Bewareftb Posted July 22, 2009 Share Posted July 22, 2009 This is my first post; I have been following this site for a number of years now. I believe housing in the UK is still vastly Overvalued and is due a further drop of at least 20% more in some high unemployment areas. I think a very important point to make is that according to the land registry house prices are still falling albeit slower than They were asking prices are meaningless. I believe what is happening at the moment is the people who were waiting for A bottom have jumped in this includes some people with large deposits. This will not last and cannot be sustained over the course of the year, my question is this what are these people going To do when interest rates rise I just hope for their sake they can still make the payments if interest rates rise to lets say 6% which will happen as soon as the world economy recovers and oil led inflation returns due to china. For my fist post I want to explore the correlation between unemployment and house prices because from the research I have done falls in house prices do not stop until unemployment stops rising and then stagnates for a couple of years. http://chartingtheeconomy.com/?page_id=206 "This analysis clearly shows a correlation between employment and housing in the examined markets. Next, it shows that Unemployment peaked before home prices bottomed. Given that most economists believe that unemployment has not peaked In the current crisis, this analysis tells us that housing prices most likely have farther to fall" If unemployment peaks at 3.5 million in mid 2010 then prices will continue falling until then and will probably then stagnate For a few years. I have a lot of respect for Fred Harrison who has correctly predicted the crash and got the timing correct as well. He still thinks there are more falls to come by the way and if the whole system is not changed then the whole Boom bust will happen all over again In summary prices need to fall 20% overall. In high unemployment areas they could drop by up to another 30% people Without jobs cannot buy houses or pay mortgages. The falls may end in mid 2010 or continue for a few months after This. Houses will become cheap again and average people will be able to buy them again. Quote Link to comment Share on other sites More sharing options...
Orinoco Posted July 22, 2009 Share Posted July 22, 2009 Welcome. Good post - it would be interesting to see a UK unemployment / Haliwide comparison over the last 25 years - I'd guess that would provide food for thought for a few bulls! Shame I'm too busy / lazy to do it really.. Quote Link to comment Share on other sites More sharing options...
NotMyHouse Posted July 22, 2009 Share Posted July 22, 2009 Cracking first post. Where's Hamish when you need to ram something where the sun don't shine? Quote Link to comment Share on other sites More sharing options...
Sonic the Hedge Fund Posted July 22, 2009 Share Posted July 22, 2009 "This analysis clearly shows a correlation between employment and housing in the examined markets. Next, it shows that Unemployment peaked before home prices bottomed. Given that most economists believe that unemployment has not peaked In the current crisis, this analysis tells us that housing prices most likely have farther to fall" Welcome to the forum Note that the analysis relates to the US, in the UK the welfare system changes the rules somewhat. A combination of ultra low IR and mortgage assistance is holding back the fire sales, and LHA is propping up rents to a certain extent. But house prices and rents have fallen despite massive state intervention, and of course it can also be argued that the current level of welfare is unsustainable. Quote Link to comment Share on other sites More sharing options...
spivT Posted July 22, 2009 Share Posted July 22, 2009 . A combination of ultra low IR and mortgage assistance is holding back the fire sales, and LHA is propping up rents to a certain extent. could be argued that US also ultra low IRs via fannie/frediie and mortgage assitance from the govt. exists in the US. Although doesn't seem to have prevented the fire sales. Quote Link to comment Share on other sites More sharing options...
the_duke_of_hazzard Posted July 22, 2009 Share Posted July 22, 2009 Both employment levels and house prices are functions of the availability of credit. One is business sector froth, the other private sector. But obviously employment confidence precedes the confidence to borrow so it's the leading factor. Quote Link to comment Share on other sites More sharing options...
Fudge Posted July 22, 2009 Share Posted July 22, 2009 How Job Losses Affect House Prices Quote Link to comment Share on other sites More sharing options...
Bewareftb Posted July 22, 2009 Author Share Posted July 22, 2009 How Job Losses Affect House Prices It would be good for someone to put that sort of info in a graph. But seriously the crash is by no means over housing is just way too overvalued for that. I look at wages and there are still no where near the levels that they need to be for people to "AFFORD" housing, by afford I mean 3.5X salary not this complex affordability rubbish that got us into this mess in the first place. Public sector borrowing is going to either be reined in or we will need much higher taxes either way it's going to hurt the economy. I think the USA will be probably fall a little more then stagnate for a while before the next bubble I suspect it will be in green energy or something other than housing. But the UK the crash has further to go unless massive wage inflation comes along which just isn’t going to happen any time soon. Quote Link to comment Share on other sites More sharing options...
meedge Posted July 22, 2009 Share Posted July 22, 2009 The point is, I think there's a chance rates will not rise for a very long time. The next government will slash and burn large parts of public services, and may get control of debt in time to not be punished by higher bond yields, and the continued downturn in business may make bonds more attractive. QE may start again but be less maligned with a clear repayment plan for UK. Inflation will be significantly above the official interest rate. This means nominally house prices go nowhere, in real terms the hope will be that inflation eats away at them. Anyone in cash gets screwed. It will all take years and years to resolve. Quote Link to comment Share on other sites More sharing options...
Moley Posted July 22, 2009 Share Posted July 22, 2009 "For my fist post" Not sure about that at all. Quote Link to comment Share on other sites More sharing options...
D.C. Posted July 23, 2009 Share Posted July 23, 2009 Welcome Bewareftb, good that you stopped lurking! How do you make a prediction for percentage falls still required though if your premise is that rising employment is required before a HPI can take off? Surely as long as people are losing jobs, the price of housing is going to carry on falling regardless of what percentage drops there have been? Quote Link to comment Share on other sites More sharing options...
aa3 Posted July 23, 2009 Share Posted July 23, 2009 We lost a net of 280,000 jobs in the last quarter. To put it in perspective the active duty armed forces of the UK is 202,000 people. Quote Link to comment Share on other sites More sharing options...
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