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House Price Crash Forum

carseller

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Everything posted by carseller

  1. I think Japan had a deflation. Falling prices, falling wages, real estate in big cities down 80%, while the value of the loans have increased a lot, and have gotten increasingly harder to pay, despite low rates. The Nikkei index is still trading under half of the value during the peak year. However if they had not done everything to avoid bankruptcies, it would had been more steep, and not as long lasting (like 1929-1932). The same could have happened to us after 2000, but there were room for one more credit expansion first. After this expansion are over, we will have low rates, and deflation, and like Japan today, foreigners could use this cheap money to support carry trades, and support M3 growth, even the economy are having a deflation. Who knows, maybe Africa could be growing and take the cheap credit we won’t use because we are to occupied paying our own debt when the time come. Our deflation could be steeper than japan due to today’s debt structures. Hedge funds are behaving as banks, and when the margin calls come, they will be forced to liquidate their positions. It could be anything from leveraged buyouts not meeting the payments to their hedge fund, to large companies as general motors’ going bankrupt, that will set it off. Those leveraged buyouts are definitely not something smart done to preserve capital in the coming hyper inflation, cause there will be none. However when China buys stocks in Blackstone as their first stock deal you have to wonder what their plans are, since Blackstone would profit tremendously from hyper inflation. I think China are buying into an ongoing buyout bubble, because it's the hottest thing around right now, they even made 20% the day blackstone went public, but who knows.
  2. I do think the interest rates have gone down since the early eighties. It's a long term trend that has caused the big credit bubble we have today. The next time the interest rates spike and cause a recession the central bank will lower rates. It could be in 2008. As the trend shows, at each credit expansion/contraction cycle the rates go lower, while the total debt builds, and the central banks go closer to running out of weapons, last time they were close. There will be no next time. The rate cuts coming won’t save house prices, or create new credit, however it will cause consumers to hang on in what I could describe as a slow mess or payback time for the huge credit bubble.
  3. I think if you look at the Reichmark, you will see that the trouble was too much cash chasing too few goods. Now people only have debt and credit cards, not cash, and we are floating over with goods. When the world economy hit a depression, those making all this products, everything from car makers in germany to those making cheap plastic toys in china, will make less money, then they will increase production output and decrease salaries leading to further price drops. Making it to many goods chasing to few money. Back then, they printed cash, now the money printing is done by issuing credit, using increasing M3 supply, at some point the market will enter a liquidity trap as nobody want to take on more debt, despite low interest rates, as Japan did in the eighties, the result will be deflation.
  4. Are there any discount buying gold from eBay compared to the 650 dollar gold price? Or does postage, and everything add up making it expensive?
  5. The debt bubble will burst, set off by high interest rates. Then inflation will fall fast creating a worldwide deflationary depression. China will not have any pricing power over debt loaded western consumers in that scenario, and I think most central banks will lower interest rates all the way to 0% with no stimulation on the economy. Since cash is what most people lack, I think cash will be king. If everyone were loaded with cash, not debt, then the hyperinflation scenario could happen. The best cash will be Yuan that most likely will move like the Yen did, doubling its value after the Nikkei burst.
  6. I think those who claim we are going to have hyper inflation are failing to see the global credit bubble that is driving up the price of everything. The price of gold, steel, silver, real estate is just a part of this bubble. Most of the hyper inflation crowd are into conspiracy theories trying to explain why gold would make a seventies comeback. Well it's not. We are just a few steps away from deflation once the global bubble burst.
  7. Let me say that I believe in this 3 step scenario. 1. House bubble growing 2. Inflation growing (oil bubble), bursting real estate bubble, then oil bubble, and the chinese bubble burst because of failing demand caused by bursting house bubble. 3. Deflation, 0 % interest rates, falling house prices, wages, rents, everything. (we could have hyperinflation if they decide to go that route), but no matter what happens we will be in a deflationary environment. I believe in 15-20 % unemployment. The middle class will get hammered.
  8. I've been in that situation, but I've given up. I have realised it's no need to offer 160 on a 70K property being sold for 200. It seems patience is the best. I have decided to simply rent, and wait it out.
  9. There is no doubt. It's going to be bargain times in some years. The Bubble in UK are far worse than in US. Good luck, and don’t be a sucker for circumstances, I meet them every day, don’t be one of them.
  10. If you need a house, but not that one, sell it and use that money to buy a house in an area you are familiar, and rent it out. If you do not need a house, and want to study, sell that house, it will be great for your education, or rent it out, eighter way you can use it to pay for your education. Those extra cash each month if you rent it out will be great to have, and if the area of the house is as attractive as where you will live when your education is finished, you will not loose on not selling, if the market goes down. If you sell, and it goes down in value (as I think it will), you will be able to buy a better house, in a better area. All said, I was in your situation, and I sold in mid 2004! So far stupid, but I still think I did the right thing.
  11. That is why a crash will happen, for sure. When buying are driven by fear, not greed, it's on the last step before disaster. Thats why the last (and fearful investor) buys in at top, and sell at rock low prices.
  12. We are in for a 1929 like experience, the experience have been avoided so far because of the cheap credit housing bubble, once it bursts, we are going to have deflation, very low interest rates, and it will all go to hell. The start sign will be a horrible stock market crash.
  13. As I said 4 years are the average of all house crashes in the world, I read that in a research report, that measured lots and lots of crashes. I think it could be more than 4 years, but not less. The story now are far worse than in the eighties, and more similar to Japan where it fell for at least 13 years (with a 0 % interest rate), than the eighties. The reason is that when house prices fall, real interest rates get's very high, like 10-15 %, and in such an environment not many buy, even if you can handle the loan.
  14. Again: I think you will see declines beginning in 2007, lasting for at least 5 years. I do not believe in a short correction, since it has never happened before. I believe we will have a period of at least 5 years, where the prices could come down 5-10 % each year. And in that period it will be stupid to rush in a buy, the best would be to rent, while it unravels. Do not buy before the prices have flattened out or shown signs of going upwards. The average time with declining prices following a housing boom is 4 years. That’s why you should not buy just as it turn into a buyers market. So if we have a crash, it will not be a smart time to buy before the summer of 2010 at the earliest.
  15. I think those who are FTB (with no debt), will do great in the crash. There will be so many people with debt up to their knees, so I think 80 % down in London can happen. Investors don’t buy unless prices go up, or have flattened. The trumps have more than enough with their balance sheet. It's usually the most popular and best locations who have the strongest crash. As I say, it could really unravel, and I do think the whole economy will be severely hit, lots of unemployment.
  16. I think the crash is happening right now. Most people just have unrealistic thoughts that this will unravel in 2 years, even those interviewed here on TV, I think. I think it will take at least 5 years, from 2007, probably ending in 2012 or even further down the road before it will be the right time for first time buyers to buy. Those who buy right after it turns into a buyers market, will do something stupid, I think.
  17. That would be stupid, you will have to wait to 2011-2012 atleast.
  18. I all depends on employment figures. People will have to move if they cant find jobs. In Tokyo it went down around 80 %. I think it's mutch worse than anyone, even the bears, think.
  19. I do not think 80 % off in london is a fantasy. I think it could be reality. The Donald Trumps of London could go bankrupt. It could really unwind.
  20. I have looked at some US house prices, and they have started to form a head shoulder formation. That is very dangerous. It's just what NASDAQ, and Nikkei stock index did right before they crashed. In technical analysis it is a sell sign. In fact the three graphs look almost the same, except that the house prices have a longer time frame. Have you thought about that this site, while saving some from getting hurt, could help prevent a larger crash? It's my impression, the less negative bias, the longer the positive bias can continue, and the more likely a huge fall in prices are likely to occur.
  21. If the prices crash, they will fall to half of what seems resonable, creating a real buying opportunity, as long as the prices fall badly, interest rate changes will have no effect at all.
  22. The key here is that everyone having one or more extra home wanting to secure their profit all comes onto the market at the same time, making a small downturn into a big. The sales figures lie, because they measure price. In a downturning market, only the best stuff are sold, creating a rise in average prices, because less "trash" are sold, when in reality things are going down, the key here are low sales volume and high inventory. New built projects just finished, bought at inflated prices from one year ago, are finally coming into the numbers, creating a false boost to house prices. That have already happened for a while.when you can choose between tons of objects, and things bought yesterday clog the matter..Average price goes up, when prices in reality are going down, on that average ugly house... The old saying is everyone needs a place to live. That is the difference from the 80..Back then speculation was not big, rather it was interest rates. This time it is different and worse.
  23. If things really start to roll of a cliff there is no reason to think about 10-20 % , in cities like london 80 % should be possible. Remember at a rapid crash people dont think about interest rates at all, they think about price, only when things are going up interest rates matter.
  24. Let me cover the main reason for high house prices: Globalisation. China can push their cheap goods, and with manipulations in the CPI (exclusion of house prices and other things), is makes it possible for us to expand credit at a rate that keeps us going. . It also makes it possible to hold the CPI inflation at a stable rate. What we are seeing now, much more important than the UK market, is that the US economy are slowing. This will limit demand for Chinese goods, weaken the USD (since the chinese goverment will buy less USD as they sell less goods), and cause a destructive lack of demand driven deflation in china (not supply driven / competitive as it have been so far), and reduce the price of Chinese goods even further (just as seen with Japan in the seventies, only on a larger scale). The US economy will do as they always have, keep the economy propped up with credit. There is no payback time for the US. They will never pay back the Chinese what they own. They will create inflation by dropping cash on the economy if they have to. This does reduce the value of cash in the bank. The true rate of inflation is almost identical to the amount of money the printing presses produce. Look at the value of gold, it have more than doubled. A conflict free oil price is probably around 45 USD after the latest run of inflation. The reason housing are overvalued is because income is to low for a group of buyers, CPI inflation is really not a useful tool to compare with. However this group of buyers does not need to buy. Landlords can rent out to them and make a profit. So according to true inflation, house prices are probably undervalued. But as long as the increase in salary does not follow true inflation (the debt bubble), the housing market is creating a condition where earlier homeowners back to 1970 who did not have to deal with this faulty inflation figures could buy their homes at the right price. This situation with cheap Chinese goods can go on very long, and a weakening US demand could further amplify it. Thus the conditions for low interest rates could remain strong for a long time. A US recession could even push the rates down. Because homes will be priced based on the affordability and not on value, prices could come down to a level where first time buyers can afford them at the current interest rates. However this is not sure. The central bank could let inflation slip out of their zone, and let is rise, to avoid bursting the housing bubble by keeping rates low enough. Since breaking the housing bubble could cause a recession it is not a crazy idea. With today’s China situation, and stagflation they will probably avoid pushing up rates, or else they will kill all growth just to have the CPI bogus inflation figures in check. The FED will set the trend for this. If they let inflation go, all the other countries will do the same as teh US is the leader. China and Japan, the biggest debtors would be screwed. That could mean flat prices in nominal terms, while the inflation have a run like in the seventies, making a loan an attractive option with negative real interest rates, more attractive than sitting with cash in the bank that quickly loose value to a red hot printing press. Hyper stagflation is a real option, because it could save the US from a depression and at the same time ease their debt due to inflation. Due to deflationary pressures in china in the case of weakening US demand, interest rates here will be lower than they should. It’s the first time buyer generation who pays the price for cheap Chinese goods, and an economy who sadly cannot grow without excessive debt. Some say the debt have to go out of the system through a deflation. But I think more debt, and inflation is more likely. I am not sure if a deflation like Japan had, is possible in the US, due to their willingness to screw their debtors, by dropping cash on the economy for free, if nobody wants to borrow it (unlike japan). Whatever happens will be what suits the US best. It could be hyper stagflation and negative real interest rates.
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