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Mikhail Liebenstein

Are We At The Return To Normal Phase Of The Crash?

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http://www.independent.co.uk/news/business...ry-1703241.html

This article has already been posted by Interest Rate Rip Off, but I felt a separate subject was worthwhile for a separate branch of the discussion, as to where we are in the bubble cycle. The article talks about how rising bond yields should perhaps be seen as a "return to normality".

Obviously these are dangers, but for the time being the better way of looking at rising government bond yields and a weakening dollar is as a positive, rather than a negative development. Far from marking the beginnings of a new crisis, in fact they are only indicative of a return to normality.

Now I think it is pretty clear that in the past 2 months there has been a kind of mini bounce in house sales, with many going Sold STC and under offer, though of course many of these deals could still fall through due to a lack of mortgage lending. But those deals aside, I am now seeing increasing evidence this month on property bee of more homes hitting the market and further price reductions, so it looks like the bounce has ended.

These two observations perfectly fit the life-cycle of a bubble chart that has been posted on this site many times before. I have attached it again here for reference.

What are people's thoughts on this? Are we now about to see the real house price crash?

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http://www.independent.co.uk/news/business...ry-1703241.html

This article has already been posted by Interest Rate Rip Off, but I felt a separate subject was worthwhile for a separate branch of the discussion, as to where we are in the bubble cycle. The article talks about how rising bond yields should perhaps be seen as a "return to normality".

Now I think it is pretty clear that in the past 2 months there has been a kind of mini bounce in house sales, with many going Sold STC and under offer, though of course many of these deals could still fall through due to a lack of mortgage lending. But those deals aside, I am now seeing increasing evidence this month on property bee of more homes hitting the market and further price reductions, so it looks like the bounce has ended.

These two observations perfectly fit the life-cycle of a bubble chart that has been posted on this site many times before. I have attached it again here for reference.

What are people's thoughts on this? Are we now about to see the real house price crash?

What do you think the responses are going to be? For most, another 40-60% further drops is on the cards.

Needless to say I do not share this view. At most another 5% although as it stands, we are in the recovery stage.

A simple rational for my view is that most sellers will not sell for the above 40-60% quoted, unless being forced to.

So the dream is still on..........................

Edited by Valerius

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http://www.independent.co.uk/news/business...ry-1703241.html

Now I think it is pretty clear that in the past 2 months there has been a kind of mini bounce in house sales, with many going Sold STC and under offer, though of course many of these deals could still fall through due to a lack of mortgage lending. But those deals aside, I am now seeing increasing evidence this month on property bee of more homes hitting the market and further price reductions, so it looks like the bounce has ended.

These two observations perfectly fit the life-cycle of a bubble chart that has been posted on this site many times before. I have attached it again here for reference.

What are people's thoughts on this? Are we now about to see the real house price crash?

No, I don't think the HPC will gather momentum yet. It will take a few more months before the higher rates (whether BoE or Lender-driven) kick in, and the grey skies dampen enthusiasm. My bet is that the stats (i.e. Haliwide/LR) will show small rises for the next 3 months - don't forget these lag - then a bottoming out in September/October, followed by a return to subtantial month-on-month falls from November onwards.

The advice has always been: If you're a seller, sell in Spring/Summer, if a buyer, buy Autumn/winter.

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First off how dare you put spaces in MY NAME!!!!! :P:lol::lol:

Lenders Rush To Raise Fixed-rate Mortgages

It would seem that if we are going to haven another leg down it's been set up nicely.

Even though volumes are down, sales are reported as happening.

Vendors hold out for asking price

Confidence is growing that asking prices can be met.

We have been drip fed some very good news that the "recovery" is here.

It also seems likely that perhaps the GDP figures could have been seen as positive this quarter.

So we could certainly be in a position to claim normality has returned and the worst is over.

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What do you think the responses are going to be? For most, another 40-60% further drops is on the cards.

Needless to say I do not share this view. At most another 5% although as it stands, we are in the recovery stage.

A simple rational for my view is that most sellers will not sell for the above 40-60% quoted, unless being forced to.

So the dream is still on..........................

Valerius, I detect a sense of concern in your writing? In all seriousness the paths taken by most bubbles are pretty similar, I have been suckered in before to things like the dot com rally and now I get the same feeling about the housing market.

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What do you think the responses are going to be? For most, another 40-60% further drops is on the cards.

Needless to say I do not share this view. At most another 5% although as it stands, we are in the recovery stage.

A simple rational for my view is that most sellers will not sell for the above % I quoted, unless being forced to.

So the dream is still on..........................

And what about all the mortgage resets in 2010 and 2011? What about the 100,000 people a month who will be losing their jobs over the next year? What about the broken political establishment?

Rising bond yields...

Broken financial system...

Flight of foreign investment capital...

Retiring boomers...

Record personal debt...

Record government deficit...

Etc..ad naseum

Having you repeat the same tired old mantra and fuzzy statistics like a captains parrot wears pretty thin on the forum you know. Try looking at the greater economy, the true indicators, and use some reasoning.

Basically, stop this:BeatDeadHorse.gif

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What's currently going on is a fluorescent yellow net has been laid down attached, with a fluorescent orange rope, to a tree. Around the tree is a sturdy fence that on top of which sits flashing neon sign that says 'warning this is a classic bull trap - do not walk into'.

Despite all this, many do seem intent on walking into this classic bull trap.

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What do you think the responses are going to be? For most, another 40-60% further drops is on the cards.

Needless to say I do not share this view. At most another 5% although as it stands, we are in the recovery stage.

A simple rational for my view is that most sellers will not sell for the above 40-60% quoted, unless being forced to.

So the dream is still on..........................

Another 40-60% is NOT on the cards. However, another 20-25% off today's prices could be, if interest rates rise (as they will).

How can you say we are in the "recovery stage"?

Ok, so (some) houses are selling at the moment. That is hardly a surprise, given that it is spring/summer, and there is undeniably an element of pent-up demand. However, with unemployment rising by unprecedented amounts (and set to continue for the forseeable future) and the recent rise in interest rates from major players in the mortgage markets, on what basis can you say that we are in "recovery"?

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Valerius, I detect a sense of concern in your writing? In all seriousness the paths taken by most bubbles are pretty similar, I have been suckered in before to things like the dot com rally and now I get the same feeling about the housing market.

Mike, I am not concerned about the alarmist comments here. Actually I found them funny.

One thing to remember, should house prices drop by let say 50-60% overall peak to thru, this will take the whole financial system as we know it down with it.

But this is fantasy land anyway.

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Mike, I am not concerned about the alarmist comments here. Actually I found them funny.

One thing to remember, should house prices drop by let say 50-60% overall peak to thru, this will take the whole financial system as we know it down with it.

But this is fantasy land anyway.

would you care to reply to my post???

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Another 40-60% is NOT on the cards. However, another 20-25% off today's prices could be, if interest rates rise (as they will).

How can you say we are in the "recovery stage"?

Ok, so (some) houses are selling at the moment. That is hardly a surprise, given that it is spring/summer, and there is undeniably an element of pent-up demand. However, with unemployment rising by unprecedented amounts (and set to continue for the forseeable future) and the recent rise in interest rates from major players in the mortgage markets, on what basis can you say that we are in "recovery"?

Confidence is returning in the market, albeit slowly.

Manufacturing output is up

Growth is returning, small one OK, but the economy has stopped contracting.

Banks capital have improved.

Mortgage approvals have been on the up for the last 3 to 4 months

Is this not recovery? Not everthing is back on track (yet) but we can say the worse is behind us.

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Another 40-60% is NOT on the cards. However, another 20-25% off today's prices could be,

Yes, that's what we are looking at.

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Mike, I am not concerned about the alarmist comments here. Actually I found them funny.

One thing to remember, should house prices drop by let say 50-60% overall peak to thru, this will take the whole financial system as we know it down with it.

But this is fantasy land anyway.

Hi, sorry to be naieve here. I am quite new to the site. How will the 50-60% overall decrease take down the financial system?

Thanks

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Mike, I am not concerned about the alarmist comments here. Actually I found them funny.

One thing to remember, should house prices drop by let say 50-60% overall peak to thru, this will take the whole financial system as we know it down with it.

But this is fantasy land anyway.

Valerius, I agree entirely that a 50-60% drop would take the financial system down. This would certainly not be permitted, because at the end of the day money is just tokens, and the Government would just print us out of total collapse. That said, further 20-25% drops, giving us a total fall between 36 and 45% are totally feasible. The banks have been stress tested to that level and frankly the lever of low interest rates is neither subtle, accurate or effective against a massive debt deflation. QE on the other hand would be effective against debt deflation, but the amount of QE is being strictly limited and in all honesty fear of QE is what will drive up bond yields so that is having to be used more sparingly.

My strong feeling is we will now see another series of declines over the summer holidays and into the winter, probably another smallish bounce next spring followed by another 2-3 years of little or no growth before the next cycle starts sometime around 2012/3.

Edited by mikelivingstone

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Hi, sorry to be naieve here. I am quite new to the site. How will the 50-60% overall decrease take down the financial system?

Thanks

Hi Kara gee

I guess the simple answer is that the banks that made the housing loans would find that the mortgagees in negative equity would start going bankrupt or defaulting on loans. This is what caused the banking crisis in the first place. People borrowed more than they could repay.

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Hi, sorry to be naieve here. I am quite new to the site. How will the 50-60% overall decrease take down the financial system?

Thanks

Because banks capital adequacy ratios would be destroyed. A fall of 15% almost took out the banking system, requiring huge government intervention.

A fall of 60% would be, well, cataclysmic. Complete financial armageddon that would snowball out of control into the rest of the economy. No sector would be safe, no job would be safe, no money in a bank would be safe.

The best case scenario from such falls would be Britain resembling a failed Soviet state circa 1990...... Failed state, failed support systems, failed social safety net, massive unemployment, homelessness, some people literally scavenging for food to survive.

The worst case scenario is a complete breakdown of law and order, anarchy and lawlessness, mass starvation, disease, and death. Think inner city detroit but worse, 40% to 50% unemployment, a murder rate dozens of times higher than the UK's today, armed gangs on the streets, and thats in the nice parts!!!!!!!!!!!!!

The people on here dreaming of such falls, would find that if they occurred, the price of houses would be the least of their worries. In large parts of the UK, avoiding getting killed for a can of beans might be a more pressing concern.

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A fall of 60% would be, well, cataclysmic.

Yes, but I wouldn't worry about it because prices are only going to fall another 25%.

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Because banks capital adequacy ratios would be destroyed. A fall of 15% almost took out the banking system, requiring huge government intervention.

A fall of 60% would be, well, cataclysmic. Complete financial armageddon that would snowball out of control into the rest of the economy. No sector would be safe, no job would be safe, no money in a bank would be safe.

The best case scenario from such falls would be Britain resembling a failed Soviet state circa 1990...... Failed state, failed support systems, failed social safety net, massive unemployment, homelessness, some people literally scavenging for food to survive.

The worst case scenario is a complete breakdown of law and order, anarchy and lawlessness, mass starvation, disease, and death. Think inner city detroit but worse, 40% to 50% unemployment, a murder rate dozens of times higher than the UK's today, armed gangs on the streets, and thats in the nice parts!!!!!!!!!!!!!

The people on here dreaming of such falls, would find that if they occurred, the price of houses would be the least of their worries. In large parts of the UK, avoiding getting killed for a can of beans might be a more pressing concern.

I have never read such total boll****s in my life!!!

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I have never read such total boll****s in my life!!!

What's your take on millions of homeowners defaulting on their loan due to massive NE following a 50% fall?

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What's your take on millions of homeowners defaulting on their loan due to massive NE following a 50% fall?

Why would anybody default on their loan simply because they were in NE?

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What's your take on millions of homeowners defaulting on their loan due to massive NE following a 50% fall?

My take: The majority of homeowners will not HAVE to sell. They will not "default on their loan due to massive NE". Negative equity does not result in loan defaults. These people have a HOME which, for the time being, will be worth less than they paid for it. These people will not sell. They will remain in their HOMES (not "profit bases").

Defaulting on home loans has **** all to do with negative equity, and EVERYTHING to do with a) losing their jobs, B) higher interest rates etc. etc.

Hmmm...

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I'm not so confident more big, big falls aren't on the cards.

Banks lending abilities will be under huge pressure from the corporate loans and commercial property rout. Not worth going into detail now but, it'll spill over and affect their ability to lend to private individuals.

I envisage a point where the average two adult household seriously struggle to achieve a gross income of £25k. To prevent a very big HPC you've got to have wage inflation. There'll definitely be significant commodity inflation but, it can't be guaranteed in the absence of serious private sector union power that it'll force wages up rapidly.

Interest rates will *have* to go up at some point and more if there's significant inflation.

To keep house prices up you've got to force wages up, which'll force interest rates up. Forcing interest rates up means an end to the en masse debt repayment interest freezing schedule the govt have arranged though fiscal policy. With this scheme removed the debtors can't stand on their own two feet it still means mass default and house prices forced down. There is no win, it's snookered.

The economy is in stasis, in order to prevent current debtors defaulting. Any attempt to get it moving again will turn those loans bad.

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What's your take on millions of homeowners defaulting on their loan due to massive NE following a 50% fall?

Assuming they can scrape the repayments they in effect become non-participatory economic zombies. If they can't it goes bad. However, it's a big leap to assume destroyed banks means a Mad Max scenario. It only means that if govts through their own self-interst continue to bail them out.

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Yes, but I wouldn't worry about it because prices are only going to fall another 25%.

It's all academic as I'm pretty sure they stopped marking to market for exactly that reason.

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