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House Prices "false Dawn"

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http://www.bloomberg.com/news/2010-07-15/u-k-house-prices-will-decline-after-false-dawn-capital-economics-says.html

U.K. House Prices Will Decline After `False Dawn,' Capital Economics Says
By Scott "Scotty" Hamilton - Jul 15, 2010
U.K. house prices will fall through 2012 as the deepest public-spending cuts since World War II and tighter credit conditions deter potential buyers, Capital Economics Ltd. said.
Home values will drop 5 percent this year and 10 percent in each of the next two years, economists including Roger Bootle and Ed Stansfield said in a note issued to clients this week. The 2012 forecast “is highly uncertain,” they said.
The U.K. housing-market recovery has shown signs of cooling this year as consumers brace for the government’s budget squeeze. While the Bank of England has held its benchmark interest rate at a record low 0.5 percent since March 2009, banks are granting only about half the number of mortgages they did during the market’s peak in 2007.
“The subdued outlook for activity is one reason why we believe that last year’s gains in house prices will prove to be a false dawn,” the economists said in the report. “Even though interest rates have been cut to record lows, affordability remains far less favourable than following previous house-price corrections.”

There is a common mistake that is constantly made when predicting house price falls. That there will be a gentle drop of the order of 5% to 10%. This scenario was predicted in the US and we all know that once panic sets in there is always a rush for the exits causing a house price correction (20% or more).

The triggers are lined up and they include deteriorating jobs market (trend shows job creation is part time positions), our huge debt problem (4TR now instead pf the previously estimated 958BN) and the fact that our housing market remains grossly overvalued compared with current wages and ability to get credit at the rate prevalent in the Brown boom years.

The spotlight will soon be back on the UK when the markets realise that out apparent ability to escape the consequences of a major HPC has been based on government plans rather than economic facts.

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http://www.bloomberg.com/news/2010-07-15/u-k-house-prices-will-decline-after-false-dawn-capital-economics-says.html

U.K. House Prices Will Decline After `False Dawn,' Capital Economics Says
By Scott "Scotty" Hamilton - Jul 15, 2010
U.K. house prices will fall through 2012 as the deepest public-spending cuts since World War II and tighter credit conditions deter potential buyers, Capital Economics Ltd. said.
Home values will drop 5 percent this year and 10 percent in each of the next two years, economists including Roger Bootle and Ed Stansfield said in a note issued to clients this week.
The 2012 forecast “is highly uncertain
,” they said.
The U.K. housing-market recovery has shown signs of cooling this year as consumers brace for the government’s budget squeeze. While the Bank of England has held its benchmark interest rate at a record low 0.5 percent since March 2009, banks are granting only about half the number of mortgages they did during the market’s peak in 2007.
“The subdued outlook for activity is one reason why we believe that last year’s gains in house prices will prove to be a false dawn,” the economists said in the report. “Even though interest rates have been cut to record lows, affordability remains far less favourable than following previous house-price corrections.”

There is a common mistake that is constantly made when predicting house price falls. That there will be a gentle drop of the order of 5% to 10%. This scenario was predicted in the US and we all know that once panic sets in there is always a rush for the exits causing a house price correction (20% or more).

The triggers are lined up and they include deteriorating jobs market (trend shows job creation is part time positions), our huge debt problem (4TR now instead pf the previously estimated 958BN) and the fact that our housing market remains grossly overvalued compared with current wages and ability to get credit at the rate prevalent in the Brown boom years.

The spotlight will soon be back on the UK when the markets realise that out apparent ability to escape the consequences of a major HPC has been based on government plans rather than economic facts.

Hmmm uncertain, i think the 2012 Forecast is when the real sh@t hits the fan, the year when fundamentals ultimately collapse, the year of the black swan we have been leading up to this last decade

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On related note, have prices ever reached a bottom after an asset price bubble has burst before transaction levels have reverted to their long run average?

I would love the see the "stages of a bubble" graph with transaction levels included. I wonder whether the "return to normal" phase is unversally accompanied by a temporary decline in volume.

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On related note, have prices ever reached a bottom after an asset price bubble has burst before transaction levels have reverted to their long run average?

I would love the see the "stages of a bubble" graph with transaction levels included. I wonder whether the "return to normal" phase is unversally accompanied by a temporary decline in volume.

Yes it is, via technical analysis you can look at volume for any bubbles , the last being the DAQ, the reducing volume is actually one of the fundamental technical indicators that warn a move is a countertrend correction rather than a new trend. At a very basic level a healthy trend must have increasing volume to keep it going , im sure you can find the Nasdaq somewhere on the web, the May 2000 retrace of 60% (return to normal) has declining volume

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Guest Steve Cook

Hmmm uncertain, i think the 2012 Forecast is when the real sh@t hits the fan, the year when fundamentals ultimately collapse, the year of the black swan we have been leading up to this last decade

If it's possible to identify both the timing and cause of a black swan it's not a black swan, by definition. It's just bad sh*t that was bound to happen.

Edited by Steve Cook

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If you can idenify both the timing and cause of a black swan it's not a black swan, by definition

Then by definition it is impossible to have a black swan in investment markets because there will always be someone who nails it perfectly such as 87 which a select few did and Lehmans (of which there were plenty on here recognised pre event) more recently. In your definition black swans can only happen in Nature (events outside human control (which is not their usual definition as they are regularly applied to markets).

I think they are just actuarially significant events (outliers). The cause is often clear to someone and the timing can become clearer as you get closer and closer to it. I think the unknown element though is what exactly the ultimate trigger turns out to be which can be anything

It really depends on how tight you want the definitions, even applying to natural events i think most would recognize the freak UK storms in 87 were a technical black swan however as Mr Fish will tell you by your definition it cant be, as someone knew and taking it further a freak airline crash has in cases been a premonition of someone which again by your definition is not a black swan when i would say it is

Edited by Tamara De Lempicka

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Some areas (London/South East) will be ok ish...............Liverpool.Manchester etc are stuffed!

But what is required is a collaspe of BTL, only rates + 5% will do that.

Mike

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Some areas (London/South East) will be ok ish...............Liverpool.Manchester etc are stuffed!

But what is required is a collaspe of BTL, only rates + 5% will do that.

Mike

Figures yesterday show that a small increase in mortgage rates will wipe out up to 40% of BTLetters.

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Yes it is, via technical analysis you can look at volume for any bubbles , the last being the DAQ, the reducing volume is actually one of the fundamental technical indicators that warn a move is a countertrend correction rather than a new trend. At a very basic level a healthy trend must have increasing volume to keep it going , im sure you can find the Nasdaq somewhere on the web, the May 2000 retrace of 60% (return to normal) has declining volume

That's what I thought intuitively but have never seen any definitive studies.

For as long as volumes remain below normal long run averages (Spline's work notwithsatnding), I really don't think that it makes sense to change from renting to owning in the UK.

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god, what a pair of dickwads you two are. Arguing about a definition.

black swan event = generally regarded as highly unlikely.

note the word 'generally'.

Teh voice of reason.

:lol:

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god, what a pair of dickwads you two are. Arguing about a definition.

black swan event = generally regarded as highly unlikely.

note the word 'generally'.

Actually, I thought that a Black Swan event = one whose likelihood has never been considered.

Think of a casino; the probability of a lucky gambler bankrupting the casino one evening is known to the management and tiny; this would not be a Black Swan event.

Whereas the probability of a huge flying saucer landing on top of the casino and crushing it has (probably) never been considered. This would be a Black Swan.

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(Which means of course that a Black Swan is indeed a Black Swan TO a particular person or institution. The UFO is a Black Swan to the casino management. It might be a considered probability to the bunch of UFO crackpots next door.)

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Guest Steve Cook

Actually, I thought that a Black Swan event = one whose likelihood has never been considered.

Think of a casino; the probability of a lucky gambler bankrupting the casino one evening is known to the management and tiny; this would not be a Black Swan event.

Whereas the probability of a huge flying saucer landing on top of the casino and crushing it has (probably) never been considered. This would be a Black Swan.

Yes, as defined by the author of the book, this pretty much sums it up

We have to be very careful here though, as PG would no doubt consider such analyses a case of semantic dickwaddery....;)

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Guest Steve Cook

(Which means of course that a Black Swan is indeed a Black Swan TO a particular person or institution. The UFO is a Black Swan to the casino management. It might be a considered probability to the bunch of UFO crackpots next door.)

And this is the key point that I attempting to encourage Tamara to arive at all by her/himself

Edited by Steve Cook

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(Which means of course that a Black Swan is indeed a Black Swan TO a particular person or institution. The UFO is a Black Swan to the casino management. It might be a considered probability to the bunch of UFO crackpots next door.)

Were not next door we're across the street.

But yes, black swan is a completely unforeseen event.

A good example was that Icelandic volcano.

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  • 259 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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