Friday, Oct 30, 2009
No quotes in this title. Even though it's based on contradicting sets of data
BBC 'News': House prices higher than year ago
I think I'm going to apply for the newly created position of chief statistician at the BBC Online new team. I can count, I can add up and most importantly I can tell the difference between selective interpretation of a data subset and a fact. Well, in the kingdom of the blind ...
Posted by paul @ 08:27 AM (1606 views) Add Comment
31 Comments
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1. brickormortis said...
It almost sounds like the world controllers are advocating that first time buyers pile into the housing market so that when prices rise, their meagre deposits will be wiped out in a sniff as prices fall back to sensible levels. Also, may I ask how rising house prices sit alongside an already stupidly high house price to earnings ratio in a collapsing economy with stagnant or falling wages and rising inflation (aback a devaluing currency)?
You know what I am thinking more and more. The masses of this country of learned nothing from this "crisis". They ahve not learned that high levels of debt are bad, reckless investing is bad, mathematical stupidity is bad, living in shoe boxes is bad and not marching on the streets when bankers award themselves massive bonujses at the expense of the tax payer is bad. We have not, moreover, learned the one important lesson - that proerty is not a one way bet. And the problem is that with lesson lesson unlearned (why should it have been, when the BoE and Government have sheilded the irresponsible from their actions), we are doomed to repeat the mistake and we are doomed to have multiple generations of people buying up property with every last penny they own, consigning us all to being held with our backs against the wall by future rises in interest rates which will come.
It's funny is it not that the worst financial crisis in living memory has not really had that much affect on most. I mean job losses are a sad thing but have masses lost their homes as a result. Not yet.
2. little professor said...
3. sparky300 said...
I am giving up on ever buying a house , these prices are crazy and still rising !
4. little professor said...
5. phdinbubbles said...
Aha - the second derivative at the stationary point is negative on the 3 month % change! Or it could be a blip.
6. Nowfedup said...
Agreed sparky300. Ive being on and off this site for over 3 years now in the hope of keeping positive and optimistic. But Im rapidly coming to the end of the road with all this. Looks like i'll just have to continue to line someone elses pockets with ott rents for evermore and consign this to been an unrealistic dream.
7. stillthinking said...
We will see next year what happens, and I don't think sustained house price increases will be part of the picture.
8. tyrellcorporation said...
Brickormortis. 'It's funny is it not that the worst financial crisis in living memory has not really had that much affect on most.'
Weird eh? When I wander around Exeter people are eating moules and drinking white wine in the street cafes. Conspicuous consumption continues unabated for a significant proportion of the population. Sure there are boarded up shop fronts but I can't help feeling that a large section of society is completely unaffected - in fact they've probably never been as well off with falling high st. prices, car purchase grants and record low mortgage repayments.
It really doesn't feel like the early 90's recession and yet this one is apparently much worse.
9. doomwatch said...
tyrellcorporation @7. They should enjoy those moules, every last drop, ahead of the big dead wood cull that will inevitably come
next year at the met office.
10. Davethebox said...
tyrellcorp @7
"...a large section of society is completely unaffected"
That's an intersting point. I was watching a documetary the other day about the 1930s (the tale of two Britains I think) and a similar thing happened. While most of the population were enjoying boom times, the industrialised areas were suffering - look at the Jarrow marches. Have we got another case of the divide widening between rich and poor?
11. cynicalsoothsayer said...
Statistics based on low transaction numbers are going to be more random and misleading.
12. magnaman said...
Have to agree about Exeter, I live here too but a friend of mine who is at County Hall tells me that on top of the 500 redundancies announced this week through "natural wastage" there will be more - today another 130 were announced - http://www.thisisexeter.co.uk/news/130-Devon-care-home-jobs-risk/article-1468694-detail/article.html
It baffles me too but I know of a few who have had there wages and hours cut by 20% which goes unreported. Having been in property most of my life I recall 1990 very well and you are right, things were different then. Much more noticeable. I suspect however, that quantitative easing is responsible and I do not believe Exeter will escape the the consequences. On the contrary, I believe, as happened in the 90's, that it will suffer more than most.
13. cyril said...
@tyrell - you're dead right. Where I live, people are having a great time because they're saving a packet on their mortgages.
14. mark wadsworth said...
@ Brickor "the world controllers are advocating that first time buyers pile into the housing market so that when prices rise, their meagre deposits will be wiped out in a sniff as prices fall back to sensible levels."
Correct. That's the most fundamental flaw in Home-Owner-Ism, that prices can only go up - but there has to be a guarantee that deposits aren't wiped out, so we end up with a ratchet:
Home-Owner-Ists love "the free markets" when prices are rising (housing is the most regulated and restricted market of all, but you can still have a "free market" in monopoly rights, in the same way as London taxi driver's licences are traded on the grey market). But when prices are falling, all of a sudden the "free market" ideology goes out of the window and we have to "protect people from the spectre of repossession" and "prevent people falling into negative equity" and "get credit flowing again" and "help hard pressed homeowners" and "help first time buyers onto the ladder" and so on.
So prices rise in the good times of their own accord and in the bad times, prices have to be propped up artificially.
The whole aim of all my little campaigns, like replacing as many taxes as possible with Land Value Tax; liberalising planning laws; and scrapping Housing Benefit for private landlords and using the money to build more social housing are diametrically opposed to Home-Owner-Ism; they are for the benefit of the economy as a whole and people's living standards as a whole - and to keep house prices low and stable. But people don't WANT low and stable house prices, they want them to go up every year.
Apart from banks, it is a mystery to me who expects to benefit from ever rising house prices. Cynics like me benefit from booms and busts (having sold all my investment properties and sold to rent) but even the cynics are getting steam-rollered by the Home-Owner-Ists.
15. letthemfall said...
It is an unexpected situation but feels like a phoney recovery. Ironically it would appear that the scale of the crisis, the record levels of debt, thus forcing the action we've seen from central banks, has held the economy on a ledge. If the crunch had been less severe, as in the late 80s, house prices may have fallen continuously. Now, along with the banks, prices are being supported as debtholders are supported by central policy. This obviously cannot continue indefinitely. The question is how long will it.
16. tyrellcorporation said...
@ Magnaman.
I really think the difference this time is that in the 90's house prices and speculators were throttled by high interest rates as we battled to protect sterling. With rates at 0.5% even the most stupidly reckless dimwit speculator has been bailed out and a repo avoided. Rising inventories (see US) destroy house prices and with this in mind GB has been very pro-active.
1/ Pressuring state owned banks to hold off repo proceedings
2/ Destroying the incentive to hold cash/savings - people trying to find a safe-haven for their cash.
3/ Tinkering with stamp duty
4/ QE - printy, printy to flood the economy with free money
5/ Decimating Sterling to encourage foreign property speculators.
6/ Decimating Sterling to prevent emigration with said cash - lifeboats have been burnt!
7/ Various daft shared ownership schemes.
8/ Various daft bank buy-back-and-rent schemes
etc, etc...
He's also been extremely lucky with the restricted supply phenomenon. All the talk of green shoots had the effect of persuading potential sellers to hold on for the boom-time to return. This has restricted supply and forced prices up.
All in all a job well done for GB and his cohorts but IMO they've run out of fingers for the holes in the dyke.
As soon as the public sector start to shed jobs I think the next down phase will start. God only knows what the economic landscape will look like post-election.
17. Duncanio said...
It's ALL ABOUT SUPPLY.
Look at the number of properties for sale - and more importantly the quality of houses on sale. Use propertysnake to see how long some of these properties have actually been on the market.
What will happen now is all the sellers who held off putting their house on the market last year will now take this as a sign to sell, in addition to this there will be all those who are going to put their house on next year anyway.
With the addition of the traditional 'winter market' where buyers are thin on the ground, I expect this winter will start the turn and create the conditions for a 'long, slow downturn' that's inevitable.
Hold on FTB's, your time will come soon.
Don't forget that the banks are holding back on reposessing at the moment in order that they don't flood the market and 'look bad' for kicking people out of their homes - this is also helping hold up prices to the artifical levels we're seeing.
Existing mortgage holders are not extending further - but are paying back their debts as fast as possible in expectation of the rate rises which will come as the Government's 'credit score' deteriorates. There is very little appetite for borrowing at the moment and quite rightly too - clearly the public are not as stupid as Government.
I also expect the building companies to start getting into serious trouble, at auction I am already seeing many new builds coming on the market for a fraction off their original selling price. Some are repo'd BTL's but some are the builder getting rid of original stock at a knock down price. There is a townhouse opposite me which is being sold at 30% below the market price 2 years ago - at the peak they were being sold for 1.2 million and now the property is up for 600k - the funniest thing is this is a BTL property (as it's got sitting tennants) - which indicates to me that the Landlord must be in real trouble as the current rent is way above the cost of mortgaging such a property - i.e. he's gone bust.
The best advice I can give is start saving up your deposit, you will need a big one to secure a good deal on the interest rate - don't be tempted to go into the market at the moment, FTB's need to 'pull down' the price levels to what they can reasonably afford. If you can get on the auction catalogue lists and get some idea of the 'bottom end' of the market so you can make a better judgement on what estate agent properties are realy worth.
Also, important to remember that estate agents will always say the market is picking up - it's their job to encourage sales regardless of any sound basis for the argument.
18. crunchy said...
Ring, ring, round 51.
When will it end?
19. tyrellcorporation said...
I think someone on the site mentioned the other day how the 90's housing crash is burned onto the Labour psyche as 'the government killer' and I think their obsession with this sector is the main reason we're one of the few G20 nations still in a recession. Their collective myopia means they can only focus on saving the housing market.
20. stillthinking said...
http://www.telegraph.co.uk/finance/financetopics/recession/uk-recession-telegraph-tour/5570464/Tourism-takes-the-edge-off-Exeters-recession.html
40% state spending is barely half of it. But at the same time, good for exeter, why not. Also,
http://admin.exeter.ac.uk/academic/planning/Student_factsandfigures.shtml
15000 students in a town of 120,000 might not sound like an enormous economic boost, but these are the "nice but dim" wealthy parent offspring who failed Oxbridge, spending but not part of the workers (aka "townies").
I don't think Exeter is a good typical example for the UK. Very nice place also, again unlike the UK.
21. ontheotherhand said...
Enough of the 'lack of supply' nonsense. Rightmove has "around 90% of all properties for sale" and this month saw 94,629 newly listed asking prices, so 100% on new listings is 105,143. Mortgage approvals are running at 55,000 per month.
22. mark wadsworth said...
@ Tyrrell 14 and 16, "Their collective myopia means they can only focus on saving the housing market."
You have deftly summarised Home-Owner-Ism. BTW, it is not "their" collective myopia, it is "most voters" collective myopia! That's what voters want and that's what politicians (of whichever party) have to offer. If voters really wanted low and stable house prices, larger houses, more social housing, I am sure the parties would be competing to make sure that happened.
23. shipbuilder said...
We all know this already but somehow the article posted the other day from Bill Gross really resonated with me. US and UK GDP is dependant on the paper economy, not the 'real' economy and has been since the 80s. Hence to prop up GDP and produce 'growth', all asset prices must be propped up at any cost. In such a situation, rather than being incompetence or conspiracy, all government policies so far are simply logic, from the point of view of producing economic growth. Lending to small businesses, in such a situation, then becomes less important than propping up house prices.
So why has this happened? In my opinion, why bother building a factory and buying machinery to achieve a meagre profit margin only to be subject to a drop in consumer demand, when huge profits, backed by the government in a recession, can be made in the paper economy?
I remember a senior manager in a manufacturing company I worked for coming back from a business function with stories of other managers from the service sector laughing at manufacturing profit margins. Needles to say that the biggest profit in any year was from the finance division. Didn't Porsche's speculative ventures dwarf their profits from cars recently?
24. phdinbubbles said...
I know it might sound like clutching at straws, but it's by far the lowest monthly increase in the Nationwide's monthly figures in six months and that three months on three months plot from LP @4 definietly to me looks like it's turning downwards - this rally's run out of steam imho. TIme to sit back and watch the next leg down. There's a lot of wishful thinking that I'm coming across amongst people that prices are rising again. It'll turn to despair fairly soon.
@ontheotherhand
The supply of houses on the market is at fairly normal levels. Isn't it just that the asking prices are too high to support normal levels of sales, so few are selling and the time on the market is higher than normal?
25. tyrellcorporation said...
@ Stillthinking.
You're right, Exeter is in no way representative of the UK as a whole and I hazard a guess it's like Mad Max in some deprived areas of Northern England. Never before has the country been so divided.
26. wally said...
@ontheotherhand
just checked out Rightmove using my usual criteria for searching on where I want ot buy. There are more properties available as you say, and I think (as I have not looked for a while) that it is largely new builds that are being added to the listings.
27. mander said...
UK is missing on the global picture here. Inflating house prices as a way of living results in loosing economic competitiveness to other countries, especially to Asia and for this reason the rest of the world stopped supporting house price inflation. UK houses are double if you take like for like with any house in other developed country and falls have not been allowed here either. Going back to the global picture we cannot become competitive in this picture by devaluing the pound so it would be devaluing the house price for a full activity in the market and for a future healthy housing market.
28. 51ck-6-51x said...
Shipbuilder said, "Didn't Porsche's speculative ventures dwarf their profits from cars recently?"
- Kind of.
When Porsche took advantage of a consequence of their financial position it did indeed far far outweigh their production profits.
The position they had was not /really/ speculative, although one could debate as to whether they aimed to do exactly what they did through some insider knowledge of the positions of hedge funds.
They had their sights on VW as a part of their business aim of acquiring a company with a broader set of technologies, to escape being a niche sports car company, which their board had decided could be the death of them as hybrid technologies became mainstream.
The "consequence" I mentioned is that upon learning of Porsche's position in VW ( 42.6 percent of outstanding stock and cash-settled options on another 31.5 percent ) many hedge funds that had been speculating over VW's share price ( betting it would go down ) were placed in a short squeeze, forcing a meteorological rise in VW's share price as they fought each other over reducing their short exposure. Porsche then took advantage of this situation by exercising a minority of their call options - this made sense as the options they held as a hedge against a rise in the shares they were accumulating went far into the money and if VW's price remained elevated Porsche would need more capital to continue accumulating shares, their stated aim. Porsche has continued to purchase VW shares since, aiming for a 75% stake. What made all of that possible in reality is the VW Law of 1960. The fact that Porsche have been fighting the act for many years seems to back up their claims too. Extensive analysis is available on the net.
29. timmy t said...
Anyone else look at the first graph from LP@4 and instantly think of the lifecycle of a bubble graph that we all know and love so dearly?
30. Basil Bell said...
This site seems about as up to date as www.michaeljacksontourtickets.com its old news!! the "crash" has been and gone, sorry! If you hang on long enough, and I know you leader Johnny will want you to, there will be another one along in time.
Over and out!
31. 51ck-6-51x said...
timmy t,
Look @ the top right graph and note how the real trend acted as a resistance to downward momentum last time around too. Very different circumstances, very different feel, but...