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Housing Is Turning The Corner

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http://business.timesonline.co.uk/tol/busi...icle6633069.ece

These are hair-shirt times. Financial gloom is the fashion. No one can publicly admit to seeing the bright side without inviting ridicule and scorn. In January, Baroness Vadera, the Treasury Minister, was derided when she claimed to discern signs of faint green shoots. Since then, public figures have responded to any positive sign with the utmost caution.

Even in the hype-filled housing market, sentiment has been subdued. Nationwide Building Society this week reported the fourth successive month of house price rises. Even after seasonal adjustment, the quarter-on-quarter trend was significantly up. Yet no one has felt ready to suggest that prices might actually have bottomed out.

As recently as last week, a Reuters poll of City economists found that they expect house prices to drop overall by 8 per cent this year, on top of the 16 per cent slide in 2008. If those analysts are to be proved right, prices therefore still need to drop by 8 per cent in the next six months because so far they are almost unchanged from last December. So the consensus is for steep falls this autumn.

The housing bears say that the market is driven by first-time buyers and first-time buyers can’t get mortgages. Therefore, prices will slide. But the market could equally be said to be driven by last-time sellers — people trading down to smaller properties as their children leave home or they retire. It is this army of natural sellers who are declining to do the natural thing and trade down. Why? Perhaps because they can’t see a better place for their money than property. Deposit accounts yield next to nothing. Bonds are for the politically naive. This, after all, is the generation who lived through the inflation of the 1970s and 1980s and know the fatal flaw in fixed-income securities.

And they have understandably lost faith in shares and share-linked products, such as pensions and endowments. The chart, right, emphatically tells why. Total returns from shares (dividends plus capital gains) have collapsed in the past 25 years. The chart shows smoothed returns over the previous ten years. So, for example, the first bar shows that annual returns in the decade to 1986 averaged 15 per cent. The last bar shows that average annual returns in the ten years to 2008 were negative.

For want of anything better, natural sellers of property are holding off, or trading down but buying other properties for their children or grandchildren. Returns from other asset classes would have to pick up markedly for that mindset to change. Property is still pricey on many historic measures, but people understand it and embrace it as the one investment category that they can control and manage themselves without the loathed and mistrusted financial services industry taking a cut.

At the risk of doing a Vadera, I will stick my neck out and suggest that house prices have already bottomed out, that February will prove to have been the low point for the residential property market (average selling price £147,700) and that we are already five months into the start of an up cycle — albeit a patchy, anaemic one.

Nothing is more important to economic recovery than stability in house prices. I am not one of those who believe that high property prices are a good thing; joy over the rocketing cost of shelter is one of the puzzles, and societal delusions, of the modern age. But having got here, the last thing the economy needs is a return to lower prices. Stability, with prices rising in line with wages, is what is needed.

Stable prices would have two immeasurably beneficial effects for the wider economy. They would boost consumer confidence and they would dramatically strengthen the battered banking sector — and, by extension, the dreadful public finances. After job security, nothing helps to lift consumer spending like appreciating (or at least non-depreciating) home values. These values also underpin the entire banking industry, because most loans are secured on property. It is not borrower defaults as such that hit banks; it’s defaults by borrowers in negative equity. Any rally in property prices will save the banks billions in potential losses averted.

That not only preserves capital, which can then be used to back other loans. It also reduces the risk to the Government, which has in two years handed out £1,260 billion in loans, guarantees and equity injections to bail out Britain’s banks and building societies.

There are few things economic to be thankful for just now, but our stubborn, sometimes perverse, love of residential property is one of them.

Please no ridicule and scorn.

Seriously don't mention anything like unemployment or debt in any rebuttal. Serious points only please.

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some good comments..

It's almost as if many commentators believe there's some sort of hardcore group of buyers out there surviving on old re-runs of Location, Location until they FINALLY get to be home"owners" with nothing more pressing to do than picking out soft furnishings.

This correction has LEGS, people !

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Its not about ridicule and scorn, its just those people who say this stuff have long and proven track records of being wrong. The media may continue theyre love-in with them, but i wont listen until some of the guys who saw this sh1tstorm coming start to say weve turned the corner.

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Guest KingCharles1st

I totally agree-

Housing is turning the corner- unfortunately NOT the corner many would like to think, but its one that leads

D

O

W

N

.

.

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Guest KingCharles1st

"At the risk of doing a Vadera, I will stick my neck out and suggest that house prices have already bottomed out,"

:lol::lol::lol::lol::lol::lol::lol::lol::lol::lol:

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http://business.timesonline.co.uk/tol/busi...icle6633069.ece

Financial gloom is the fashion. No one can publicly admit to seeing the bright side without inviting ridicule and scorn. In January, Baroness Vadera, the Treasury Minister, was derided when she claimed to discern signs of faint green shoots. Since then, public figures have responded to any positive sign with the utmost caution.

Please no ridicule and scorn.

Seriously don't mention anything like unemployment or debt in any rebuttal. Serious points only please.

Yes since the G20 meeting and the decision to pump posstive vibes around the World we have not heard anything other than doom and gloom. Or was that green shoots after green shoots whilst the powers that be try and manipulate every key indiacator to paint a picture of recovery.

Meanwhile in the real world people are facing the consequences of a collapsing econmy, but hey lets talk about house prices bouncing back up despite only just getting down to the level of unaffordability reach at the peak of the last bubble. :lol::lol::lol:

Have some of this for greenshoots in America.

nfp.jpg

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your avatar is ringing bells... what is it?

i got the last one (Water Margin)... but the new one

It's 'Baby Huey' 70s soul star with an amazing voice, from the Curtis Mayfield stable.

He was morbidly obese due to a "glandular disorder" died very young.

http://en.wikipedia.org/wiki/Baby_Huey_%28singer%29

Not specifically hpc related (although somes titles are), but covered some great Curtis tunes in his own way like

mye personal fave :

Listen to me

http://www.youtube.com/watch?v=MRTPRv2bBCc

'Hard Times'

http://www.box.net/shared/static/4s7fto9r4n.mp3

and 'Mighty Mighty Children'

http://www.youtube.com/watch?v=7e_KH97BSr0...feature=related

and earlier

'Just being Careful'

http://www.youtube.com/watch?v=Qzb3dg7mrl0

His greatest hits is superb

http://www.amazon.co.uk/s/ref=nb_ss_w_h_?u...p;x=13&y=16

Edited by Saving For a Space Ship

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http://business.timesonline.co.uk/tol/busi...icle6633069.ece

Please no ridicule and scorn.

Seriously don't mention anything like unemployment or debt in any rebuttal. Serious points only please.

The problem with most house price indices is that they do not give data on actual price paid for houses in a timely way. Nationwide and Halifax use mortgage offer prices which increasingly differ from the price paid. Also many use small samples of data. Rightmove use asking prices which is perhaps an index of vendor greed. There are too many variables to gauge the real story.

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The housing bears say that the market is driven by first-time buyers and first-time buyers can’t get mortgages. Therefore, prices will slide. But the market could equally be said to be driven by last-time sellers — people trading down to smaller properties as their children leave home or they retire. It is this army of natural sellers who are declining to do the natural thing and trade down. Why? Perhaps because they can’t see a better place for their money than property. Deposit accounts yield next to nothing. Bonds are for the politically naive. This, after all, is the generation who lived through the inflation of the 1970s and 1980s and know the fatal flaw in fixed-income securities.

But leaving your wealth in property isn't an investment for your own future, it's really an investment in the government's (inheritance tax) and any offspring's future. If I was knocking on 70 and had an asset worth half a million, I wouldn't feel rich, particularly as the most likely reason I would need to draw on this "wealth" would be to fund health care. It's the huge misnomer of "your home is your pension" that refuses to die. It's just somewhere to live and something to maintain and keep in good repair.

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Yes, but why would house prices stabillise, unless they're going back to a trajectory that is simply stupid and unsustainable? I've been looking at property in the South East, and the sort of money that would buy you a brand new FOUR bedroom detached house 12 years ago, will barely buy you a ONE bedroom flat now!

Do the maths. :O/

Tiburonsmoke

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we have an election coming up soon. That is the only reason interest rates are so low - political pressure, not economic pressure - once they start to rise again, there will be more problems.

Call it a 'sweetspot', 'eye of the storm', whatever, this is just temporary. Even the EAs are saying that the rise is too much and too soon and prices still have lower to go.

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Seriously don't mention anything like unemployment or debt in any rebuttal. Serious points only please.

[/quote]

Why not mention them? They are the reason why house prices WILL NOT rise significantly for the forseeable future. This is a very "serious point".

Edited by DownsizingDiva

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