Asking Prices At 2007 Prices

[DementedTuna]

but also by the banks' reluctance to force repossessions. As they repair their balance sheets their tolerance of mortgage defaults will inevitably decrease.

Interesting point about the repo tolerance, its an observation that I haven't come across on this site before. Thanks.

[Guest Daddy Bear]

I'm right with you there. Have been angry all day - in fact, I'm sick of feeling angry. A negative figure from haliwide this month will quell my fury a little, but I suspect it will be positive, so I will remain absf***inglutely f***ing b**tard furious.

Seriously I cannot sympathise enough.

This has gone so far beyond House Prices.....

This should have all gone "pop" in 2001/02 - the bursting of the dot com (credit 1) bubble (as well as inflated UK property)

They reinflated massiveley

Kept it going for 5 more years - each year I grew more incredulous and more convinced it would end in catastrophe - and a massive deflationary depression bust.

I ADMIT I WAS WRONG.......

I now know there can only be one final outcome.

Edited July 26, 2009 by Daddy Bear

[911-caused-it-all]

NO I AM NOT A TROLL - just lucky to have seen it all coming

YADDAH YADDAH YADDAH.

Mate I had all this from the property bulls back 2005 - 2007 when I posted this...

What do you say to that?

Ok I get your drift mate - if you STR'd in August 2007 when are you going to be jumping back in then?

I just feel like from you signature you're possibly enticing people to buy sooner rather than later by scaring them about the widespread inflation we 'may' face - which potentialy has the same effect as property ramping.

I'm just sitting on cash only so don't appeciate getting un-nerved but glad to hear you're renting also. If I haven't brought a house before long (which my instincts say not to) I'm considering investing in some ETF's by the middle of next year as an inflation hedge.

Seriously how risky is not buying in the next 12-18 months due to this potential onset of high inflation leaking through to house prices?

EDIT to add this bit...

I personally think we'll see the real HPC start kicking in about a year after the next general election.

Edited July 26, 2009 by 911-caused-it-all

[scottbeard]

I could not believe that vendors are now pricing their properties at peak 2007 plus around �20k for good measure!!! My elderly aunt in Leamington Spa has also sold her detached house for asking price in five days, she stated that she was "inundated" with offers. Where the hell is the money coming from? This is surely complete and utter lunacy.

Asking prices are a funny old thing - most people add a bit on for good measure, expecting to be knocked back. Now peak 2007 +20k might be pushing their luck, but have you actually tried coming in with an offer 15-20% below that and seeing what people say? The worst they can do is say no.

Perhaps your aunt was either lucky or maybe priced the house low: I wouldn't assume that everyone genuinely expects to get the asking price.

That said, some people seem to list their house for sale virtually permanently at an inflated price on the grounds that if someone is willing to pay that price they're quids in, and if not they just stay happily living there.

[Dopamine]

Seriously I cannot sympathise enough.

This has gone so far beyond House Prices its no joke.

This should have all gone "pop" in 2001/02 - the bursting of the dot com (credit 1) bubble (as well as inflated UK property)

They reinflated massiveley

Kept it going for 5 more years - each year I was more incredulous and more convinced it would end in catastrophe and a massive deflationary depression bust.

I ADMIT I WAS WRONG.......

I now know there can only be one final outcome.

Agree - although how do you see a bond collapse being triggered. It seems that only china can do it, in which case I can't see how it would be seen as anything other than an act of war.

[helenreed]

Regarding original query on Leamington Spa, I can report that the AHDB (Agriculture, Horticulture, Potato Council, Dairy Council, Meat Marketing) have all just moved into Stoneleigh Park from Swindon, Oxford, Milton Keynes, Maidstone so that they are all housed under the same roof. They are in temporary office accommodation and are building huge new offices to house hundreds of people. Leamington Spa must be a sellers paradise at the moment. I personally gave out property details for short term lettings and purchases in the last three/four months to lots of relocaters.

All public sector funded in part by levies on the industry.

[Guest The Relaxation Suite]

I've seen the same kind of magic mushroom induced pricing in Oxford tonight.

Just drove past a 3-bed terraced house in a reasonable part of Cowley, Oxford (maybe not so reasonable if you saw the truth about crime on bbc 1 last week), they are trying to do a quick flip.

Previously sold for:

£305,000, Terraced, Freehold, Not New Build - 05-Jan-2009.

Currently advertised for:

£495,000.

It's a 3-bed terraced house FFS! Clearly no one will buy it at this price.

It still feels like we're in the phoney war, queue the image often quoted on here of Wille-E-Coyote off the edge of the cliff with his legs still going for a few gravity defying seconds before he plummets. Interest rates going up will shortly help gravity kick in.

Oxford's always been grotesquely over-prices because so many of the houses are owned by Chinese and Pakistani millionaires who buy them for their kids to live in while at uni. As for the general trend, by any objective, sensible measure, houses in the UK are still 40% over-valued and this will right itself sooner or later no matter how much governments of the world collude to keep land prices over-valued.

[Guest Daddy Bear]

but glad to hear you're renting also.

sorry fella that's a negative.

Bought at 32% below peak 2 months ago. 10 year fix at 4.99% on very low leverage.

The deal was right for me and my family- the potential downside far outweighed the upside of staying liquid.

Do not let my rantings influence you !!!

READ READ AND READ.

I just feel like from you signature you're possibly enticing people to buy sooner rather than later by scaring them about the widespread inflation we 'may' face - which potentialy has the same effect as property ramping

I'm flattered that you think I can ramp the UK property market.....

does not matter to me if porices fall or rise.

In fact i would prefer them to fall for the next 10 years and rise in line with earnings for the future generations sake.....

Sadly this will not happen

[Number79]

sorry fella that's a negative.

Bought at 32% below peak 2 months ago. 10 year fix at 4.99% on very low leverage.

The deal was right for me and my family- the potential downside far outweighed the upside of staying liquid.

Liquid? how is chaining yourself to an asset that can not be moved or hidden classed as liquid? I am not arguing with your decision and am glad that you are comfortable with your decision but how the hell can you believe that buying the most iliquid asset of all time is 'staying liquid'?

[Guest Daddy Bear]

Agree - although how do you see a bond collapse being triggered. It seems that only china can do it, in which case I can't see how it would be seen as anything other than an act of war.

I am sure you have read my posts before - I get slagged alot for reposting but do I give a fu*K?

POST 1

Where are we at the moment?

Those in the West (esp. US/UK) are in massive personal debt and massive government debt. Governmnet deficit spending is gigantic. Trillions and Trillions of £/$ - The greatest % of GDP ever. We have borrowed and are continuing borrowing money in the bond markets from international investors to pay for our government spending, consumer spending and also to pay the interest on the money we have borrowed.

What are we doing with this money?

Buying consumable crap and supporting the Public Sector & Social Security System.

This cannot continue. We need to pay our creditors back.

We can do this - but it will take time. How ?

Raise Taxes, reduce social security, cut government spending, reduce government departments and contract the public sector hugely. Allow inefficient businesses to go to the wall and defaults to occur. Raise Interest rates and allow unemployment to skyrocket. Invest in research and technology for manufacture of saleable products. Invest in infrastructure that provides yield. This will result in our economies becoming more lean and efficient, allowing us to pay back our creditors over the next 10 - 20 years or so, thereby working off the last 15 years of consumption.

Would 'the people' keep a government in power for long if they said this is what they are going to do? I don't think so - Would you?

There is another alternative

We could Default on our Debt

How could we do this?

1. Do not pay our creditors.

2. Print Money and pay our creditors using a currency which is worth alot less.

What option will they choose? Well I reckon option 2 is highly likely. If I can work this out then sooner or later the Chinese/Japanese (bond purchasers/foreign investors etc) will too. To be honest I think they have worked this out already and are pondering their next move. Eventually they will decide not to loan us the money (buy bonds) for us to purchase their consumable crap to keep their workers in jobs...but instead give their money directly to their own people instead to buy their own goods.

So in summary there will be vastly fewer buyers for US/UK government bonds. As I have forecast a long time ago the US/UK bond market will collapse.

What will our governments (Central Banks) do?

The Fed et al. will have to buy their own governments bonds. How will they do this? Answer "Print Money". THEY ARE DOING THIS NOW - it has only just begun. As a number of central bank leaders have said " we will do whatever it takes...." This will result in the collapse of the US Dollar and UK Pound. Welcome to a currency crisis that when it happens may deteriorate very quickly. As the dollar/pound collapse all imports will rocket in price, the outcome will be high consumer prices of all goods (imported and home produced), already we can see this occurring in food etc. Within a certain time period lag (6 - 18 months of a big consumer squeeze - happening now) wage inflation will become a necessity. A Wage Spiral will occur. Interest Rates will have to rise. The $ and £ will collapse further. More and more people will be out of work (receiving printed money social security), and interest rates will be steadily climbing.

Stage 2

Eventually there will be ZERO creditors who will lend the US/UK money - due to inflationary default - the Fed and BOE will have to print more and more money to buy their own government bonds to keep interest rates down, in order to finance government deficit spending to pay for the social security (to limit civil unrest) and the public sector (to keep people in 'jobs').

So where will this end?

I fear Hyperinflation will occur.

As I have said many times before a "TIPPING POINT" will arise. The population of these economies will not want to hold on to this "printed money". They will lose confidence in the currency they are paid in - dollar/sterling. For example a state employee e.g. a teacher will want to spend his £4,000 monthly wage salary very quickly - as they can see their monthly salary was £3,000 6 months before, £2000 6 months before that - but back then bread was only £2 a loaf...its now £8. VELOCITY of money will pick up exponentially. The huge quantities of money that have been printed over the previous year or so will now result in Hyperinflation.

What will the Governments do? What will our lives be like?

The specifics... who knows? No doubt they will introduce emergency laws, taxes on assets, rules on spending, rules on access to money in banks, price controls. They may make it illegal to hold other currencies, to buy, hold or transact in gold. There may be energy supply problems, 3 day working week...most certainly civil unrest and new state controls on demonstrations.... only time will tell.

How long have we got until the Bond Market Collapses?

It could be as early as April 2009 or it may take much longer. Early 2010..... I do not know. I think the probability that it will happen within a year or so as very high.

Remember nothing is 100% guaranteed.

POST 2

Since late 2007 money has been fleeing to the safety of US treasuries. A bubble has formed. It has been a flight to quality.

Originally it went into internet stocks, then housing, then commodities/stock market, then banks on deposit and now finally govt. bonds.

There is no way all these investors in US treasuries can be paid. However the capital value of the resale of the Treasury note has increased. Soon like the housing bubble there will be a dash for the exit. The government will have to raise IR's to prevent this.

Unless the government is engineering a collapse in the bond market?

Added to this that China, Japan, Saudi Arabia have their own collapsing economies to bail out - why would they continue to lend their cash to the US?

China et al. will put up with buying US treasuries for a while, but once they stop buying and start dumping them on the market the US dollar will collapse. This collapse will drive down the market to early 80's levels - and consequently IR's will go to where they were in the early 80's. Expect IR's in region of 15 - 20%.

Big problem is where will the cash go next? Only solution is to destroy the value of this cash. There is no safety - apart from assets or gold?

If the government is unable to sell bonds to finance govt. spending they will have to raise taxes, steal pension money, reduce state spending.... BUT WE KNOW THEY WILL NOT.

They will MONETIZE the debt. Printing is their only way out. They will print money and buy their own debt. The dollar will collapse.

It is not a question of "IF" but "WHEN?"

I suppose historically we are about in 1931. The difference is last time the money was used to prop up productive competitive infrastructure. This allowed the debt to be paid off over the next 20-30 years. This time the infrastructure is not competitve. We cannot produce our way out of it.

Finally what really worries me is that so far the US have pumped in about $9.7 trillion dollars into monetizing the debt. The outstanding value of US mortgages is about $10 trillion dollars. Surely the problem should be sorted by now?

Unless of course a percentage of the $100 trillion dollars of outstanding Derivatives could unwind due to defaulting of counter-parties ?

POST 3

More thoughts on why the bond market will collapse

All Bubbles Deflate - never slowly or orderly.

The US treasury Market is in a Bubble.

The longer the US treasury Market remains in a bubble the greater the pop.

The more debt the US issues to China...middle east...etc the tighter the available credit for other markets - e.g. emerging markets....Europe...E Europe...Russia....

For an investor to invest in these other riskier markets they will want higher and higher yields. They have been seeking 'perceived safety' in US treasuries. The high yields that have to be given by places like Hungary, Eastern Europe ...the UK !! will cripple the financial system of these countries. Basically what I am saying is the increasing US treasury bubble is strangling credit elsewhere.

Investors are in US treasuries for SAFETY......not yield or the normal economic fundamentals. FEAR is the major driver of this bubble. (not the usual GREED). Eventually a reassessment will HAVE to take place....because basically the US economic model is collapsing......a dawning of reality will take place. This is what I call my TIPPING POINT.

The rush to the exit will be towards Oil, Commodities...even housing.

This is because these assets have been repriced recently ...they look fair value, or at least give the potential for some yield.

If you do the research you can see that the rate of purchasing by China of US treauries has slowed since 2007- they have been buying assets instead. When this originally occurred the dollar weakened and oil went ballistic - from $50 to $150. Admittedly it then collapsed when the projected demand dropped off a cliff with the global slowdown.... recession.

Do the research and you will see that China has stated that Gold and other investments are preferable to the US DOLLAR $. China knows they face an inflationary default by the US. This Crisis has already cost the US $10 TRILLION DOLLARS. The dollar has been in decline for a long time - since the 1970's it has now shrunk to about 20% of its original purchasing power. The policies conducted by the US government - QE et al. - since the crisis began and even more so in the past few weeks...days are condemning the DOLLAR $ to a COLLAPSE.

A TIPPING POINT is fast approaching. The US people, the international community are losing trust in the US DOLLAR $ - you can see it on TV etc it is slowly entering the global psyche. The DOLLAR has no real backing - apart from this trust. Only CONFIDENCE.

Ask Yourself this?

If you held 70% of your wealth in Dollars now would you diversify your holdings a bit. Maybe reduce to 40% ?? Maybe go into Solid Assets or Gold? China Holds 70% of its wealth in DOLLAR DENOMINATED ASSETS.

The Value of Gold has been like a thermometer in the sick global economic illness that is engulfing the world. Gold has risen from 2001 - 2009 ; $200 - $1000

I am no Gold Bug and hold no Gold - but this does indicate a problem somewhere. As the US print and devalue their dollar the Chinese will have to make their play or be humiliated in front of the world.

China has been very vocal recently about the US devaluing the DOLLAR. I think some of you may be right in thinking the Chinese won't want to cause panic and exit the bond market rapidly causing a disorderly pop. But they MAY NOT HAVE A CHOICE.

As their economy contracts the amount of treasuries they are able to buy is shrinking all the time. They have to fund their own STIMULUS PACKAGE. They are already diverting funds into their own country and consequently have to buy much less treasuries. The research and data available shows china is trying for an orderly exit - they are buying short notes as opposed to the long term 30 year ones. China has about $2.5 TRILLION DOLLARS worth of US denominated asstes....Bonds...freddy and Fanny corporate bonds etc. They need to sell a large proportion of these holdings to Diversify their 'portfolio' and finance their own economy... the future does not look good.

So those were additional reasons why the bond market collapse will occur in the near future - resulting in a massive dollar devaluation...A flight into Hard Assets .......Increasing the velocity of all this printed money...and ergo HYPERINFLATION

[Slumpmonkey Returns]

Regarding original query on Leamington Spa, I can report that the AHDB (Agriculture, Horticulture, Potato Council, Dairy Council, Meat Marketing) have all just moved into Stoneleigh Park from Swindon, Oxford, Milton Keynes, Maidstone so that they are all housed under the same roof. They are in temporary office accommodation and are building huge new offices to house hundreds of people. Leamington Spa must be a sellers paradise at the moment. I personally gave out property details for short term lettings and purchases in the last three/four months to lots of relocaters.

All public sector funded in part by levies on the industry.

That explains why she sold her house so quick. But she deserves it apparently (according to my boomer mum) because her and my late uncle "worked so hard." Yep, sitting on your **** for ten years whilst you watch you property treble in value is such hard work!

Edited July 26, 2009 by Slumpmonkey Returns

[Guest Daddy Bear]

Liquid? how is chaining yourself to an asset that can not be moved or hidden classed as liquid? I am not arguing with your decision and am glad that you are comfortable with your decision but how the hell can you believe that buying the most iliquid asset of all time is 'staying liquid'?

the potential downside far outweighed the upside of staying liquid.

I think you misunderstood my post.

By staying "liquid" I mean staying in CASH in NR at about 1% return - the upside may have been another 20% of the UK property market.

I chose not to stay liquid but instead chained myself to an asset as you so rightly put it.

[Number79]

I think you misunderstood my post.

By staying "liquid" I mean staying in CASH in NR at about 1% return - the upside may have been another 20% of the UK property market.

I chose not to stay liquid but instead chained myself to an asset as you so rightly put it.

yes, I did misread your post. I still don't fully understand though, why, expecting what you do that you would have purchased a house now rather than put the cash into something that will at worst retain its value and at best increase with inflation. A property with land I could understand as you would be able to become self sufficient, atleast on the food front but a standard house? I know that you must have had your reasons but to me the purchase of a house now just does not tie in with your signature at all.

[911-caused-it-all]

I am sure you have read my posts before - I get slagged alot for reposting but do I give a fu*K?

Ok how is it then that one of my best mates a 'Bank Manager' looks at me as if I'm a 'tripped out looney' whenever I try and explain to him the threat of hyperinflation may be real?

[tiggerthetiger]

Ok how is it then that one of my best mates a 'Bank Manager' looks at me as if I'm a 'tripped out looney' whenever I try and explain to him the threat of hyperinflation may be real?

Sorry to interrupt here, but you take anything a banker tells you seriously ??

[Fairies Wear Boots]

I see the 0.5 percent base rate as being quite key in this madness. But I don't feel it can continue.

Some Economists thought that holding the base rate down for too long as having been part of the problem that caused the financial problems. What was the response to the financial problems? Drop the base rate to a historic low. And yes, as our economy hit the skids, they dropped the base rate and the CPI still came down. But can it stay there? I don't think so. When Inflation starts to pick up, (and if asking prices of fraking houses are going up I don't see why other things can't) the BoE will have to put up interest rates.

I don't see that there has to be much inflation for it to be a problem for the BoE. If it goes back up to 3 or 4 percent and the base rate is still 0.5 that would mean a negative real interest rate. And that isn't possible for long is it?

I've seen articles saying we can have high unemployment and inflation. Other articles saying that the Output gap isn't as big as some would think it is. Do other posters feel that inflation climbing back up and the resulting rise in interest rates will be what takes us on another 'big dip' ? The BoE is saying it will have to take out the QE and do so in a timely manner.

Note: When I say inflation, I mean above target, but not ridiculous amounts of inflation, 3 to 6 percent as opposed to Zimbabwean/ Injin inflation.

[Number79]

Ok how is it then that one of my best mates a 'Bank Manager' looks at me as if I'm a 'tripped out looney' whenever I try and explain to him the threat of hyperinflation may be real?

just because he is a bank manager does not qualify him to understand anything other than the managing of a bank. Ask him questions about the economy or the gilt/bond or market or anything else discussed on hpc and you will be able to look at him like a 'tripped out looney' when he shows how little he knows.

[Guest Daddy Bear]

Ok how is it then that one of my best mates a 'Bank Manager' looks at me as if I'm a 'tripped out looney' whenever I try and explain to him the threat of hyperinflation may be real?

because he is probably a c0ck

[Guest The Relaxation Suite]

I see the 0.5 percent base rate as being quite key in this madness.

This is because what you want, and what the banks want, are two different things.

[Slumpmonkey Returns]

I see the 0.5 percent base rate as being quite key in this madness. But I don't feel it can continue.

Some Economists thought that holding the base rate down for too long as having been part of the problem that caused the financial problems. What was the response to the financial problems? Drop the base rate to a historic low. And yes, as our economy hit the skids, they dropped the base rate and the CPI still came down. But can it stay there? I don't think so. When Inflation starts to pick up, (and if asking prices of fraking houses are going up I don't see why other things can't) the BoE will have to put up interest rates.

I don't see that there has to be much inflation for it to be a problem for the BoE. If it goes back up to 3 or 4 percent and the base rate is still 0.5 that would mean a negative real interest rate. And that isn't possible for long is it?

I've seen articles saying we can have high unemployment and inflation. Other articles saying that the Output gap isn't as big as some would think it is. Do other posters feel that inflation climbing back up and the resulting rise in interest rates will be what takes us on another 'big dip' ? The BoE is saying it will have to take out the QE and do so in a timely manner.

Note: When I say inflation, I mean above target, but not ridiculous amounts of inflation, 3 to 6 percent as opposed to Zimbabwean/ Injin inflation.

I didn't think it was possible that house prices could rise when we had experienced the biggest financial meltdown in 100 years and when unemployment is rising by hundreds of thousands every quarter! Then I guess, I underestimated the resolve of the powers that be who would do ANYTHING to prevent a decrease in asset values! Bast@rds!!!

[911-caused-it-all]

just because he is a bank manager does not qualify him to understand anything other than the managing of a bank. Ask him questions about the economy or the gilt/bond or market or anything else discussed on hpc and you will be able to look at him like a 'tripped out looney' when he shows how little he knows.

I shall do so next time

[the flying pig]

asking prices never did drop below 2007 selling prices, in any place that i looked at, other than in a few extreme cases [such as blocks of newbuilds that had previosuly sold one or two at high very high superpeak prices before reality set in]. the 'crash' was played out in: (1) sales volumes, which were inredibly low; and (2) discounts under asking prices, which were very substantial.

and the situation has barely changed. prices clearly did stop falling sometime late in the spring, and have been bouning round the '20% off peak' region, but talk of a second boom is risible and nothing that a couple of months' worth of negative haliwide figures won't cure.

Edited July 26, 2009 by the flying pig

[TheCountOfNowhere]

look on the brightside....if they manage to keep the UK prices high and everyone losses their jobs they'll be selling their crappy houses in spain for peanuts so we can all move there :-)

[Slumpmonkey Returns]

asking prices never did drop below 2007 selling prices, in any place that i looked at, other than in a few extreme cases [such as blocks of newbuilds that had previosuly sold one or two at high very high superpeak prices before reality set in]. the 'crash' was played out in: (1) sales volumes, which were inredibly low; and (2) discounts under asking prices, which were very substantial.

and the situation has barely changed. prices clearly did stop falling sometime late in the spring, and have been bouning round the '20% off peak' region, but talk of a second boom is risible and nothing that a couple of months' worth of negative haliwide figures won't cure.

I hope you are right! The trouble is I think this week's NW are going to be positive! :angry: This will give the VI's more excuse to keep on ramping and mean that vendors become more deluded!

[Guest The Relaxation Suite]

asking prices never did drop below 2007 selling prices, in any place that i looked at, other than in a few extreme cases [such as blocks of newbuilds that had previosuly sold one or two at high very high superpeak prices before reality set in]. the 'crash' was played out in: (1) sales volumes, which were inredibly low; and (2) discounts under asking prices, which were very substantial.

and the situation has barely changed. prices clearly did stop falling sometime late in the spring, and have been bouning round the '20% off peak' region, but talk of a second boom is risible and nothing that a couple of months' worth of negative haliwide figures won't cure.

I disagree, partly. Houses are definitely worth considerably less than they were two years ago, but most of them are being kept off the market by vendors who are in a position to do so until "recovery". This is where the propaganda comes in, because if you are able to convince an entire population there is no crash, then there is no crash - until the joblessness starts, of course. Then it all comes undone. The unemployment and wage cuts will bring this thing to its conclusion.