New Bear

It looks as if the olf manufacturing heartland is showing the signs of strain. Here are some Home.co.uk figures for Coventry, arguably the epicentre of the latest wave of manufacturing decline and uncertainty. This is probably the extreme opposite end to the London situation but the picture for apartments looks desperate. The centre and its periphery are stacked with new and recent new builds that are just not selling. Edit: sorry, I see these links do not work. If you are interested just use the house price trends facility on home.co.k http://www.home.co.uk/guides/house_prices_...ntry&lastyear=1 Wolverhampton looks a bit poorly too: http://www.home.co.uk/guides/house_prices_...pton&lastyear=1 Birmingham by contrast just looks to be flat-lining but that's as good as it gets in the old industrial heartland: http://www.home.co.uk/guides/house_prices_...gham&lastyear=1 Even leafy Solihull is hardly booming, especially on apartments: http://www.home.co.uk/guides/house_prices_...hull&lastyear=1 And neither is Leamington Spa: http://www.home.co.uk/guides/house_prices_..._spa&lastyear=1

Agreed, a well informed discussion. But as I understand it JP is saying only that the Fed and other CBs will attempt to inflate their way out of their problem. It's not bound to succeed, indeed is fraught with difficulties, and will in any case only defer a crisis (for around 18 months?). There is still a recession waiting at the end of the process even if it succeeds... But whatever, I've been trying to work out the implications for house buying. From a HP perspective it seems there are a number of possibilities, including: (i) the housing price bubble deflates with falling nominal prices and falling real prices - a crash like 89-96. Clearly house buying in this scenario is plain stupid. (ii) the housing price bubble deflates with stable or rising nominal prices but falling real prices. On the (ii) possibility, it could be a situation like 74-79, which few remember as a crash, in which mortgage debt continued to be eroded by inflation because wage inflation more or less kept pace with prices, though not without social and industrial unrest. I guess this is the soft landing scenario the CB's are trying to go for - and if they succeed then buying now or soon, especially on a lowish fixed rate would not be a disasterous move. (Unless there is something I'm not seeing here). But if price inflation is not matched by wage inflation, which seems more likely to me this time around, then we will end up back with (i) - but it may take time and HPC will be delayed for a further albeit shortish time. So on this scenario holding out on house purchase seems very prudent. Or it could be price hyperinflation, in which case all bets are off - except for cgnao's strategy. But, hey WTF do I know! I'm just trying to gauge the best time to buy a house without the huge risks that are out there at the moment. Maybe I should Q-line him on it.

Same thing happened to me this week. An EA who hasn't sent me emails for months has started again. Interesting.

I've just caught up with this thread today and want to say a big thanks to kuurus and few others for injecting some real knowledge of what university lecturers actually do into the discussion. Pioneer31 said "Some of the comments on this board make me realise just how CLUELESS some people are." How true.

Hi KoN. Do you have link to that Economist article?

Yes, a very interesting point about the discourse of home ownership and the construction of social problems. Interests come into it strongly though IMO. Why is the locking out of home ownership of the young not presented as a social problem? Because there is an intergenerational conflict of interest about house prices and the means of mass communication are more sympathetic to the older generation?

If my calculations are right then the 30K reduction is about 6% off asking price. I believe that's about the average figure at the moment. Believe me I'm not at all belittling your efforts but I would see how far you can push it. 10%? That would give us a little bit of insight into how soft the market is right now.

You could well be right and there are arguments being made for your selection of asset classes. But according to Paul van Eeden, a well respected and level-headed analyst, commodities may have peaked. His main argument is that the recent run up was largely speculative. The argument from BRIC demand is false - it is mainly substitute demand - and a fall off in US consumer demand will lead to less demand for commodities in BRIC countries. He certainly gave me pause for thought. Edit to add link: http://www.kitco.com/weekly/paulvaneeden/jan212005.html

I well remember sandbagging friends' houses along this stretch of the Cam as it rose in around 1980/81 - though this was back a few hundered metres along Riverside towards the Elizabeth Way flyover. I certainly wouldn't buy without checking the flooding chances and the availability of insurance. Also from the look of it these new flats are built on the old gasworks site - it was declared dangerously polluted at the time it was decommissioned - but it could have been cleaned up of course.

On demography and missing the golden age of housing see this paper: "The Baby Boom: Predictability in House Prices and Interest Rates" Robert F. Martin, November 2005. I don't have the link but you can Google it and see the PDF. Abstract: This paper explores the baby boom's impact on U.S. house prices and interest rates in the post-war 20th century and beyond. Using a simple Lucas asset pricing model, I quantitatively account for the increase in real house prices, the path of real interest rates, and the timing of low-frequency fluctuations in real house prices. The model predicts that the primary force underlying the evolution of real house prices is the systematic and predictable changes in the working age population driven by the baby boom. The model is calibrated to U.S. data and tested on international data. One surprising success of the model is its ability to predict the boom and bust in Japanese real estate markets around 1974 and 1990. The UK is one of the economies used to test the model. See Figures 14, 15, 16. In theUK the baby boomer generation inflates prices as their cohort moves through time - until around 2012 when they start to die off (sorry to put it so bluntly). The prediction for the UK is declining HPs until 2035. On this view the golden age of housing, if there is such a thing, is yet to come and will be most beneficial to those born around, say, 1990. I keep posting this paper but to little response. Too bearish for the bears?

I agree with you.

You can't include it in an ISA - not sure why. You have to phone trade - again I don't know why but it doesn't take long to do.

How about 2035? For the evidence and argument see "The Baby Boom: Predictability in House Prices and Interest Rates" Robert F. Martin, November 2005. I don't have the link but you can Google it and see the PDF. Abstract: This paper explores the baby boom's impact on U.S. house prices and interest rates in the post-war 20th century and beyond. Using a simple Lucas asset pricing model, I quantitatively account for the increase in real house prices, the path of real interest rates, and the timing of low-frequency fluctuations in real house prices. The model predicts that the primary force underlying the evolution of real house prices is the systematic and predictable changes in the working age population driven by the baby boom. The model is calibrated to U.S. data and tested on international data. One surprising success of the model is its ability to predict the boom and bust in Japanese real estate markets around 1974 and 1990. The UK is one of the economies used to test the model. See Figures 14, 15, 16.

No not compensation - just a duty on banks to lend so responsibly and a cost to them if they can be shown not to have done.

Maybe this explains the situation you describe: http://www.home.co.uk/guides/house_prices_...ntry&lastyear=1 And longer term this: http://www.home.co.uk/guides/house_prices_...=coventry&all=1 These are asking prices BTW