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Scooter

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  1. House prices 'may subside by 2010' By Edmund Conway, Economics Editor Last Updated: 1:23am GMT 03/11/2006 The prospect of a fall in house prices is looming, with one economist warning there is a one-in-three chance that prices will be lower in 2010 than they are now. PricewaterhouseCoopers warn that there is a 50-50 chance that real prices will be lower by 2010 PricewaterhouseCoopers warns, in a report today, that houses are no longer a safe investment. It finds that there is a 30pc chance that prices will fall - in nominal terms - over the next four years. When inflation is taken into account, there is a 50-50 chance that real prices will be lower by 2010, it warns. The news will come as a shock for many homeowners, who have seen the price of their properties take off again this year. Nationwide said annual house price inflation is running at 8pc. Gordon Brown said last year that the Bank of England had averted a housing bubble. But PwC's head of economics, John Hawksworth, said prices looked extremely unaffordable at the moment. "The message is: be very aware of how risky housing is [as an investment] over the short period," he said. "While housing is a risky asset over a few years, it is less so over the longer term because some of the ups and downs will even out." The warning came after Abbey, Britain's second largest mortgage lender, confirmed it is offering borrowers loans of five times their salary as a direct consequence of rising house prices. Meanwhile, a report by Hay Group showed that monthly mortgage repayments on the average British home are worth more than half of take-home pay.
  2. I disagree-affordability is precisely a matter of fact. If you rely on a mortgage, it is the specific amount that you can borrow. If you are paying cash, it is the cash that you have. 8 times salary may be affordable in theory or alternatively 4 times may not be depending on your circumstances or other outgoings. Either way, it is dependent on money you have or can borrow, not your assumptions of how the asset will perform in the future. S.
  3. yes, I agree but what ypu took issue with before was my saying that sentiment and affordability are unconnected, not that sentiment and prices are unconnected. Now you seem to be banging on about prices and sentiment being connected which I agree with entirely but you seem to think I don't. Oh well, life's too short... s.
  4. Prices certainly rise on sentiment. What I said was affordability is unaffected by sentiment. "Folks possessed of funds" do not have affordability issues but the fact that they can afford a certain amount is nothing to do with how bullish they are about property (i.e. sentiment). S.
  5. Explain to me how being bullish about property increasing in value (i.e. sentiment) helps you if you cannot actually afford it. You may think it is a great investment but it will be a great investment forother people if you cannot get a mortgage on however many multiples of income to pay for it (mate!). In other words, sentiment does not affect affordability as I said-they are not connected. S.
  6. Sentiment does nothing to improve affordability. S. Nothing like a reasoned argument!
  7. You don’t need a weatherman to know which way the wind blows, sang Bob Dylan, and you don’t need a mathematician to tell which way that trend is headed. Furthermore, unusually, say the pessimists, we not only know more or less exactly what lies behind this slump but we have been predicting it for years. After the longest and most gravity-defying run-up in US house prices in history, the bubble has finally burst. In the three months to September residential investment declined at an annual rate of 17 per cent, a weighty blow to overall output. House prices have fallen across the United States in the past six months. We may even experience the first calendar-year decline in the median national house price since accurate records began half a century ago. Since it was housing that was propping up the economy for the past five years, it is said, the outlook is bleak. http://business.timesonline.co.uk/article/...2429213,00.html Actually he is still upbeat about the US stockmarket though... S.
  8. Yep, no one has been repossessed until now. One swallow makes a Summer etc...
  9. "Whether it is a bubble or not, in other words, depends on the level of interest rates. If the Bank was forced to push up base rate to 8%, there would be a clear overvaluation. With a Bank rate of 5% there is not." I do not really see what he is getting at here especially-can anyone explain? Surely asset price to income (or some other measure of value) demonstrates a bubble or not, not the cost of borrowing to buy any particular asset? S.
  10. The Sunday Times October 29, 2006 House prices just keep on flying WHAT have been the surprises so far this year? Globally, we’ve seen the further rise (and fall) of oil prices but continued strong global growth. The steam has come out of the US economy but America appears to be heading for a slowdown rather than anything more worrying. In Britain, by contrast, the economy has had plenty of steam. At the start of the year the average prediction was for growth of 2.1% this year. Now it is 2.6%. Alongside higher growth, however, there has also been higher inflation. In January economists expected consumer price inflation to end the year at 1.9%, below the Bank of England’s target. Now they expect 2.5%. RPI (retail prices index) inflation is expected to end this year at 3.6%, much higher than the consensus expectation of 2.7% back in January. Perhaps the biggest domestic change, however, has been in the housing market. Last winter housing was convalescing. Having slowed sharply in the middle of 2004, it did not appear likely to speed up again very soon. In the latter part of 2005, house-price inflation dipped below 2% on both the Halifax and Nationwide measures. But housing was not dead, merely sleeping. Perhaps the Bank of England’s one-off interest-rate cut in August last year provided the elixir. Maybe, in London and southeast England at least, it was those City bonuses. The latest figures from the Nationwide, which had house prices last month up by 8.2% on a year earlier, suggest London continued to lead the way in the third quarter, with the strongest rise of any English region. For true Klondike conditions, however, you had to look to Northern Ireland, with third-quarter prices up by 33% on a year earlier. We are more accustomed to housing booms south of the Irish border. The effect of rising population and limited housing supply on prices should not be underestimated. The number of new “dwellings” being completed is rising. I use the word dwellings advisedly because about half of current “housing” starts are flats and maisonettes. The House Builders Federation has just changed its name to the Home Builders Federation for that reason. In 2004-5, 206,750 dwellings were completed, nearly 9% up on the previous year. But housebuilding has not moved decisively higher. During the 1990s, the typical number of new dwellings completed was about 190,000. Nearly 90% of new accommodation these days is built by the private sector. These are gross figures. When you convert a house into flats you gain the flats but lose the house. Kate Barker’s review of housing supply for the Treasury suggested that conversions and demolitions mean the loss of about 50,000 properties a year. So net new housing is roughly 150,000 units a year, and the Barker review suggested we might need getting on for double that to slow house-price inflation decisively. Her review, it should be noted, was published in the spring of 2004, before the big influx of migrant workers from Poland and the other EU accession countries. Housing demand is not, of course, just about population growth and immigration. It is also affected by size of household, divorce, how early young people fly from the parental nest, second homes and a range of other factors. The government’s projections show that in England alone there will be an average of 209,000 new households annually over the next two decades. The strength of housing demand is one thing, but what about the “fact” that house prices are plainly too high? The surprise about this year’s housing market strength is that what looked like an overvalued asset has gone up a lot more. How can this be, and how dangerous is it? Perhaps not at all, because housing was not overvalued. Professor Steve Nickell, then a member of the Bank of England’s monetary policy committee, set the ball rolling more than a year ago on this with his British Academy Keynes Lecture. He cited three factors — low levels of housebuilding, low short-term interest rates and, most importantly, low long-term real (after-inflation) rates — and said: “It may be legitimately argued that there has been no housing bubble whatever.” Indeed, it could be argued on the basis of his analysis that prices were still undervalued. Sure enough, they began rising soon after his September 2005 speech. Economists at Lombard Street Research have taken that process on, in particular the fact that housing valuations are highly sensitive to the level of interest rates, to develop a different kind of affordability index. “The interest rate is by far the most important determinant of housing price affordability,” says the firm’s Diana Choyleva in its latest Economic Bulletin. “Examining various scenarios for house-price affordability, it becomes clear that if house-price inflation is subdued, then mortgage rates will have to increase to above 8% in order for the housing market to become a bubble.” Whether it is a bubble or not, in other words, depends on the level of interest rates. If the Bank was forced to push up base rate to 8%, there would be a clear overvaluation. With a Bank rate of 5% there is not. Lombard Street, indeed, thinks house prices will rise quite strongly next year, with prices up by more than 12% on the Nationwide measure and nearly 14% on the Halifax’s index, in spite of a rise in Bank rate to 5.25% early next year. Whether or not prices rise so strongly, many readers will dispute Lombard’s starting-point, that houses are close to their average affordability level of the past four decades. How can this be when so many potential first-time buyers are locked out of the market? The answer, I think, is twofold. Existing homeowners have done extremely well in recent years and have been able to use their wealth gains to trade up. Buy-to-let landlords have, to a certain extent, moved in to make up the gap left by first-time buyers. Some first-time buyers, of course, continue to climb on to the first rung of the housing ladder, often with the help of deposits extracted from their parents’ wealth gains in property. But many do not, and there is no denying that rising house prices have created social problems. When does the process come to an end? Not for a long time, according to the Lombard Street analysis. I would hope things settle down rather sooner. But that may require, among other things, that we build a lot more houses. PS: Some people say economists have too much influence these days, but in some areas they do not have enough. Laws and regulations affect the economy enormously. All too often, however, their economic effect is misunderstood or miscalculated, as is pointed out in a new paper from the Institute of Economic Affairs — the Economics of Law by Cento Veljanovski. Suppose you wanted to reduce property crime by 1% and had three options — increasing police numbers, sending more offenders to prison, or increasing the length of sentences. A politician would probably choose the extra police, as would most voters. But a classic piece of research, quoted by Veljanovski, shows that it would cost 10 times as much to do this as imprisoning more criminals, and 14 times as much as lengthening sentences. Food for thought at a time when the debate is about sending fewer people to prison and shorter sentences. Most policy decisions, let alone changes in the law, are not subjected to even rudimentary cost-benefit analysis. Gordon Brown has prom- ised (again) to cut red tape by 25%. He should start by getting the govern- ment’s economists to run regulatory impact assessments — cost-benefit analyses — on existing regulations. Many would fail to pass muster. The Sunday Times October 29, 2006 House prices just keep on flying WHAT have been the surprises so far this year? Globally, we’ve seen the further rise (and fall) of oil prices but continued strong global growth. The steam has come out of the US economy but America appears to be heading for a slowdown rather than anything more worrying. In Britain, by contrast, the economy has had plenty of steam. At the start of the year the average prediction was for growth of 2.1% this year. Now it is 2.6%. Alongside higher growth, however, there has also been higher inflation. In January economists expected consumer price inflation to end the year at 1.9%, below the Bank of England’s target. Now they expect 2.5%. RPI (retail prices index) inflation is expected to end this year at 3.6%, much higher than the consensus expectation of 2.7% back in January. Perhaps the biggest domestic change, however, has been in the housing market. Last winter housing was convalescing. Having slowed sharply in the middle of 2004, it did not appear likely to speed up again very soon. In the latter part of 2005, house-price inflation dipped below 2% on both the Halifax and Nationwide measures. But housing was not dead, merely sleeping. Perhaps the Bank of England’s one-off interest-rate cut in August last year provided the elixir. Maybe, in London and southeast England at least, it was those City bonuses. The latest figures from the Nationwide, which had house prices last month up by 8.2% on a year earlier, suggest London continued to lead the way in the third quarter, with the strongest rise of any English region. For true Klondike conditions, however, you had to look to Northern Ireland, with third-quarter prices up by 33% on a year earlier. We are more accustomed to housing booms south of the Irish border. The effect of rising population and limited housing supply on prices should not be underestimated. The number of new “dwellings” being completed is rising. I use the word dwellings advisedly because about half of current “housing” starts are flats and maisonettes. The House Builders Federation has just changed its name to the Home Builders Federation for that reason. In 2004-5, 206,750 dwellings were completed, nearly 9% up on the previous year. But housebuilding has not moved decisively higher. During the 1990s, the typical number of new dwellings completed was about 190,000. Nearly 90% of new accommodation these days is built by the private sector. These are gross figures. When you convert a house into flats you gain the flats but lose the house. Kate Barker’s review of housing supply for the Treasury suggested that conversions and demolitions mean the loss of about 50,000 properties a year. So net new housing is roughly 150,000 units a year, and the Barker review suggested we might need getting on for double that to slow house-price inflation decisively. Her review, it should be noted, was published in the spring of 2004, before the big influx of migrant workers from Poland and the other EU accession countries. Housing demand is not, of course, just about population growth and immigration. It is also affected by size of household, divorce, how early young people fly from the parental nest, second homes and a range of other factors. The government’s projections show that in England alone there will be an average of 209,000 new households annually over the next two decades. The strength of housing demand is one thing, but what about the “fact” that house prices are plainly too high? The surprise about this year’s housing market strength is that what looked like an overvalued asset has gone up a lot more. How can this be, and how dangerous is it? Perhaps not at all, because housing was not overvalued. Professor Steve Nickell, then a member of the Bank of England’s monetary policy committee, set the ball rolling more than a year ago on this with his British Academy Keynes Lecture. He cited three factors — low levels of housebuilding, low short-term interest rates and, most importantly, low long-term real (after-inflation) rates — and said: “It may be legitimately argued that there has been no housing bubble whatever.” Indeed, it could be argued on the basis of his analysis that prices were still undervalued. Sure enough, they began rising soon after his September 2005 speech. Economists at Lombard Street Research have taken that process on, in particular the fact that housing valuations are highly sensitive to the level of interest rates, to develop a different kind of affordability index. “The interest rate is by far the most important determinant of housing price affordability,” says the firm’s Diana Choyleva in its latest Economic Bulletin. “Examining various scenarios for house-price affordability, it becomes clear that if house-price inflation is subdued, then mortgage rates will have to increase to above 8% in order for the housing market to become a bubble.” Whether it is a bubble or not, in other words, depends on the level of interest rates. If the Bank was forced to push up base rate to 8%, there would be a clear overvaluation. With a Bank rate of 5% there is not. Lombard Street, indeed, thinks house prices will rise quite strongly next year, with prices up by more than 12% on the Nationwide measure and nearly 14% on the Halifax’s index, in spite of a rise in Bank rate to 5.25% early next year. Whether or not prices rise so strongly, many readers will dispute Lombard’s starting-point, that houses are close to their average affordability level of the past four decades. How can this be when so many potential first-time buyers are locked out of the market? The answer, I think, is twofold. Existing homeowners have done extremely well in recent years and have been able to use their wealth gains to trade up. Buy-to-let landlords have, to a certain extent, moved in to make up the gap left by first-time buyers. Some first-time buyers, of course, continue to climb on to the first rung of the housing ladder, often with the help of deposits extracted from their parents’ wealth gains in property. But many do not, and there is no denying that rising house prices have created social problems. When does the process come to an end? Not for a long time, according to the Lombard Street analysis. I would hope things settle down rather sooner. But that may require, among other things, that we build a lot more houses. PS: Some people say economists have too much influence these days, but in some areas they do not have enough. Laws and regulations affect the economy enormously. All too often, however, their economic effect is misunderstood or miscalculated, as is pointed out in a new paper from the Institute of Economic Affairs — the Economics of Law by Cento Veljanovski. Suppose you wanted to reduce property crime by 1% and had three options — increasing police numbers, sending more offenders to prison, or increasing the length of sentences. A politician would probably choose the extra police, as would most voters. But a classic piece of research, quoted by Veljanovski, shows that it would cost 10 times as much to do this as imprisoning more criminals, and 14 times as much as lengthening sentences. Food for thought at a time when the debate is about sending fewer people to prison and shorter sentences. Most policy decisions, let alone changes in the law, are not subjected to even rudimentary cost-benefit analysis. Gordon Brown has prom- ised (again) to cut red tape by 25%. He should start by getting the govern- ment’s economists to run regulatory impact assessments — cost-benefit analyses — on existing regulations. Many would fail to pass muster.
  11. This all seems to imply that the UK/Australia have already had a soft landing, a false premise IMHO. S.
  12. You must work for NuLabour or at least be in a public sector job of some kind?
  13. Word on the street Edmund Conway Last Updated: 12:01am BST 21/10/2006 Toxic loans that threaten us all. By Edmund Conway Remember those big tubs of Neapolitan ice cream - the ones with the three fat slices of chocolate, vanilla and strawberry flavours? Well, believe it or not, those tubs can tell us a great deal about the housing market. Cast your memory back to the turn of the millennium. Prices were accelerating in the early days of the property boom. Buy-to-let loans, introduced only four years previously, were increasingly popular. The mortgage market in Britain was not unlike that ice cream tub. When Britons chose their mortgages, they usually selected one of three flavours - bank mortgages, building society mortgages or specialist mortgages. advertisement The first two were the vanilla and chocolate of the mortgage world: dependable, solid favourites. Specialist mortgages were strawberry: fruity and unpredictable. They are, more specifically, the mortgages taken out by those who can't get a loan from regular lenders: those with poor credit ratings, the self-employed and buy-to-let investors, for example. Here's the intriguing thing: in 2000 this specialised lending accounted for a third of new mortgages. Since then it has rocketed to almost two thirds. The banks and building societies with which many of us have our mortgages now account for only a third of new home loans. Some might say that's nothing to worry about. After all, much of this must be down to the increased popularity of buy-to-let. But buy-to-let isn't the only ingredient within the specialist flavour; for example, a sizeable chunk is taken up by those lending to people with poor credit ratings, who are likely to be the first borrowers to default if the going gets tough. Then there are companies that consolidate all your loans into one. This debt does not vanish; all these firms usually do is to plop what you owe into a new mortgage secured against your home. The mortgages lent by the specialist sector tend to be less competitive than those from banks and building societies. Lenders are also less likely to be forgiving if their customers are late with a payment. The Financial Services Authority, which regulates mortgages, said recently it was extremely concerned about this part of the market, warning that lenders might not be stringent enough with those who have poor credit records. My worry is that the market has become too reliant on this slice, whose growth cannot go on forever. If there is a downturn, the FSA fears strawberry may be the first flavour to suffer, with some overstretched borrowers defaulting. This would have been less of a problem a few years ago, but now that this sector accounts for such a large chunk of overall mortgage lending, it could send the rest of the market reeling too.
  14. This one caught my eye-even ex-celebs are in trouble... 'Screech' didn't pay, case claims Home sellers say they're still waiting for money from former TV actor By DAN BENSON [email protected] Posted: Oct. 12, 2006 Port Washington - If former teen TV star Dustin "Screech" Diamond has made money selling T-shirts and a sex tape to save his home here, a court filing alleges that none of that money has been used to pay the money he owes. Advertisement Recent Coverage 10/8/06: Nichols: Screech turns mild sympathy to disgust 9/2/06: Nichols: Screech's many pleas sound like mere noise 6/19/06: Nichols: Help save Screech's house, but stay out 6/15/06: The bell may not save him this time And it may be too late, the attorney for the home's owners says. "We will file a motion for judgment next week," Grafton attorney Steven Cain said. "My clients want their house back. Simple as that." In recently filed court records, the home's owners say the 29-year-old Diamond has not made any payments on the home since January despite his highly publicized efforts since then to raise money by selling T-shirts online and through television appearances. More recently, Diamond has made a sex tape, titled "Saved by the Smell," to earn money to save his house, according to press accounts. Could lose home Diamond, who played geeky Screech Powers in the teen sitcom "Saved by the Bell," faces losing the home under a foreclosure order filed in Ozaukee County Circuit Court by the owners, Lewis M. Herro and Brian S. Behrens, operating as B&L of Grafton. Herro and Behrens say Diamond has not made monthly payments of $2,261.98 since January. They're demanding under terms of a land contract that Diamond pick up the remaining $250,000 he owes on the gray, two-story home. Diamond has said the land contract - in which the buyer agrees to make an initial payment and regular subsequent payments until the full price is paid - was one of the few options available for him in 2003 because of a bad credit record, which includes a 2001 bankruptcy filing in California. To raise money to stave off foreclosure, Diamond created a Web site to sell autographed T-shirts, saying "I paid $15 to save Screech's house." Since then, some people have complained they have paid for, but not received, their shirts. What the complaint says Herro and Behrens say in court documents: "Diamond's stated purpose of the aforementioned Internet site is to bring publicity to the foreclosure action pending against (Diamond) and raise money to pay the outstanding balance on the contract." "During the time Diamond has been publicizing the foreclosure action and Diamond's fundraising sales, B&L has received $0," the civil complaint says. Diamond could not be reached for comment. His attorney did not return a phone call seeking comment. From the Oct. 13, 2006 editions of the Milwaukee Journal Sentinel Have an opinion on this story? Write a letter to the editor or start an online forum. Subscribe today and receive 4 weeks free! Sign up now.
  15. Do, by all means. Some of my best friends are heterosexuals! I was just curious that you seem to link it with all the bad things in the UK that you list and your implication was that that particular minority was awash with government priveleges, which is not the case. Gay Pride funds itself from ticket sales, not government money I think (at least predominantly) and regularly goes bust, notwithstanding the unwelcome support of the odious Ken Livingstone, so its funding should not be something to upset you. MOBO I have no idea about-does it receive public money? S.
  16. I agree with much of this but why do you make a big deal of the "heterosexual" bit? Gay people, usually childless, are paying for everyone else's dopey kids' education and healthcare and child support (yours maybe?), no hand outs or tax breaks... I assume you just think gay people are part of a left wing conspiracy destroying the country and are receiving benefits from the governmment as a priveleged minority group, for some reason. S.
  17. Are you calling me an ignorant, white, middle-class liberal? I haven't been called liberal in a while! To the right of Genghis Khan usually and a bit unfairly.
  18. What do you mean by "Asians"? Indians, Pakistanis, Bangladeshis? Thais, Chinese (what Americans call Asian)? Even if you keep to the subcontinent, there are a massive number of subgroups of many religions and identifiable cultures whcih makes your comment a bit odd.
  19. Cameron has no interest in people thinking he will reduce the value of their nest egg, pension (i.e. house!) if he wants to get elected. Also, he may not actually understand it (he was only in marketing prior to politics .)
  20. I am still minded to go with the respondent who says "I call troll." It is all just a bit incredible, bloke, screws up massively and admits huge fraud on the internet but plays as if he is just an innocent, failed "entreptreneur." too much what people want to hear...
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