Are We About To Hit The "fear" Part Of The Bubble

[Bruce Banner]

Exactly, you are keeping the BTL market fuelled.

Really, a £400K (at 2007 prices) house for £10K per year, that's 2.5% gross yield. Not exactly an exciting investment is it, I'm getting twice that interest on deposit accounts, even now . Allow for repairs, ground rent and depreciation......... .

Keep on trolling .

[athe]

Que ?

quoted for truth I'd imagine, although it could have been Quantitative feedback theory I suppose

[athe]

Anybody got a link for the month by month data from the previous crash ?

I think it's only available quarterly (as far as I could find anyway)

eg

http://www.nationwide.co.uk/hpi/historical.htm

[dances with sheeple]

So you'll be saving money, then. And where will all that saved money go? Other people's mortgages, maybe?

The reality is that the prudent landlords will be able to accept less for their flats and houses, glad to just make something every month. the ones who have to ask for silly rents to cover silly mortgage outgoings will not get tenants and will be repo`d. Low rates are holding the roof up at the moment, that can`t last. A tenant who has cash can tell landlords and agents to jump three times through a hoop and then f*ck off if they like, the landlords and agents all know this, they don`t like it, but they know it, and the situation is only going to get better if you are renting.

[time 2 raise interest rates]

Unelected Brown thinks re-inflating the housing market will win him the next election and this is

why he should go, what gives him the right to blow billions of pounds of tax payers money so

he can stay in power, it wouldn't be so bad if this is what Labour voters wanted but they don't.

[andykn]

Are you sleeping?

It has alread. Do you think rates would be so low without QE?

Yes.

[andykn]

So taking over Northern Rock with tax payers money, then giving out 90% mortgages in a crashing market is responsible

behaviour in your book?

Didn't significantly affect the market, did it? What we're talking about.

[Kazuya]

Yes.

Can I smoke what you're smoking?

[otters]

But no one can point to a similar "bull trap" in previous UK House price crashes. That's why you have to use this made up graph.

People need somewhere to live, they don't need Gold, equites or bonds; markets that the graph you know and love is based on.

I moved to the UK in 1990. Many of the people I met at work, and in the pub knew I was looking to buy a pub, a business I have been in all my working life. I was advised that the market had reached bottom and I should get in quick, or be priced out. I'm no financier but I knew how many pennies made a shilling, and none of the businesses I looked at seemed viable, and that was buying with a very large deposit. I held fire until 1994 and bought my pub mortgage free. I sold it in 2004, not to STR but to semi-retire. As of yet I still have not bought, the money is still in banks growing, albeit at a slower pace. So once again to all those that are saying now is the time to buy I will still be going with my gut instinct as to when the time will be right, that is when I see wages moving up, and sensible borrowing multiples.

[time 2 raise interest rates]

Didn't significantly affect the market, did it? What we're talking about.

We are talking about Brown taking over NR with tax payers money then giving out irresponsible mortgages

in a crashing market, all the independent banks want large deposit as they understand house prices will continue

to crash, but Brown is only thinking about winning the next election.

[andykn]

Really, a £400K (at 2007 prices) house for £10K per year, that's 2.5% gross yield. Not exactly an exciting investment is it, I'm getting twice that interest on deposit accounts, even now . Allow for repairs, ground rent and depreciation......... .

Keep on trolling .

But we're not at 2007 prices today and your interest income on your deposit accounts isn't indexed.

Whether you rent or buy you still represent demand for one house.

That's only trolling if you really want to keep your head in the sand and your fingers in your ears at the same time.

[kilroy]

Yes.

Rates are set by supply and demand. If all the extra supply using QE would not make a difference to interest rates, then why did the BOE bother?

[dances with sheeple]

Unelected Brown thinks re-inflating the housing market will win him the next election and this is

why he should go, what gives him the right to blow billions of pounds of tax payers money so

he can stay in power, it wouldn't be so bad if this is what Labour voters wanted but they don't.

I don`t agree he is trying to re-inflate the housing market now. I think the banks told him a while ago that the only hope is to slowly try to de-flate to late 90`s prices while trying to keep as many people paying their mortgage as possible ( and also squeezing the taxpayer) I don`t know if you have seen the Wes Craven film "Shocker", but the scene where the hero and the bad guy go into the power supply and are seen fighting across various backdrops on various TV channels, war, documentaries etc before sprawling through a chat show punching and kicking? Very imaginative scene. This is Brown, he wants to perform and be applauded whatever the background. He doesn`t care what the background is, so long as he is at the centre of the action, being seen to control and affect things. High house prices were just one of his props, he has long since moved on from that.

[andykn]

Rates are set by supply and demand. If all the extra supply using QE would not make a difference to interest rates, then why did the BOE bother?

I may have misread the question. I was talking about BoE rates, which were low before QE started.

Yes, QE does increase the supply of money in the market and keep LIBOR rates low. But mortgage rates for new mortgages are still around 4%, not much lower than deals at peak.

Keeping LIBOR low is to help business, not mortgages.

[Bruce Banner]

But we're not at 2007 prices today and your interest income on your deposit accounts isn't indexed.

Whether you rent or buy you still represent demand for one house.

That's only trolling if you really want to keep your head in the sand and your fingers in your ears at the same time.

So, I should take £320K out of the bank and buy the house now when I think it will be worth £250K next year? Not bloody likely, I'll leave the money in the bank thanks.

And what has indexation got to do with it?

Obviously everyone who lives in a house represents demand for one house, your point was? No, please don't bother to answer that, I've had enough of your fatuous arguments for one day.

[time 2 raise interest rates]

I don`t agree he is trying to re-inflate the housing market now.

Then you tell me as all the others here seem to be blanking it.

WHY IS GORDON BROWN LETTING THE NORTHERN ROCK DO 90% LTV MORTGAGES WITH TAX PAYERS

MONEY WHEN THE HOUSING MARKET IS CRASHING?

[time 2 raise interest rates]

What no replies, well, well.

[Hip to be bear]

The frustrating thing is, in a way, this is a bull trap.

It is only a temporary rise, and it will revert to more (but much smaller) falls over next winter.

But what the bears fail to realise is that not all bull traps occur close to the top. Some occur close to the bottom. Not so much a bull trap, but rather a premature recovery.... It would be just as appropriate to call the coming falls over winter a bear trap.

The point being, that the stereotypical "lifecycle of a bubble" chart was designed more for highly liquid equities or commodities bubbles. It has no precedent in UK housing, even in previous bubbles.

Whilst it is illustrative in terms of phase, it is entirely innacurate in terms of timing and scale.

Have we had a boom of this scale before?

Have we had such reckless lending by newly demutualised lenders before?

Have we had 20% falls with Interest rates at historic lows before?

Have we had a RMBS market before? Which now has disappeared!

Have we had such "light touch regulation" before?

Have we had the political will that we have now by the FSA to regulate mortgage lending with a salary cap before?

Have we seen such levels of personal / mortgage deb before?

Maybe you should factor a few of these into your analysis Hamish. I am not forcasting a further 60% fall, I just think you need to open your eyes to the current circumstances.

[Hip to be bear]

Duplicate post due to steam powered internet connection.

Edited June 9, 2009 by Hip to be bear

[bimyo]

WHY IS GORDON BROWN LETTING THE NORTHERN ROCK DO 90% LTV MORTGAGES WITH TAX PAYERS

MONEY WHEN THE HOUSING MARKET IS CRASHING?

Since the remaining Labour senior figures have said out loud that their chances depend on upturn, between now and next May they will throw everything at the market, and even when it fails they will describe it as recovery. Every day on the news, relentlessly.

The spin between now and May is going to be more hardcore than anything we have seen before.

[righttoleech]

Next thing we will hear is that 'Filth' Spencer has been made a Lord, and is now HOUSING CZAR

[athe]

are house prices genuinely index linked? (not being facetious, just not sure of the stats)

It depends to a great extent on what you accept the trend to be, inflation values etc etc.

Using Nationwide's historical data, and accepting their value for inflation (which is close to but not quite equal to the OfS CPI and HCPI figures), and accepting the Nationwide trend value (9% historic) then this comes out at about 1.6% above inflation increases per year on the inflation adjusted index. Of course that is a straightline prediction whereas the actual prices have more hills and valleys than the peak district, and the current price rise dwarfs everything before it, so it's very difficult to see what the actual trend is, as you can see below, which shows the Nominal and Real Long Term Trend fits (at 9% HPI Nominal), Nominal and Real Salary trends (at 4x multiplier) and Nominal and Real GDP per Capita trends at 5.5x Multiplier.

[athe]

What no replies, well, well.

Well, if you will post a question in the middle of everyone's lunch break...

[Soul Reaver]

Exactly. Bull traps are sentiment driven. What has engineered the current housing bull trap is that houses are 20% cheaper, interest rates are very low and the economy is recovering.

The reality is that property is stil way overpricec, interest rates can only go up and the economy has far from recovered.

Its the incoming decline in house prices that is going to crush any positive sentiment and push people into the fear/capitulation stage.

How exactly is the economy recovering? Are we in less debt perhaps? Or maybe we manufactured and sold more? How is it recovering?

[MississippiJohnHurt]

It depends to a great extent on what you accept the trend to be, inflation values etc etc.

Using Nationwide's historical data, and accepting their value for inflation (which is close to but not quite equal to the OfS CPI and HCPI figures), and accepting the Nationwide trend value (9% historic) then this comes out at about 1.6% above inflation increases per year on the inflation adjusted index. Of course that is a straightline prediction whereas the actual prices have more hills and valleys than the peak district, and the current price rise dwarfs everything before it, so it's very difficult to see what the actual trend is, as you can see below, which shows the Nominal and Real Long Term Trend fits (at 9% HPI Nominal), Nominal and Real Salary trends (at 4x multiplier) and Nominal and Real GDP per Capita trends at 5.5x Multiplier.

Many thanks . Interesting stuff. As you say, it all looks very volatile. I was wondering about AndyKN's post re 2.5% yield being a good thing, partly cos it was index linked.

Based on your data below, property doesn't look like index linking for the faint hearted ! Some on here talk about it as if it perfectly tracks inflation over short, mid and long terms, not much different to an index linked gilt. Your data shows that it clearly doesn't.