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mdman

The House Price Crash Cascade

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Housing Collapse Cascade Pattern

* Volume drops precipitously

* Prices soften a bit

* Inventory levels rise slowly

* High-end home prices remain relatively steady for a brief while longer

* The real estate industry tries to convince everyone it's "business as usual" and homes are affordable because rates are low

* Bubble denial kicks in with media articles everywhere touting the "fundamentals"

* Stubborn sellers hold out for last year's prices as volume continues to shrink

* Inventory levels reach new highs

* Builders start offering huge incentives to clear inventory

* Some sellers finally realize (too late) what is happening

* Price declines hit the high-end

* Increasingly desperate sellers get creative with incentives, offering new cars, below market interest rates, trips, etc

* Gimmicks do not work

* Price declines escalate sharply at all price levels

* The Central Bank issues statements that housing is fundamentally sound

* Prices collapse, inventory skyrockets, and builders holding inventory go bankrupt

Can QE stop this?

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Housing Collapse Cascade Pattern

Can QE stop this?

I really like the "stages" piece.

We still seem to be somewhere near the top of the list. The US seems to be somewhere near the bottom of the list.

We have both had QE so I don't see that as the determinant of outcomes.

I think that the UK's "mortgage rescue scheme" is the main reason why our house prices have not yet settled to a level that would bring back normal volume to the market.

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Housing Collapse Cascade Pattern

Can QE stop this?

The black hole of debt can't be filled with QE. It can only do so much, just to keep the cogs of the financial system grinding.

It certainly can't stop unemployment, it won't make banks lend more at higher LTVs and it won't bring lending rates down either.

I'd say we're about to hit:

* Inventory levels reach new highs

from your list, btw.

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I really like the "stages" piece.

We still seem to be somewhere near the top of the list. The US seems to be somewhere near the bottom of the list.

We have both had QE so I don't see that as the determinant of outcomes.

I think that the UK's "mortgage rescue scheme" is the main reason why our house prices have not yet settled to a level that would bring back normal volume to the market.

Really? Take another look. We've been through the first seven stages during this bull trap...

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The black hole of debt can't be filled with QE. It can only do so much, just to keep the cogs of the financial system grinding.

It certainly can't stop unemployment, it won't make banks lend more at higher LTVs and it won't bring lending rates down either.

I'd say we're about to hit:

* Inventory levels reach new highs

from your list, btw.

I'd agree we are that this stage. I'm already lots of new build reductions so we should start seeing incentives soon?

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I think that the UK's "mortgage rescue scheme" is the main reason why our house prices have not yet settled to a level that would bring back normal volume to the market.

NO, it's not this scheme that's saving the housing market. It's this one.

EDIT: Typo

Edited by twatmangle

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* Price declines escalate sharply at all price levels

at this point I would insert:

* civil war initiated by home builders and associated lobbies destroys 60% of US national housing stock

* HPI resumes

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* Volume drops precipitously

* Prices soften a bit

* Inventory levels rise slowly

* High-end home prices remain relatively steady for a brief while longer

* The real estate industry tries to convince everyone it's "business as usual" and homes are affordable because rates are low

* Bubble denial kicks in with media articles everywhere touting the "fundamentals"

* Stubborn sellers hold out for last year's prices as volume continues to shrink

* Inventory levels reach new highs

* Builders start offering huge incentives to clear inventory

* Some sellers finally realize (too late) what is happening

* Price declines hit the high-end

* Increasingly desperate sellers get creative with incentives, offering new cars, below market interest rates, trips, etc

** Gimmicks do not work

* Price declines escalate sharply at all price levels

* The Central Bank issues statements that housing is fundamentally sound

* Prices collapse, inventory skyrockets, and builders holding inventory go bankrupt

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Not without regulation.

Didnt vince cable say something like 90% of the effects of QE hasnt gone into businesses, but into the housing market.

Will Hutton also wrote that our financial system is doing what its designed to do - not to encourage business, but to encourage mortgage lendindg.

QE came with no strings attached, afterall. Why would printed money post 2008 behave any differently to borrowed money pre 2008?

Obviously this was all expected. The Brown Bailout was never meant to increase employment or wealth, but to help those who can help themselves.

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Housing Collapse Cascade Pattern

Can QE stop this?

This all may well be true but there are some on here who would argue this has ALL already happened.

I saw plenty of all of these in 08/09.

* Increasingly desperate sellers get creative with incentives, offering new cars, below market interest rates, trips, etc

** Gimmicks do not work

* Price declines escalate sharply at all price levels

* The Central Bank issues statements that housing is fundamentally sound

* Prices collapse, inventory skyrockets, and builders holding inventory go bankrupt

So if we have had all of them already where next?

Edited by MinceBalls

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  • 146 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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