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House Price Crash Forum

Gavin

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About Gavin

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  1. Why? That’s an easy statement to make, but I am talking about real anomalies here. Did the US authorities anticipate this crisis? Did we? Is it not as simple as that? I think you overestimate the fed’s ability considering their track record and cross board members in each camp. 20% of USD12t is a loss of USD2.4t, doesn’t matter how big your computer models are. I work with complex models, and whilst they are all very interesting; back of fag packet calcs will tell you enough to arrive at an initial decision. The computer models are good for detail and measuring small effects of things like inflation, or current movements or interest rates over long periods of time. Explain to me what other factors will have a large effect on the result other than 1.assets falling, 2. mark to market, 3. big loss, 4. insolvency? Its was supposed to be a STRESS TEST, not a cake weighing competition.
  2. Whilst I do not know the methodology for the stress tests, I am making some very rough assumptions regarding the lead problem of US house prices. I understand US home values total approx USD12 trillion. (I guess there are roughly 120m houses, worth approx USD100k each). Lets assume we have seen a 20% average fall in value across the board since 2006-7. = USD2.4trillion loss, this loss would have been borne by the owner occupiers (primarily) and the banks on mortgages marked to market. Reports this week that 25% of US home owners are now in negative equity; this means USD3 trillion in bank assets are at direct risk. If we assume the stress test is for another 20% fall across the board in US housing value, then we need to consider an USD600bn loss in the stress tests, and this would mean at the very minimum USD60bn of capital required for banks. This ignores corporarte debt (!) and the value of mortgages for 75% of US homes that are not currently in negative equity. Conclusion, the USD67bn leaked about the major banks appears to be the very bare minimum required, it could easily be twice or triple this. If it isn’t then either the banks already have more capital than we thought (unlikely given the public need for stress tests!), or the Fed is fudging figures to stave of panic, which will be found out soon enough. Verdict? Sell banks and wider indices.
  3. Still here, amazed by what I am seeing now;.....out there.......in the real world.
  4. I get the analogy. Clippers are the easy option. Less pain, but also less time before the hair extends to become unsightly and catch the boogerloos again.
  5. Clippers are less pain. Going back to whether we have been right about a crash. What about the US? I don't think there is much doubt it has happened there? I know that there are arguments about why it is different here. But that really is the only thing the bulls (or flatliners) have left. They can't really say that house markets don't crash. Only that the UK one is 'special'....... Going back to the topic at hand. I enjoy the cynicism when discussing the world/market but I don't really 'get' the cynicism of the site itself. After all it is called housepricecrash and therefore the collective consciousness is likely to reflect that view in the majority. Its like turning up for every Russel Brand gig on a tour and complaining he swears to much. Why keep going? In short what brings the cynic of the site back?
  6. I accept that we haven't been able to time the end of the housing bubble accurately, but I think the nature of irrational bubbles made that nigh on impossible, and this isn't JUST an excuse. When I look around.;I believe it is better to call it 2 years to early than 1 month to late. I would suspect that to STR now as an example would be very difficult and very stressful. If you then take HPC predictions for stock market falls, or golds ascension; then armed with cash, you have had ample time to benefit in real terms.
  7. I have been here longer than most, and I love this place, neither do I tire of it! I know there have been some thread thats have touched on this but why do you like it here? Personally I have learnt so much, and although I clearly thought 'something was up' when it came to property prices being to high, but I couldn't claim to have formulated an encompassing understanding of quite how the market got there. I believe we have managed to create a 'collective consciousness' by pooling lots of ideas and cutting and slicing until they seem to fit in. Who knows if we are right, but in terms of prices, fiat currency, credit etc we certainly appear to be getting it right. I know before coming here I would never have considered buying gold for example. Or been SO skeptical of the federal reserve. To speed up the collective consciousness we are able to take in particular views and adopt the ones that suit our interpretation. The anecdotals/professional insights from hundreds of people help to speed up our current understanding and ability to read market before real movements appear in the figures. This helps us to keep 'ahead of the game'. If this is even possible, it should put us in good stead to invest, or divest ahead of the game. An invaluable tool. Do you agree? Why do you like it here?
  8. Actually this guy never had a chance, if he says "who's selling now?" then he really does not understand what is going on at all.
  9. I think we will see more of this kind of thing before it gets better......
  10. More evidence seeping through to the public consciousness. Went to see Michael McIntrye last night at the Lyric theatre. Great night and extremely funny. You get the feeling he is genuinely a nice guy and his style with the audience is to speak like we were his friends. All in the audience were 18-40. He has a young family and had done a lot of gags about them growing up. In the encore he told a story about he had been physically attacked by his 75 year old neighbour for not clearing up his share of the shared gardens leaves. He said “I would love to buy a house, but it’s so difficult isn’t it…………..that’s why I AM JUST WAITING FOR THE CRASH……………[a few cheers amongst general silence…. he said it like it was a fact]. “Ooooh, I can feel the tension over that one, except I hate people who become billionaires just by sitting on their arXe doing nothing.” [Laughter resumes] “You know, those that say hmmmm, my house is worth 700 thousand pounds, but when I bought it in 1961 it was only 7 pence.” I think Michael could become HPC’s mascot. If you have never seen him, watch this although it is not the routine in question.
  11. FP I would like you to echo the point made earlier. Why not say you are delighted to be part of the panel because the views given are always by those parties that are desperate to keep the housing boom going. In the Times yesterday they did a four page pull out on where prices are headed and asked Estate Agents from each region for their comments. Please press that: Estate agent earn fees from sales and earn more fees from higher prices. They would see fees fall and transactions fall in a crash. RICS earn fees from the number of housing transactions and strongly opposed hips because suddenly there would only be the need for one survey per house sale. Mortgage companies (and the CML) earn greater interest on larger loans made on more expensive houses and could face failure (Northern Rock) if prices fell below outstanding mortgages. The government know that presiding over a house price crash on their watch would mean almost certain election defeat. So its highly unlikely you will get a balanced view from anyone asked in the above catergories. Hence the "we expect prices to level off but we are not expecting a crash", of course they will say that and note they never give an economic reason why not. The only bears are the serious academic economists and independent publications (Economist, Moneyweek) who almost unanimously say house prices are overvalued and will fall. State that when people are worried about prices crashing and they hear reassurances to the contrary, then tell them to bare in mind why the re-assurers say 'no crash'.
  12. Me and Mrs G will be watching in our comfy slippers. Don't forget to say how sentiment bought into the boom and chased it upwards, but sentiment also watched people queue up in a good ole run on the bank today at NR. Mention that you will be interested in seeing what the Rightmove figures are on Monday and urge people to look out for them to. p.s. Is it just me or wouldn't HIPs be expected to boost prices in the short term due to; 1. People wanting to recoup the cost of one or; 2. A 4 bedroom house being advertised as a 3 bedroom house with a study suddenly being considered in the 3 bed house category? Surely this would be a 400k house falling into the 300k bracket and temporarily boosting average prices for 3 beds? So why the 2.6% drop?
  13. Then we agree on something because the fact about this bull market and exuberance was that the mainstream refused to even accept that cycles still existed. When on here we were saying house prices will go down we were literally laughed at. Now it seems that we a likely to be proved right, you are saying exactly what we were expecting. “Well that was obvious”. I do not think I am an expert, but my money is in the bank (and in gold and Japanese property) it is not stuck in an overvalued UK house. Therefore I sleep well tonight, what about you?
  14. I understand what you are saying sir, it’s the old, “a broken watch is correct twice a day” theory but I do not accept that. My house was over valued I didn’t feel I could pay my mortgage over 25 years without the risk of losing my employment at some point. I looked at average earnings and mortgage multiples and I decided this could not go on. I read up about bubble theory and identified the match. House prices had become fundamentally detached from any valuation model and I decided to sell. I never called when the bubble would burst because a core part of the theory is that timing is almost impossible to call; it’s the very nature of the irrational exuberance that makes that so impossible to judge. Once I had sold, I watched rates rise and saw distress but then the BoE cut rates. It took longer than I expected but sooner or later one individual in a credit committee in a bank somewhere said “no more”. At this point it all went exactly as I and other have predicted, and the credit markets have seized almost entirely, we have seen from the US what happens next. So no, I do not accept I am akin to broken watch. In retrospect it will be so obvious that we will not even be given the chance to say I told you so, therefore I say it now. I told you so.
  15. This morning we have seen the Northern Rock story hit the front pages, the Times’ Kaletsky make a u-turn and state that house prices will fall and on Monday we are going to see the Rightmove figures go public. I think a few of the sheeple flock will now have seen a wolf circling the field. Most won’t have seen one before and will not know what to think but they will know its not good news and try and keep away from the field perimeter. I have to say I TOLD YOU SO, because that’s how I feel. For 3 years we have been mocked for saying that this would all start to unravel with a combination of rising interest rates and a CREDIT CRUNCH to quell high multiples and reckless lending. We can’t say I TOLD YOU SO to the wider world, because they don’t want to hear it and still don’t quite understand what is happening. But we can rant on here. Please join me in the rant. It’s been a long time but I actually think this is the beginning of the end. Northern Rock cannot recover from here, who will be the first to take over from the Bank of England and say ‘OK we believe you now, you can service all your debts’, London house prices will not be able to maintain momentum if bonuses are squeezed. I TOLD YOU SO.
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