Wednesday, Jun 30, 2010
Cowie has been reading our blog
The Daily Telegraph: Why house prices must fall by 28 per cent
Fall by 28%? and then some. Cowie comes up with this number as necessary to return first time buyers' price/earnings ratio to 3.3 which is the trend over the last 25 years. However, most models of bubbles say that the multiples must fall back to levels seen before the present bubble started. Clearly the last 25 years includes 1996 - 2007.
Posted by ontheotherhand @ 12:50 PM (2289 views) Add Comment
14 Comments
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1. mark wadsworth said...
Excellent, especially nice to read in this in one of the most Home-Owner-Ist of newspapers.
2. doomwatch said...
I know you won't like this, but I just don't see prices falling this far. I think that 1st time buyers will just have
to get used to saving a 30% deposit. The "I want it now" generation will no longer enjoy >90 LTVs.
I'd say an average 20% drop tops in the dodge BLT bubble areas like Salford, Barking, Streatham, Liverpool, but
the rest of the quality NINBY rule places will be relatively flat, with some +/- 5% volatility tops.
3. sceneclub68 said...
MW: I agree. Is it just me, or has there been a change of tone across the MSM this week? May well be temporary of course, with a return to Anne Ashworth/David Smith spouting drivel next week (chances are they are doing it this week, in fact, but as I'm never going to pay for the online Times I will never know).
Re Captcha: we[']re poorer. Sounds like a comment on the results of house price inflation.
4. bluebeach said...
not another prediction of a substantial drop..... it happens every time..... we've had gigantic shock waves so far that have failed to unhinge the market..... just what's going to happen to now to make this happen..... nothing I tell you....nothing..
Just as Doom says above ......+/- 5% tops..... do get real please........
5. hpwatcher said...
..... nothing I tell you....nothing
Only inflation in other sectors. That way the governments hands will be tied and they will need to raise interest rates.
6. happy mondays said...
Dripping tap, bluebeach, be patient & get on with the rest of your life, whilst waiting..
7. mark wadsworth said...
Cheerfully rising to Bluebeach's bait:
What if the government expects the banks to stick to the agreed repayment schedule for that £300 billion plus bail out? Sure, the Tories are the Blue Wing of the Home-Owner-Ist Party, so they will probably extend and pretend, but without an infusion of at least £100 billion of taxpayers' cash every year, there is no way that a credit-fuelled house price bubble can be sustained. Remember always that the extra £100 billion the government has to borrow or raise in taxes from the productive economy leads us further towards the Home-Owner-Ist death spiral (i.e. interest rates will rise and productive economy will be slowly choked to death).
8. mrflibble said...
I see the BBC is still running with the 0.1% increase as its top Business news some 7 hours later - obviously nothing else happening in the world.
I think bluebeach is right, nothing will happen to cause prices to drop, they'll simply drop, all by themselves, no more shocks required, it's called a market top.
The Sheeple have painted themselves into a nice little corner through greed and stupidity and the hand that feeds them has been well and truly gnawed off. In the last chance saloon sits Merv and his printing press, ready to destroy the currency to keep the bubble inflated, will he print, won't he print, who knows, Mr Reality left the building two years ago and hasn't been seen since.
9. growler said...
I'll also rise to Bluebeach bait....
I can't see how long-term every FTB coming into the market over the years can provide so much money in deposits to feed a slow growth over inflation without (1) exhuasting bank of mom and dad or (2) taking out lots of debt like they used to in the Noughties (3) earning shed loads more cash.
It was debt before. Now it's been Bank of Mom and Dad - but their supplies are limited (unlike banks who effectively "printed" credit)
Add in interest rates and unemployment to varying degrees, and this will have an effect. Since interest rates can't get any better and unemployment is not about to disappear anytime soon.
So it is simply is a question of time before we have a correction.
10. jack c said...
Nationwide's response to keep the party going as follows:-
Nationwide is cutting interest payments on mortgage deals for home buyers by up to 0.29%. From tomorrow the lender is adjusting its 70% LTV three-year tracker downwards by 0.29% to 2.69% while its two-year fixed rate will drop 0.19% to 3.19% The three-year fixed rate is being reduced by 0.09% to 3.89% and the five-year is dropping 0.19%, now available at 4.49%.
Andy McQueen, divisional director for mortgages and general insurance at Nationwide, says: “These are very competitive deals and, in particular, our two, three and five-year fixed rate deals with £896 product fee available up to 70% LTV are amongst the lowest in the market.
“The £300 cash-back deal for existing mortgage customers who take a new Nationwide mortgage when either moving home or switching at the end of their deal continues to be available. Furthermore, if you’re a first time buyer, you will continue to receive a further £500 product fee discount on selected fixed and tracker products; another great reason to take out a mortgage with Nationwide.”
New customers can access 85% LTV rates while 95% is available for existing customers.
SOURCE - Mortgage Strategy 30/06/2010
11. hpwatcher said...
Nationwide's response to keep the party going
It's high prices and no buyers that is stopping the party.
12. simon68 said...
"From tomorrow the lender is adjusting its 70% LTV three-year tracker downwards by 0.29% to 2.69%"
I wonder how many FTB is able fork out 50K as down payment?
13. tenyearstogetmymoneyback said...
Bluebeach wrote ......+/- 5% tops
But over what timescale ?
My prediction is -5% a year for the next five or more years.
The housing market has more inertia than the largest Iceberg
14. 51ck-6-51x said...
Jack C - They are revising their spread downwards, but it's still not going to be a small spread - just smaller than that of the herd's. The yield curve they implement says a lot about the market prediction of future interest rates. Also there are not many fixes of > 5 years to be had out there are there?