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PhilT

Us Housing Boom Vexes The Fed

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US housing boom vexes the Fed

As the Federal Reserve  raises interest rates in the US for the 10th time, its inability to control accelerating house price inflation is worrying analysts.

Much of this is uncannily similar to what was happening here last summer and shows that the US seems to be about 12 months behind us in "bubble cycle" terms.

For middle income earners hoping to get on the housing ladder the maths does not add up anymore - with an average US property now costing $225,000 (£126,000), you require an annual salary of $71,000, substantially higher than the average household income of $40,000.

So, in the US a fair p/e multiple is seen as 3x annual salary. Note also that the average house price there is still well below ours.

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Frankenstein's monster just won't lie down.

Heady mix of speculation, cheap money and plain fraud is rampant in the US. They got what they wanted and they know what is coming next, just not when.

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Those who still have hopes of UK rate cut helping the housing market may like to take note. USA rate up, market still has futher to go = prices up. UK rate up, market on way down, still = prices down.

I'm not sure of this, but I think UK rates were cut just before, or as, the last two HPC's happened?

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Those who still have hopes of UK rate cut helping the housing market may like to take note. USA rate up, market still has futher to go = prices up. UK rate up, market on way down, still = prices down.

I'm not sure of this, but I think UK rates were cut just before, or as, the last two HPC's happened?

I think you might be right, they were falling, and then spiked at or just after the peak.

Need to dig around for the graphs, the spike was blamed for the 89 crash, even though it came

well after the official price peak.

ABB

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ABB, yeah, be interesting to see the graph. What spike are you refering to, IR's or oil. Unfortunatley oil or suchother may be blamed for this crash, rather than the market itself getting out of hand. I don't believe the right lessons will be learned, let alone be remembered from the bubble. That is, to my mind, that the market itself was in error - a mania has happened. Conditions such as low IR's / irresponsible lending may have supported, but not caused the bubble. Also, the bubble will not be "burst" rather than it will self correct. Yet factors, such as higher unemployment or oil will, incorrectly, be seen as why the market collapsed.

Just my 2p's worth.

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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