Halifax +1.1% Mom, -12.1% Yoy

[Neverland]

Is it really that bad? I welcome the cash/equity rich taking some leverage out of the system.

These buyers are those who can most afford to lose and hence a fluid market does remain. Crash Gordon has slowed the rate of crash that's all.

As each month goes by, couples divorce, people die, kids go to new schools and adults will need to move for work (or emigrate). Increased supply WILL come on to the market.

+1

...and interest rates will go up...

....and more people will lose their jobs

Housing crashes don't usually end until prices are below their long term average and they still look above their long term average on even the Halifax figures....

Relax the process takes five plus years and we're barely 18 months - 2 years in...

[Realistbear]

Gordon Hamish Brown's career and legacy will be determined by one thing: the direction of house prices over the course of the next couple of years (after that it can be blamed on Dave).

Venture forth and calculate.

[FreeTrader]

This is the latest P/E chart for the Halifax (based on their own data).

According to the Halifax, average wages fell between June and July, from £37,018 to £36,576. The P/E ratio now stands at 4.36.

As I did last time I updated this, I've also shown what the average house price would be if prices reverted to:

1) the long-term average P/E (Halifax definition, which tends to rise and fall due to the boom/bust cycle)

2) the long-term median (arguably a better average)

3) the low of the last crash

[the end is a bit nigher]

Well, still cheaper to rent than buy around here. Most new stock is advertised at or above 2007 prices so looks like I will be renting for a while yet.

Plus the minor problem of still being on a 3 day week with little prospect of moving back to 5 or even 4.

Still, i'm sure some people are buying, just not sure who!

[Guest Daddy Bear]

Daddy, why don't you just save this post in to your autosig and save yourself the trouble of rewriting it 50 times a day?

I used to post threads like this (see below) in 2005-07 to educate all members and guests about the coming HPC and Banking Collapse - (and I got it spot on). I feel I helped many people. People used to laugh at my dire predicitons.

When I started educating people about the coming HYPERINFLATION I was derided and mocked. As it does not fit with HPC.

Well if you want the info its all here (moved to economics section by mods as they do not think its relevant to the economy or HPC - I wonder why !)

Have you read this thread Bolton fury ?

http://www.housepricecrash.co.uk/forum/ind...howtopic=121543

Here's what I used to post - probably the best piece written by anyone on this site.

Why the Property market WILL crash

Daddy Bear 2007

1. There has been an unprecedented global price rise in property since October 1995 of bubble proportions, not only in the UK but globally (Ireland, Spain, US, Australia, France etc.). These property bubbles have already began to burst or are deflating rapidly in these countries, the UK is likely to follow this pattern.

2. Interest rates have risen 10 times since November 2003 when they were at an all time low of 3.50%. (and 5x since Aug 06). Each time the rise has been 0.25 basis points. Interest rates are now (July 5th) 5.75% basis points and in my opinion are likely to rise to 6.00 or 6.25%. Some forecasters predict even higher rates of 7.00% within 12-18 months. This would be a 100% rise from 3.5 basis points (Nov 2003) to 7.0 basis points – a doubling of mortgage payments. (equivalent of going from 7.0% to 14.0% as in 1990.

Whatever the outcome the trend is well and truly established, and sentiment has changed.

Higher interest rates raise monthly repayments, and more importantly limit the amount a buyer can borrow through a mortgage. Typically a .25 basis point rise reduces borrowing by 5-10K for the average earning couple in the UK.

3. High Interest Rates or Unemployment do not necessarily have to be a precursor to a HPC, all that is needed, is a change in sentiment. The expectation that one can buy a property and sell it on at a profit is the underlying driver to all bubbles, when this is no longer the case and sentiment changes demand will drop off the proverbial cliff and a collapse will occur – the bubble will burst. An example of this happening at present is the Irish Property market, where IR’s are still low 4.0% (but have risen), and sentiment has changed – prices are falling.

4. First Time buyers now only account for 8.9% of the market (July 2007). If there are not buyers buying the first rung of the ladder (80-150K) properties, then the owners of these properties are not able to trade up. The property market in the main is fuelled by First Time Buyers (FTB’s).

5. Many house owners have seen their equity increase from for example, £0 to £350k or more in the space of 10 years. When it becomes apparent that by Selling To Rent (STR) it will allow this 350K to earn 6.25% per annum gross, approximately 15K after tax and a similar house can be rented for £1000PCM or less in most cases, with no maintenance and repairs etc it looks prudent to do so.

Obviously they cannot all rush and get through the door to sell at once (as well as the BTL’ers!). This will cause property prices to fall.

6. There were over 100,000 bankruptcies last year (the highest since records began). Rising IR’s are having an effect. Homes are being repossessed; this will cause a fall in prices. Latest figures Q1 2007 show personal insolvencies climb to a record 30,075, a new quarterly record.

7. 8% of Mortgages in the UK are sub-prime (risky lending). This equates to £30bn, 200,000 mortgages since April 2005. A lot of these (62%) were fixed rate. These deals and thousands of other (safer lending) fixed rate deals are expiring (2 million by the end of 2007). The borrowers face hefty increase in repayments when they end. This will cause financial hardship, decrease spending power, and in some cases lead to insolvency/repossession. This will cause House prices to fall.

Latest figures (July 2007) show Q1 2007 mortgage repossessions stood at 33,715. This is up over 10% on Q4 2006, and again an all time record high.

8. Many Irish/foreign Investors have released equity from their own property market and have invested in the UK market, typically northern cities. As their property market falls they will need to liquidate their assets thereby putting their flats onto the market increasing supply, causing price falls.

9. Many UK Investors have released equity from their own property market and have invested in the foreign market. As these property market falls they may need to liquidate their assets thereby putting their properties onto the market increasing supply, causing price falls.

10. There has been an over supply of 2 bedroom flats. For example there are over 5000 units planned to be released in the Leeds city housing market by 2009. This over supply is causing prices to fall. This is also the case in Liverpool, Manchester, Birmingham etc.

Figures released (July 4th 2007) show only a 1.5% rise in the average flat price across the UK in the last 12 months, and the trend is to turn to price falls. This compares to 11.1% in the house market. This fall in prices will filter upwards through the higher rungs of the market.

11. Many BTL investors have bought purely for capital gain and not rental yield which is historically low (4-5% or lower in many towns), due to oversupply. The BTL landlords are also highly geared, and as IR’s rise they may need to liquidate assets to pay off debt. This may cause a flood of flats onto the market reducing prices.

12. If a BTL landlord can get a yield of 6.25% (July 2007) in a high interest savings account why bother BTLing when yields are lower and the hassle factor and overheads are much higher? As amateur landlords wake up to this and see their money tied up in asset form depreciating they may cut their losses and sell causing a flood of properties onto the market, causing property prices to further fall.

13. Aside from London/SE (where foreign investment and city bonuses as well as a low supply of property to a dense population has increased competition for housing) house prices have risen by only 4-5% in the past year. This is a marked slowing compared to previous years and if inflation is taken into account the value of the average house has actually leveled off and is some regions is falling.

14. Unemployment has been falling for a number of years in the UK but this trend is now slowing markedly and is predicted to rise in the future. Less jobs equals less money equals less demand for housing.

15. The % of UK earnings which is in savings is at an all time low (last 25 years), 1.9%. Consumers have no more cash to raid from their piggy bank to spend on housing and other goods. The consumer led boom has to come to an end. Higher interest rates will encourage people to spend less and save more. This will contribute to a downturn in the economy leading to job losses. (See previous point).

16. Latest figures (July 2007) show that the UK population has borrowed more then £1.38 trillion. A huge proportion of this has been secured on the rising value of their homes, in the form of Mortgage Equity Withdrawal (MEW), and has been encouraged as interest rates have been so low compared to history.

£13.2 billion was borrowed against properties in Q1 of 2007 (£13.3 billion in Q4 2006), for spending on holidays, home improvements, ‘paying off debts’, and funding other investments. (This is worth 6.2% of disposable income). This money has been used to fuel the consumer led boom and is keeping millions of people in their service industry/luxury goods jobs (restaurants, hairdressers, new cars, retail etc). As interest rates rise and people realize they have to pay this money back the new cars and £30 haircuts every month soon stop, people lose their jobs and we get a domino effect, a positive feedback loop where people slow spending, people lose jobs, spending slows even more, more jobs lost and so on….

Rising unemployment and a recession is the result. This will cause house prices to fall.

17. Apart from the consumer led boom based on credit card debt (unsecured) and MEW (secured debt) of £1.38 trillion, there has been massive borrowing by the government to pump money into the economy through public sector. For example an economy like Newcastle is mainly supported through government money. 60% of the working population is employed directly by the government and nearly all the rest depend on this money indirectly to keep their service industry jobs alive.

The government is running out of money and will have to reduce public sector spending dramatically over the next few years to balance its books. Many public sector jobs will be cut, this will contribute to a recession and unemployment and cause house prices to fall.

18. Due to the huge amount of cheap cash being pumped into the global economy there are asset bubbles in many areas e.g. the art market: With Monet's Waterloo Bridge fetching £17.9m and Warhol's Green Car Crash selling for $71m last month (June 2007) , it's no surprise that commentators are increasingly wondering if the art market is signaling a top in other markets. In 1990, the Japan's very own car crash was signaled when Japanese paper tycoon Ryoei Siato paid £50m for a Van Gogh. The wine market is another example of this phenomenon, as well as the huge growth in private equity and mergers and acquisition activity.

The ‘wealth’ has been fueled by "a tidal wave of cheap cash" which has allowed them to borrow vast sums to fund "the most spectacular takeover boom for 20 years... All the most dangerously inflated bubbles today are spin-offs of this global credit binge." The housing market is supported by a PONZI Scheme of debt. There is the potential for the biggest global asset bubble collapse in modern times. The consequences could be far worse then the recessions of the past, and may even be worse then the 1930’s depression.

19. The UK economy has had unprecedented growth since 1994. This boom has been mainly consumption/debt led. The boom has been fuelled by a huge supply of money and global low interest rates. (UK, US, and Japan). This money has to be paid back.

As the tap of liquidity has been turned off the Boom will turn into Bust. Japan is increasing Interest Rates, and as the Yen Carry Trade unwinds it will have devastating consequences on Hedge Funds and global markets will collapse. There has always been BOOM and BUST, it is the nature of capitalism. Why should it be any different now? Bigger BOOMs should become bigger BUST’s. This boom has gone on for nearly 15 years and has been mainly debt/consumption led; the consequences may be far reaching. The Bust may become deflationary and a global economic depression may occur. Imagine paying back a £300K over 25 years when inflation has not eroded it’s real value, like it did in the 60’s – 70’s and 80’s

20. The sentiment in the housing market has been very positive over the last 10 years of boom times (its called GREED), this has self perpetuated the boom. Sentiment is very important in a bubble scenario. The GREED may turn into FEAR and cause self perpetuating price falls.

21. The ratio of average earnings to average house price is now very high. A person on an average salary of £25K/annum needs 8x their salary to buy the average UK house £200K

Historically 3.5 times average salary has been the norm.

22. The % of monthly disposable household income, set aside each month to pay the mortgage is at a historically all time high figure of 41% of. This cannot continue and will be even more unsustainable if IR’s rise any further.

23. Due to high oil prices, currently $76 per barrel (July 2007) compared to $20 per barrel 5 years ago, high money supply, and low IR’s in Japan, inflation has the potential to rise rapidly over the next 12-18 months. It is seen as a threat and rising IR’s in the UK will be the main tool used to counteract it. High IR’s will cause a fall in property prices.

24. A generation of university graduates are leaving university with huge debt (£20K) and may be unwilling/unable to take on further debt in the form of a huge mortgage.

25. Credit lending has been extremely loose since 1997 when Gordon Brown changed the rules regarding the multiple of what a Bank has on deposit that it can lend.

A Bank used to be able to lend out 4x the amount of money it held on deposit, since the rule change it could then lend out 8x its deposit holding.

As the banks "had" much more money to lend they relaxed their lending criteria over the next 10 years:

1. They increased the multiple of earnings that they could lend to a mortgage borrower from an average of 3 x to in some cases 6 x joint earnings

2. They relaxed the rules regarding proof of income to certify a mortgage and self cert mortgages proliferated. ( I got one as a student at university !! net income a year -9000K !!!! (It allowed me to buy a flat as I had the 25% deposit and rent it out).

3. As property prices inflated they had to relax lending criteria more and more to keep the Ponzi scheme going.

There was a wall of cheap and easy money to fuel the property market. As we are seeing at the moment (13 Aug 2007) money will no no longer as cheap as it was - Interest rates have risen to 5.75% and borrowing is no longer 'easy'. Credit lending is tightening, and a time may come when to borrow one must have a very secure job, with excellent credit rating and even then you will only be able to borrow 3 x income.

As buyers are not able to borrow as much money prices will have to fall in line with credit supply. This will contribute to the House price Crash

Anyway I'm not bothered anymore.

Goodbye

I'll be back periodically to mock your blinkered naieve stupidity....

DB :angry:

Edited August 5, 2009 by Daddy Bear

[red]

This is the latest P/E chart for the Halifax (based on their own data).

According to the Halifax, average wages fell between June and July, from £37,018 to £36,576. The P/E ratio now stands at 4.36.

As I did last time I updated this, I've also shown what the average house price would be if prices reverted to:

1) the long-term average P/E (Halifax definition, which tends to rise and fall due to the boom/bust cycle)

2) the long-term median (arguably a better average)

3) the low of the last crash

Great graph, Freetrader - thanks.

Can we expect a larger overshoot owing to the severity of the preceding boom and current economic conditions? I think so...

[Neverland]

This is the latest P/E chart for the Halifax (based on their own data).

According to the Halifax, average wages fell between June and July, from £37,018 to £36,576. The P/E ratio now stands at 4.36.

As I did last time I updated this, I've also shown what the average house price would be if prices reverted to:

1) the long-term average P/E (Halifax definition, which tends to rise and fall due to the boom/bust cycle)

2) the long-term median (arguably a better average)

3) the low of the last crash

Tells the tale very nicely

Another 10-30% from here over time, assuming incomes don't change much

Time - my guess is 3-5 years from now for the bottom (sorry I dont have a chart to back it up)

No general election until mid-2010 after all, so the first real budget will be the end of 2010 with its effects felt from 2011 onwards...

[waitingscot]

And so you should be

No turning back now in US or UK

This is way past HPC now

Tipping Point will come sudden

It's a good job some of us decided to keep our money so we can make for the exit. Ooops you bought a house, that ties you down a bit doesn't it?

[@contradevian]

Well, still cheaper to rent than buy around here. Most new stock is advertised at or above 2007 prices so looks like I will be renting for a while yet.

Plus the minor problem of still being on a 3 day week with little prospect of moving back to 5 or even 4.

Still, i'm sure some people are buying, just not sure who!

The amount of rental stock is growing daily, which together with a delayed repo policy is restricting supply. We don't know even if banks are buying there own repo's. If the dam bursts I reckon it will be reluctant landlords capitulating and putting their houses on the market. The only buyers are cash buyers or those with squeaky clean credit ratings and big deposits.

[Guest Daddy Bear]

+1

...and interest rates will go up...

....and more people will lose their jobs

Housing crashes don't usually end until prices are below their long term average and they still look above their long term average on even the Halifax figures....

Relax the process takes five plus years and we're barely 18 months - 2 years in...

...and interest rates will go up...

I think you have the wrong website - you should be here..

take boltonfury and brucebanner with you too

[Waiting Patiently]

.......According to the Halifax, average wages fell between June and July, from £37,018 to £36,576. The P/E ratio now stands at 4.36.

I know we have had this debate on here before but, are average wages in the UK really as high as £36,576? That seems to be considerably above what most people earn outside of the city.

[Guest theboltonfury]

I used to post threads like this (see below) in 2005-07 to educate all members and guests about the coming HPC and Banking Collapse - (and I got it spot on). I feel I helped many people. People used to laugh at my dire predicitons.

When I started educating people about the coming HYPERINFLATION I was derided and mocked. As it does not fit with HPC.

Well if you want the info its all here (moved to economics section by mods as they do not think its relevant to the economy or HPC - I wonder why !)

Have you read this thread Bolton fury ?

http://www.housepricecrash.co.uk/forum/ind...howtopic=121543

Here's what I used to post - probably the best piece written by anyone on this site.

Anyway I'm not bothered anymore.

Goodbye

I'll be back periodically to mock your blinkered naieve stupidity....

DB :angry:

Don't be silly. You're as welcome here as anyone, even if you are covered in foil.

[Neverland]

...and interest rates will go up...

I think you have the wrong website - you should be here..

take boltonfury and brucebanner with you too

I would reply, but you just arent worth the effort

[loginandtonic]

It's a good job some of us decided to keep our money so we can make for the exit. Ooops you bought a house, that ties you down a bit doesn't it?

DB, no sarcasm intended: can you now sell your property and get out at break-even or profit if you wanted to?

...and interest rates will go up...

But your own 2007 post there says IRs will go up to 7pc etc. That didnt happen and they've now played this dangerous game of near zirp and dangerously unleashed qe.

[Deckard]

Anyway I'm not bothered anymore.

Goodbye

I'll be back periodically blah, blah blah

Great, and PLEASE keep "periodically" to a minimum

[Bruce Banner]

snip........ blah, blah, blather......I got it spot on..........the best piece written by anyone on this site.......

Anyway I'm not bothered anymore.

Goodbye

I'll be back periodically to mock your blinkered naieve stupidity....

[foa4]

what's going on?

Isn't this the period where there should be the biggest HPC?

all we're getting is bounce bounce..(no dead cat in sight 8 lives left)....before the boom boom

[Guest Daddy Bear]

DB, no sarcasm intended: can you now sell your property and get out at break-even or profit if you wanted to?

What I posted yesterday

Joined here in July 2005 was certain the market was about to crash due to the unfeasible capital gain on the first homes my wife (then gf) and I had bought in the late 90's.

It would have taken me 100 years to save what we had 'made' in 8 years !

Both my wife (gf then) and myself had kept our first homes (which we had rented out) as we had bought a family home together.

Convinced my wife to sell our 'inadvertent' BTL's and amazingly paid off the mortgage in family house.

Hindsight has shown me that the 2 bed flat market peaked in July 2005.

Sold to Rent in Aug 2007 - cut it very fine - could not believe the boom had continued for two more years (it was that interest rate cut that did it!).

Rented a fine house for about the same as our repayment mortgage per month was before we had paid off the mortgage - the interest on our funds covered the rent.

I was convinced the UK banking system would collapse and moved money from HBOS to NS&I and then finally into Northern Rock in search of the safest place for a deposit with the best return.

As I 'studied/read' more and gleaned more knowledge I have become convinced that we were heading for very high inflation or even hyperinflation. However was also convinced that UK housing would fall 40% from the peak. So kept money in cash on instant access deposit. Watched as the return on deposit dropped to peanuts and QE and massive multi million pound bailouts were accepted as normal. Still believe houses will fall in real terms by 40-50% but nominal falls will be masked by high inflation and will take many years to reach their correct equilibrium.

We eventually found the 'ideal' family house at 32% below peak and completed 2 months ago >60% deposit.

Took out a 10 year fix at 4.99% and will have it paid off in 10 years.

Currently putting spare cash into mortgage and a little bit into commodity funds and a tickle in gold.

Waiting to see what happens to monetary system.

My advice to FTB's is hold off buying but do not rely on keeping savings in cash. Diversify your savings into a variety of assets. Stay hedged and ready to buy at at least 40% below peak. Do not buy a 2 bed flat! To other STR's - if you hold a big cash fund - buy if you can get 30% off - don't be too greedy. Your downside risk of not buying (and staying in cash) is much greater then that of a FTB.

I hope you get the same luck I did.

DB

But your own 2007 post there says IRs will go up to 7pc etc. That didnt happen and they've now played this dangerous game of near zirp and dangerously unleashed qe.

Exactly - I WAS WRONG (edit; just re-read it I said "some forecasters have predicted..." so actually I was not wrong )I was convinced we would have a deflationary outcome - if this had played out naturally

It will not now end in the biggest global asset deflationary bust of all time - quite the opposite....

Hyperinflation is inevitable

I advise all to read this thread:

http://www.housepricecrash.co.uk/forum/ind...p;#entry2056537

That troll bruce banner has conveniently bumped it to the top of the economics section. Thanks BB

Edited August 5, 2009 by Daddy Bear

[Zzzzzzzzzzzzzzzzzzzzzzzzzz]

+1.1% is an underestimation of what's happening at the moment. I'm seeing average +2.5-3.0% all over England and Wales at the moment. Much higher than that in some areas. Sad but true. It will all end in tears... again. But the next year or so is going to be painful to watch

DB - you are correct on inflation. 100% correct.

Edited August 5, 2009 by gruffydd

[foa4]

+1.1% is an underestimation of what's happening at the moment. I'm seeing average +2.5-3.0% all over England and Wales at the moment. Much higher than that in some areas. Sad but true. It will all end in tears... again. But the next year or so is going to be painful to watch

..and gazzumping is back

[loginandtonic]

i think it would be naive to think prices can harmlessly continue to bubble up, no one sane should be cheerleading that.

locally to me lots of for sales and solds returning to for sales, however agents have plastered solds across window displays and probably are short of property due to your and my tax money being used to subsidise reckless mortgagors. i'd say that cant go on but brown's discovered colour Xeroxing and thinks qe wont harm your or my future or generations to come in any significant way, in fact we all wonder why we just didnt think of public sector qe methods of money supply expansion before - it's such a jolly gig, you should try some yourself man, its reeeeeeallly good sh!t.

[Mammon]

There will be no major resumption in house price falls while the BOE base rate is so near 0%.

Rates will only be raised in a big way when the economy has fully recovered.

Then the postive effects on house prices of a growing economy will counter the negative effect of interest rate rises.

House prices bottomed in the first few months of this year when rates went to almost 0% and are unlikely to take out that low point (147K on the nationwide index).

Had rates been kept at around 5% we would still be making new lows in the house price indices.

The BOE base rate averaged about 8% during the last crash in the early 90s. And mortgage rates were about 3 times higher than what they are now (10% instead of 3.5%).

[Joey Buttafueco Jr]

The great thing is that

a. These figures are not a surprise

Yes they are

[Zzzzzzzzzzzzzzzzzzzzzzzzzz]

..and gazzumping is back

It sure is. Please HPCers - stop deluding yourself that this is a monthly blip - it isn't. We are into a new period of sustained house price growth which will last well into next year. Hopefully not into 2011. If you're waiting for house price falls to resume, you'll have a long and painful wait.

I would be tempted to buy now if I was a STR and looking to stay in the UK. Or perhaps you've left it a little too late...

Edited August 5, 2009 by gruffydd

[foa4]

There will be no major resumption in house price falls while the BOE base rate is so near 0%.

Rates will only be raised in a big way when the economy has fully recovered.

Then the postive effects on house prices of a growing economy will counter the negative effect of interest rate rises.

House prices bottomed in the first few months of this year when rates went to almost 0% and are unlikely to take out that low point (147K on the nationwide index).

Had rates been kept at around 5% we would still be making new lows in the house price indices.

The BOE base rate averaged about 8% during the last crash in the early 90s. And mortgage rates were about 3 times higher than what they are now (10% instead of 3.5%).

You've got it bang on !!

Someone who talks sense for once!!

Peak to max drop- max 17% inc flats...10% for house