Wednesday, Nov 04, 2009
A confused housing market
The Economic Voice: A confused housing market
We seem to have reached an uneasy equilibrium between those that wish or need to sell and those that want and can afford to buy.
Posted by titaniccaptain @ 12:36 PM (1762 views) Add Comment
31 Comments
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1. cynicalsoothsayer said...
You assume that governments control the markets. They can have no more than a temporary influence.
2. titaniccaptain said...
No I don't but I didn't write the article.
Governments may not "Control the markets" but they certainly influence them and have had a huge impact on holding this housing market up. If there had been no interference by the government where do you think house prices would be?
3. crunchy said...
The people that control the governments control house prices.
How long is it going to take for some to work that one out.
Oh, I forgot that needs the capacity to see reality when it is produced on a plate..
4. cynicalsoothsayer said...
Ok. More "standoff" than "equilibrium" though. The article comment about FTBs in Scotland being entirely absent is probably down to the different house purchase system making house prices more sticky.
Like most here I think house prices would be a lot lower by now without government interference, but I don't think they can interfere indefinitely; they can't afford to. It is just a matter of when it all goes wrong.
5. growler said...
I'm with you TC. Without support - particularly price and quantity of credit - the HPC would be much higher. As the article implies, there is today a gulf between the seller and the buyer. In short, there is no real market. The interesting bit comes when this help is taken away. I think world economics will force the UK to move faster than the housing market would like - so I see a drop in houses a virtual certainty.
6. crunchy said...
13. crunchy said...11. brownsters_billions said...Not everyone is THAT stupid.
I remain out on that one. I think you have timed buying about right (in this late stage). I think in the future one will need around 80% cash if
not the total sum. For cash buyers and current homeowners this will not pose a future problem as long as they can afford interest rate
fluctuations/employment gaps. However, for the FTBer I feel it will be a case of finding the most stable and permanent place to rent.
I think that the banks, rather than selling on will slowly move into the renting of their property stock. This may be intergrated also with the
government or indepentent housing Assiocations. Why? There is too much money to be lost in a crash of any real magnitude.
This is global now. I will leave some other reasons out. If anybody does not like this that's just tough. It's my opinion.
7. cynicalsoothsayer said...
A firm must ensure that, whenever a property is repossessed (whether voluntarily or through legal action) and it administers the regulated mortgage contract in respect of that property, steps are taken to:
(1) market the property for sale as soon as possible; and
(2) obtain the best price that might reasonably be paid, taking account of factors such as market conditions as well as the continuing increase in the amount owed by the customer under the regulated mortgage contract.
So banks cannot rent out repossessed properties.
8. smugdog said...
A very confused HPC site full of extremely confused contributors!
9. cynicalsoothsayer said...
Not confused, just stymied and expectant.
10. crunchy said...
9. cynicalsoothsayer
If only your plight was that easy to overcome.
Money is more powerful than words on deaf ears.
11. growler said...
@8 - indeed.
If there were a huge drop so that banks really felt they'd be better of keeping property and renting it, then rents would plummet. If rents plummet, capital value will suffer.
Best is to leave well alone and protect the consumer from being bamboozeld into buying with bull###t loans from vested interests.
12. cynicalsoothsayer said...
I'm not in any plight, I just choose not to pay silly prices.
13. crunchy said...
11. growler
Disagree, there would not be huge drops if this was implimented. That may be a glue as to why the banks may take this option.
Housing assiocations have little trouble charging rents. yes, they do have debtors but they also have the option to evict if needed.
I can't see rents reducing. A tenent chooses the property he/she can afford. Horses for courses.
14. crunchy said...
7. cynicalsoothsayer
I did not say banks exclusively "Government" and housing agencies. I am sure they can be quiet creative as demonstrated to date.
15. ontheotherhand said...
Can we clarify this supply and demand thing? 55,000 sold last month and new listings were double that.
I think there are more buyers than 'urgent' sellers for want of a better phrase. Everyone else has seen it worthwhile hanging on over the summer and have ignored all the cheeky offers.
What will happen over the winter as the seasonal buyers hibernate, but 'urgent' sellers continue at the same rate? If it tips, then this specific supply and demand dynamic will drive the sentiment of the whole market and all of a sudden there is a hurry to sell again and the cheeky offers are accepted.
16. mark wadsworth said...
Crunchy "The people that control the governments control house prices."
And the people who control the govt are, by and large, the voters, and the voters are, by and large, Home-Owner-Ists, so they get what they want.
17. Charlie White said...
We are subsidising the banksters and the sellers. No QE? Prices would have fallen to a point where they reached their real equilibrium... and they would have STAYED there for quite a while.
We're constantly told there's a "critical housing shortage". That's why prices are so outrageous. Hmmmmm...... if so, why did prices fall around 25%? Was there suddenly a 25% decrease in the UK population? Swine flu killed off 25% of the population? A 25% drop in demand?
Or had housing been 25% over-valued?
Obviously it isn't about "market forces" or supply & demand. It's about public funds being used to artificially inflate a lethal, toxic, monster bubble, even bigger and more grotesque than before. The moment prices finally fell to a more realistic level, WHAM! The government re-inflated them via humungous injections of taxpayer QE that will take beyond forever to pay off. Within a few short months the huge bubble that led to the crash was back, bigger & badder than ever.
Look at countless articles from as recently as late spring. NOBODY predicted that house prices would rocket past their 2007 peak by October 2009, not even in the poshest parts of London. Many analysts predicted further falls, or a stagnant market bumping along till 2010 .... and then a slooooooooow rise.
The lightning re-inflation of the bubble is completely artificial, subsidised entirely by......."guess who". What happens when the bubble pops again? Perhaps with a bigger bang than last time?
Gearing the entire UK economy around ceaseless HPI is suicidal. QE should have gone into creating jobs, rebuilding the infrastructure, the NHS, transport, manufacturing, research, education and the future. I.e., encouraging a diverse economy instead of artificially propping up house prices (and providing whopping bankster bonuses). When will this madness stop?
18. crunchy said...
16. mark wadsworth
That's how it should work mark. Is it working like that now?
The banks are in control, well it looks they way to me.
19. mark wadsworth said...
Crunchy, there isn't a big conspiracy.
Sure, the banks are fraudsters and charlatans, but they only get away with it because of Home-Owner-Ism. Home-Owner-Ists need a price bubble - a price bubble needs a credit bubble - a credit bubble needs banks awash with cash - nobody else is lending to UK banks at the moment, so the government has to step in.
The banksters were getting bonuses of £5 billion a year or whatever (largely subject to tax & NI), an outrageous sum of money in objective terms but of little interest to me as I didn't own shares in banks so wasn't paying them (until now) BUT far more importantly, the Home-Owner-Ists were basking in the warm glow of annual tax-free property value increases (albeit on paper) of a couple of hundred billion.
If this country weren't run by politicians trying to chase the Home-Owner-Ist vote, and we had a sensible approach to house prices and liberalising planning laws and LVT and all the rest of it, then a) the banks would have not got into this mess so b) they wouldn't need bail-outs and c) even if they'd needed them, the govt would have told them to go bankrupt or do debt-for-equity swaps (which in practice is the same thing - see CIT Group).
20. greenshootsandleaves said...
smugdog@8 'A very confused HPC site full of extremely confused contributors!'
What is it they say, 'ask two analysts and you'll get two diametrically opposed views'? I'll take the apparent confusion on this site any day rather than the clear, monosyllabic and unvarying message from the vested interests ('Now is the right time to buy'). For all we know, they may well be just as confused at the BoE and inside the Cabinet (QE must have its detractors there too!), only it doesn't show.
21. phdinbubbles said...
smugsie, wisest is he who knows he knows not.
22. growler said...
Spot on MarkWadsworth. I think "homeownerism" is a word that is better placed in the OED than, say, "muppet" - although there is an idiomatic link
Frankly, if house prices are so vital to the economy, the BofE should be writing to explain any inflation over 2%p.a. just as everything else. Surely we have enough empirical evidence to show the dangers of uncontrolled HPI.
23. mark wadsworth said...
Growler, thanks, so far I'm the only person who says "Home-Owner-Ism" or "Home-Owner-Ist". I hope it catches on.
24. timmy t said...
MW@19 - reckon you just summarised the disastrous UK economic policy of the last 15 years in a couple hundred words!
Only thing I would change is "...basking in the warm glow of (and spending) annual tax-free property value increases..." If they hadn't MEW'd and spent it, we wouldn't have had the illusion of growth and wouldn't be needing to intervene to avoid horrific Nequity now.
25. cat and canary said...
blimey! lots of differing opinions on here! so i'll throw in my two-pennies too, for what's its worth:
What's the real government's motive for propping up house prices? Is it vested interest, for voter appeal, or to keep the banks solvent? I don't think the link between government's propping up the housing market and voter demand is as strong as Mark suggests, but it does exist for sure.
But voters are furious about bonuses, but has the government listened? Has the government listened to calls for tighter regulation? Surely labour realise they are bleeding votes due to their lack of bank regulatory policy. I think there is more to government policy than just winning votes due to house prices, ..enter the shady world of banking lobbyists etc. Its blindingly obvious how much this influences policy, due to the complete lack of banking regulation that's come out of all this. Problem for the govt now is the public have suddenly aware of the giant squid-like-elephant-monster in the room!
26. crunchy said...
Crunchy, there isn't a big conspiracy....Sure, the banks are fraudsters and charlatans............
Mark, there is no conspiracy. Bank robbers only got away with it because the cashiers and branch manager were in on the deal
and did not ring the police.
Sorry, don't buy it.
27. estrader said...
Surely we must be near the top of the "Back to normal" phase of the bubble curve..
I was wondering how long it would be before the banks offer yet another way of buying into this rally, BOMAD's have been sucked dry no doubt...
The latest ad from Lloyds (** Asterisk highlights added by me)
------------------------------------
Our preferred mortgage provider
We've made getting on the property ladder a little easier
We’ve made getting on the property ladder a little easier with our Lend a Hand mortgage – you only need a 5% cash deposit, plus the backing of **someone** who wants to help you onto the property ladder by **putting their savings up as additional security for the mortgage.**
------------------------------------
28. alan said...
The government policies are inflating a housing asset bubble. No confusion about that one.
There are questions as to how it will all end and varied options are suggested.
It looks like stagflation from my seat, but I'm open to other views. This government could push us towards bankruptcy - they are quite desparate. Finally, whoever wins the election will have a lot of cleaning up to do .......for years.
29. crunchy said...
I have always wanted to punk HPC.
OH THE SWEET GLORY!!
OH THE GLORY!!
ANARCHY~~~~~~~
I am an anti-christ
I am an anarchist
Don't know what I want but
I know how to get it
I wanna destroy the passer by cos I
I wanna BE anarchy!
No dogs body!
Anarchy for the U.K it's coming sometime and maybe
I give a wrong time stop a traffic line
your future dream is a shopping scheme
cos I, I wanna BE anarchy!
In the city
How many ways to get what you want
I use the best I use the rest
I use the enemy
I use anarchy cos I
I wanna BE anarchy!
THE ONLY WAY TO BE
LIKE A LOSING HPC.
Is this the M.P.L.A
Or is this the U.D.A
Or is this the H.P.C
I thought it was the U.K or just
another country
another council tenancy
I wanna be a hpc geek
and I wanna be anarchy
Know what I mean
And I wanna be anarchist!
Get PISSED DESTROY
THE HPC. repeat.....ALTOGETHER LADS.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
30. shining wit said...
I see the virtue of serious debate is not lost on a culture vulture like you crutchy.
Do you by chance go to football matches?
31. 51ck-6-51x said...
@1
cynicalsoothsayer said, "You assume that governments control the markets. They can have no more than a temporary influence."
- Well everything is "temporary"...
But that aside and more to the point, governments can, and do, distort markets for a long enough time to affect a mortal man, they do this via either, or a combination, of:
legislation such as embargo or enforced state monopoly; or
regulatory bodies ( which even though they are marketed as protecting the consumer usually serve the interests of the industry, especially once the regulatory body is, as seems necessary, composed by those with specific knowledge of the industry )
Some such distortions have been in place for a lifetime or more. Yes, temporary, but as good as permanent. Furthermore removing some such crutches or suppressants would now have such a big impact for some subsets of society that any attempt to are fiercely opposed ( look to things like farm subsidies and import restrictions ).