maybe this time I'm right!
11. cynicalsoothsayer said...
If you've read the first chapter of the Housebuilders Bible by Mark Brinkley, he relates how in '89 the market went stagnant for months before crashing. He was a small housebuilder and went bust. Looks much like what's happening this time.
12. fubar said...
Cheers 666.
13. titaniccaptain said...
mystie010 , will, phdinbubbles......
There is alot to be said for gut instinct.....learning the difference between that and wishful thinking is a true lesson...but I also agree my gut as huge as it is is telling me we something is about to give....
The final nail in the coffin will be when the bank of Mum and Dad is no longer...........
I believe that outside cash rich parents equity release of the over 55s has been the primary source for deposits on houses...however as has been announced today by Newcastle Building Society (Yes I know its a comparatively small lender but one thing I learnt on here 2 years ago is that the banks have a herd mentality) many equity releases will cease to be....expect the final equity release vehicles to be withdrawn from other lenders following suit.
This means that there will also be more distressed sales by the over 55s to pay for future care etc...
And it sends a clear signal from lenders that SHOP IS SHUT and lenders really have no faith in the housing market....
I will expand on this in more detail in an article next week....
14. jackas said...
It is the unwinding of the biggest, most vulgar credit bubble in history. Any parent that is reinvesting in the ponzi scheme with profits from the ponzi scheme truly is a fantastic idiot.
tick tock
15. bystander said...
If HPC and the stock market are intertwined, does this mean there could also be a major correction in share prices again, the much discussed double dip, proving that this has been the longest and highest bear market rally ever?? Any thoughts.
16. techieman said...
bystander see mine in the summer mortgage thread today
17. gone-to-colombia said...
I totally agree with all stated above.
Could it be that the bigger the bubble the greater the pardigm shift required when it has clearly burst?
Therefore, the longer it takes to turn. But the greater will be the fall!
18. bystander said...
Thanks techieman. I have had a look at the earlier thread. Very interesting. I have felt myself getting sucked into this rally in shares, especially as I am earning sod all on any savings at present, but am concerned that my timing will be well off and be buying at the beginning of a major down-leg, as I have begun to see many articles advising buying before it's too late, just like they did before the HPC. I am waiting to see some 3rd quarter earnings before I commit, but have been looking at banks, Barclays looks too expensive at the moment and missed the bottom of that one, but Lloyds is a possibility, as the bank itself is/ was fundamentally sound, better than Barclays, RBS etc, but was forced to take responsibility for the basket case, HBOS. What are your thoughts?.......also is there plenty of room for growth in miners still and looked at some retailers? Sorry to bombard you with questions, but you appear to be very well informed in these matters.
19. bystander said...
techieman, I have just seen this article from the FT: http://www.ft.com/cms/s/0/7a9acfa2-a494-11de-92d4-00144feabdc0.html
This has chucked a few more vipers into the nest of decision making.
20. mdmick said...
So let me get this straight..
It is the gut feeling of people visiting a site named House Price Crash that ....
house prices are going to experience a sharp fall ? !!!!!!!!
Even in London? - where renting is really expensive and where it makes sense to have a mortgage?
My gut feeling is, apart from too many jalapeno peppers last night, yes.
Why? Anecdotal evidence of a perfectly good CV not leading to ANY phone calls -
compare with other years where the phone was ringing quite a lot.
There are people in London who want to pay a mortgage BUT
who can not get back to the salary that they used to have.
Are there a lot of these people? Yes, people who assumed they could persist in a high paying Finance industry but who now work full time, if they are lucky, for a wage that is not covering the mortgage, council tax, etc..
IF the finance sector turns around then these people will be saved. Otherwise, they have to rent out their homes [at unambitious prices] or sell their homes or hand back the keys - all of which put a downward pressure on house prices.
My other theory is that my CV has been attacked by a virus which word replaces 'liaise' with a rude word.
21. techieman said...
Bystander i went to bed not long after that post, so didn't see yours until this morning. I tried to look at the FT article but the site was down for maintenance.
So to your questions: generally you can ask me what you like and i will try to answer. However in some cases i cannot answer.
The premise of my method is that TA works best, i have found, when i close my mind to the news and concentrate on the - if you like shapes and patterns of the price charts. We also use volume as an indicator and breaks of certain trend or quasi trend lines (e.g. MACD) and momentum indicators.
My best advice is that the market will do all it can to take you out (or at least question) your position or view, even if your view proves ultimately right. We have all been stopped out of a bullish position at the low of a counter-trend move only to find if we had held on we would have made bundles. By the same token we have all ignored those stops that have been hit and have saved us money, because its all about human emotion.
I dont know what your personality is or your attitude to risk. Personally i am quite conservative believe it or not, to me (whether it turns out that way or not is another matter) the £/$ trade was more or less perfect. I calculated a bear market top at 1.70 with a possibility of 1.73. Rather than sell @ 1.70 i waited for "confirmation" or to be more accurate what i thought was confirmation. The high was on 5th August at the mid 1.70s, and the market went down to 1.61 - which was below bullish trendline support (according to my interpretation - and its all about interpretation). Now what to do?
Should i sell some and say well its going down and i dont want to miss the move? OR should i wait for a retracement? If a retracement how big should that be? If i had sold i would either have had to have had a huge 10 cent stop (too risky for me) or got in hoped for some follow through and then tried to lower my stop quickly.
Thinking about it sensibly and trying to take out the emotion, a move from the 1.30s to 1.70 isn't going to go straight down without indecision and people thinking the move off the 1.70 is a good place to buy to look for still higher prices.
[on the footsie that was my mindset re the 4800 level - when the market got to 4950 it had a couple of goes at that resistance and backed off. Lots of people where saying to me that was the high of the bear rally but i said no and thought that the market would come off and present a buying opportunity at 4800 (it came off from 4950 to 4775 and has rallied since).My target then was 5120-5150].
So now i look for a place to retrace on the £/$ (cable) and it gets up to the 1.6750 - just above an ideal fib retracement level. So now (after having been PATIENT - thats A VERY IMPORTANT POINT) the market makes a retracement target after the 1.61lows from the bear market rally retracement high of the 1.70s. (its a good idea to have a spot £/$ chart available to see what i mean).
At this point you have a secondary tradeable high to trade off - so now i look for some entry position, which will also "confirm" the trade, and hopefully wont go down too much so that the trade is difficult emotionally to embrace.
LUCKILY the day of the high is a Doji on the japanese candlestick charts (a doji indicates a change of the preceding trend). To be fair it could have been any technicall indicator for me to go short. I knew i wanted to go short so the challenge was to try to get in with minimal risk after some more confirmation. That suits my personality. If the market hadn't had the doji and carried higher then i would have probably still looked to get short unless the 1.70 high was broken. Of course it doesnt always work. You can miss the boat - which for me means i look at another market or for another lowish risk trade further down (if we get one). Or you can get stopped - which effectively means you are just plain wrong - the market is ALWAYS (when you are trading it) right.
So i am short @ 1.6570 - around 8am on Monday. My stop was at the tradable high of 1.6770 ish - so a two cent stop. What happened next ? Well some pain a high the following day of 1.6660. At that stage i was losing 1 cent. In years gone by i would have sold more to be honest but as i said these days i am more mellow. (or in this case stupid :-)). So we have some figures out re borrowing which were not as bad as some people thought and yet the £ finishes the week at around 1.6270 - i.e. 3 cents lower from my entry.
As for next week on Friday we broke an upward sloping bullish trendline, 20 day and 100 day moving average. On the weeklies we have a bearish engulfing pattern and a break of the 10 week moving average (these are technical indicators that some others like to trade). Therefore even IF we have a bit of upside early next week to suck out the shorts who got in friday (the RSI is quite low) then after that we SHOULD have some decent moves down. Of course there are no certainties.
Then another decision has to be made to move stops? take profits on some or all of the position? or add to the position?
Bystander i am trying to show you the kind of issues that are involved. Sometimes its difficult to pull the trigger (especially after a few losing trades). ITS a certainty you are always going to be wrong even when your analysis is right. For example- i should have added to my size when the market went a cent against me - i probably dont have enough size at the moment, whereas if it had been a loss then i would have had too much size.
If it seems like i am trying to make it sound like a gamble - i am - to highlight the issues involved.
Now, finally to get to your questions:
Looking to see 3rd quarter earnings before you commit seems a bit odd to my way of thinking - by the time you have waited its likely that the numbers will be good but already priced in, so that any announcement may result in some falls. I discussed this with UT the other day.
Buying before its too late? Eh? We have had a 50% gain - i have started on here 3 places to go long and i have said that my targets have been reached. For me its a case of looking for somewhere to go short. Now yes you could have some more upward moves - and i could be wrong but the risk/reward of going long was good @ 3950, good @ 4520 (after it had breached for the second time) but for me its bad where we are and will get even worse if we go higher.
Look at Dividend yields look at P/Es etc.
As for individual shares i dont look at those - so i couldnt say. B/wether has been pretty good on this so maybe he can give some input.
YEs - whether the market rises or falls there will be individual shares that will do well and those that do badly - a bit like comparing 4 bed houses with city centre flats - but in the stock market which is which? Miners / retailers - i have no idea either by sector or by share.
I am really not trying to discourage you - its really up to you - i am just saying to me (and i can only say what i think i have made many terrible calls over the years -some have not lost me any money though because of discipline and money management but some have cost me alot) most of the guests have gone and the party is winding down. Of course the guests that are left might find some new bottles of champagne! Its always a possibility.
Sorry to have rambled! If i were you and really wanted to buy some stuff - and you haven't before - use a spread bet firm and do small stakes.
22. techieman said...
mdmick - yes fair points. I have said on another thread yesterday that we shouldn't be bullish about being bearish until we have had 2 consecutive falls in the HP indexes. I stand by that. Now it may be that's a late call to be fair and if i owned somewhere now i would really not know what to do (assuming i didn't want to live there for the long term but was trying to maximise gains). TC says he will expand next week - i await with interest.
Right off to the weekend now!
23. titaniccaptain said...
@MdMick
"So let me get this straight..
It is the gut feeling of people visiting a site named House Price Crash that ....
house prices are going to experience a sharp fall ? !!!!!!!!".........Yes
Have a good weekend :)
P.S. I have a feeling in my water also that we are about to start seeing disasters on the scale of Lehman Brothers hitting the U.K. and it might start in the public sector where pay is about to run out........£16bn borrowing in one month???? the IMF and foreign investors (I read somewhere foreign investment fell by half last year) must be very very concerned.....
And if my guts and water is wrong....WHO CARES?....The only thing that is more inflated than the housing bubble is my ego.
But if I am right then all hail the Captain lol....
24. andy_boy said...
Up to a couple of weeks ago the economic reporting by the media was pretty much all positive (positive spin that is). However in the last couple of weeks the reporting has become increasingly more negative. Talk of double dip recession etc has been bounced around on this site for quite a long time, but in the last one to two weeks i have seen increasingly more reporting of double dip recession in mainstream media.
On top of this w shape recession reporting you then have the negative reporting on the public debt. To the average person, I suspect this will not mean to much at present as it remains just media reporting and nothing that has affected them at present. However this will change when this debt has to be reigned in (which all major parties are saying they will do if they win the election). It will mean something real to people when they lose their public sector jobs and can't find another job. No doubt tax will rise and this will be another hard blow to the economy.
The economy is in no position what so ever to withstand public sector jobs cuts and tax rises. The combination of these things will be a hammer blow to an economy thats already on its knees.
In respect of house prices, lenders are lending at sensible multiples of PROVEN incomes which means that the mortgages wont be availablre for purchase houses at the still inflated prices.
The major thing keeping the market going at present is cash rich investors, and there are only enough of them to keep the market afloat in the short term.
Everything is pointing to a another dip in prices, but i wondering if this wont really happen until the public sector debt is dealt with next year.
25. uncle tom said...
There are a few people on the other side of the pond who can see the potential of a fire sale - who realise that in many places, US house prices are already close to build cost, and that further falls would give them an opportunity to secure a bargain.
America has been there before - there were many who profited in the 30's from the forced sale of assets, and there is evidence that some of those in power actively encouraged liquidations so they could themselves clean up (Kennedy Snr comes to mind..)
Negative property VI's may start to get vocal..
26. bystander said...
Thank you techieman for your time and insightful reply. I too am conservative by disposition, which has made it nearly impossible to take many risks. This too feels like a risk and I am very grateful for your experience and knowledge. Thanks again. The link I included from the FT has been added as a thread on this forum by tpbeta.
27. bellwether said...
Bystander the last time I looked Meredith Whitney's only equity buy was Goldman Sachs. She justifies this by talking about how they will make huge amounts issuing muncipal bonds and the like, lack of competition with rivals having been liquidated etc but I suspect her point is that they are serious insiders, and in a politcally motivated market that is gold dust.