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Realistbear

Housing Market To Stay Flat Until 2013

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http://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/7920146/Housing-market-to-stay-flat-until-2013.html

Housing market to stay flat until 2013
The UK will see sluggish house price growth over the coming years according to the Centre for Economics and Business Research, as the Bank of England's Monetary Policy Committee prepares to leave interest rates on hold this week...../
CEBR forecast a 6.7pc rise in house prices this year, slowing to a 2.7pc rise next year and 5pc in 2012.

As soon as it is obvious that house prices are no longer rising out come the "plateau" theories. What these experts fail to understand is that our housing market goes one of two ways and one of those options is not remaining fixed. Its up or down.

Why is this so? Because the entire HPI industry from banksters to EAs require movement to make money. When the market moves it does so on the basis of price. As prices rise in a frenzy as they do here every decade or so the VIs grow fat on commissions. When there is a crash the VIs get just as fat selling off and repossessing housing stock ready for the next boom. If the market plateaus, which it rarely ever does for an extended period, the VIs starve.

The last plateau prediction of note came from the former chief EA in the US who predicted a flat market at the tipping point. The rest is history.

That all said, the experts in this case are NOT predicting a flat market but a return to HPI. In my area I am seeing 10% reductions in houses that were in the close to 300k range at the beginning of the year.

Edited by Realistbear

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This graph shows average house prices (selling prices not asking prices) in the Carlisle area for the last year:

http://www.home.co.uk/guides/house_prices_report.htm?location=carlisle&lastyear=1

It goes up and down a bit but there's no real trend and any variation seems best explained by differences from month to month in what's actually sold. I would describe it as flat lining and expect it to continue to do so for a couple of years. When there are no buyers and no sellers this seems a reasonable prognosis n'est pas?

The real crash won't come until the number of forced sales hits the sort of levels seen in the last recession and for my money this is another couple of years down the line.

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This graph shows average house prices (selling prices not asking prices) in the Carlisle area for the last year:

http://www.home.co.uk/guides/house_prices_report.htm?location=carlisle&lastyear=1

It goes up and down a bit but there's no real trend and any variation seems best explained by differences from month to month in what's actually sold. I would describe it as flat lining and expect it to continue to do so for a couple of years. When there are no buyers and no sellers this seems a reasonable prognosis n'est pas?

The real crash won't come until the number of forced sales hits the sort of levels seen in the last recession and for my money this is another couple of years down the line.

I think you're right.

Because BoE/Treasury have pursued a policy of stopping HPC at any cost. The slightest hint of house price falls and BoE will reduce interest rates yet further (another 2 months negative on Haliwide and we'll see more QE to bring virtual IRs down well into negative territory). They are ignoring inflation to keep the HPI pyramid from collapsing.

If your graph's Y axis was labelled consumer prices with a nice low amplitude sine wave around a neutral line we would applaud BoE for maintaining price stability. But instead prices/inflation are heading to exponential growth and BoE will do nothing to stop it. I expect lots of printing and high inflation (including wages and public sector because there will be crippling industrial action). I agree that house prices will be kept from falling in nominal terms because this is a policy that they will pursue to the death. They will only get away with it because US and EU have even bigger problems.

Edited by ingermany

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Guest BetterOffOnBenefits

On a very simple level, you either have a buyers or a sellers market...and 'plateau' doesn't happen in either of those.

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I think you're right.

Because BoE/Treasury have pursued a policy of stopping HPC at any cost. The slightest hint of house price falls and BoE will reduce interest rates yet further (another 2 months negative on Haliwide and we'll see more QE to bring virtual IRs down well into negative territory). They are ignoring inflation to keep the HPI pyramid from collapsing.

+1. The writing is already on the wall.

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This graph shows average house prices (selling prices not asking prices) in the Carlisle area for the last year:

http://www.home.co.uk/guides/house_prices_report.htm?location=carlisle&lastyear=1

It goes up and down a bit but there's no real trend and any variation seems best explained by differences from month to month in what's actually sold. I would describe it as flat lining and expect it to continue to do so for a couple of years. When there are no buyers and no sellers this seems a reasonable prognosis n'est pas?

The real crash won't come until the number of forced sales hits the sort of levels seen in the last recession and for my money this is another couple of years down the line.

I agree that if IRs remain this low, government support keeps avoiding repossessions, and somehow banks keep lending for mortgages, then, maybe, the current price levels could, perhaps, remain at this unsustainable level (in relation to salary/employment) for a little longer, perhaps even 1 or 2 years. And then crash.

However, do you really think the current government would put so much effort to have a crash in the pre-election years?

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(...)

Because BoE/Treasury have pursued a policy of stopping HPC at any cost. The slightest hint of house price falls and BoE will reduce interest rates yet further (another 2 months negative on Haliwide and we'll see more QE to bring virtual IRs down well into negative territory). They are ignoring inflation to keep the HPI pyramid from collapsing.

(...)

Look at this news, re. the Treasury under the new coalition gov.: http://www.housepricecrash.co.uk/forum/index.php?showtopic=147307&view=findpost&p=2624404

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This graph shows average house prices (selling prices not asking prices) in the Carlisle area for the last year:

http://www.home.co.u...isle&lastyear=1

It goes up and down a bit but there's no real trend and any variation seems best explained by differences from month to month in what's actually sold. I would describe it as flat lining and expect it to continue to do so for a couple of years. When there are no buyers and no sellers this seems a reasonable prognosis n'est pas?

The real crash won't come until the number of forced sales hits the sort of levels seen in the last recession and for my money this is another couple of years down the line.

The real crash wont come until mortgage funding becomes very hard to get.

the mindset of British people is 100% ingrained with "put it all in the house..you cant lose"...ive heard this all my life.

If you dont think like this, you aint British.

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The plateau cant happen for several reasons. Many people, both owner ocs and BLTers are relying on indefinitely increasing prices to make ends meet. Also there are many positive feedback factors that will kick in.

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I agree that if IRs remain this low, government support keeps avoiding repossessions, and somehow banks keep lending for mortgages, then, maybe, the current price levels could, perhaps, remain at this unsustainable level (in relation to salary/employment) for a little longer, perhaps even 1 or 2 years. And then crash.

However, do you really think the current government would put so much effort to have a crash in the pre-election years?

On a five year term I think a crash in 2 years time, i.e. mid-term, would suit them quite well. You can't put 1 million extra on the dole overnight. Plus the BofE seems set on low interest rates and more QE so my bet remains more extend and pretend followed by a crash in about 2 years.

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On a very simple level, you either have a buyers or a sellers market...and 'plateau' doesn't happen in either of those.

I take your point, and in a perfect market where all market actors are perfectly informed then prices will always fluctuate. This isn't the case in the housing market however where people don't always behave rationally and aren't always perfectly informed. You can actually extend that graph to a period of two years where prices haven't really done anything either way. The corresponding graph for asking prices is even flatter.

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I take your point, and in a perfect market where all market actors are perfectly informed then prices will always fluctuate. This isn't the case in the housing market however where people don't always behave rationally and aren't always perfectly informed. You can actually extend that graph to a period of two years where prices haven't really done anything either way. The corresponding graph for asking prices is even flatter.

it's about sentiment

usually, positive sentiment leads to rising prices and negative sentiment to falling prices, with strong positive feedback mechanisms for both

at the moment, positive sentiment leads to approx. flat prices because they're limited by affordibility

prices can only remain flat as long as sentiment remains positive; once it shifts it will be downhill all the way

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The plateau cant happen for several reasons. Many people, both owner ocs and BLTers are relying on indefinitely increasing prices to make ends meet. Also there are many positive feedback factors that will kick in.

Given that prices have been flat lining in many areas for some time now it seems to me that this simply isn't true, or isn't true enough to make prices fall. The only things that are really going to change things, IMHO, are a change in the availability of finance, as Boo Loo says, or a dramatic increase in forced sales which are currently well below what they were in the last recession.

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On a five year term I think a crash in 2 years time, i.e. mid-term, would suit them quite well. You can't put 1 million extra on the dole overnight. Plus the BofE seems set on low interest rates and more QE so my bet remains more extend and pretend followed by a crash in about 2 years.

The first decent argument I've heard for a two-year delay, good point your evilness.

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Look at this news, re. the Treasury under the new coalition gov.: http://www.housepricecrash.co.uk/forum/index.php?showtopic=147307&view=findpost&p=2624404

This would indeed be good news. I just wonder if they will and if they can.

The policy of the last 10 years has been to aggressively pursue house price inflation. Interest rates have been cut as soon as HPI faltered (even if it meant CPI bursting through supposed targets). When houses became unaffordable public sector pay was hiked to compensate (primary school teachers in London getting 250K, GPs 150K etc etc). Tax credits were used to increase pay, in effect giving away money wityh little or no control (overpayment scandal). LHA has been abused to keep house prices artificially high. The list goes on. The house price tail has been wagging the treasury/central bank dog for so long now that I wonder if anyone can stop it. I guess the test will come soon, now that HPs are falling.....................will BoE restart QE/special liquidity in response to this when RPI is 5% and CPI 50% above its supposed upper limit? Are they targetting inflation or house prices?

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As soon as it is obvious that house prices are no longer rising out come the "plateau" theories. What these experts fail to understand is that our housing market goes one of two ways and one of those options is not remaining fixed. Its up or down.

Why is this so?

No need to go looking for bogeymen under the bed, this one's really simple.

The housing market, like any other market can be represented at any given moment in time as an order book of prices and volumes, offers and asks.

Each cross removes a given lot size of offers and asks from the market at some pricepoint.

The crossing pricepoint tends toward the middle of the book (it's more likely to be near the center than either outside end, even allowing for the relative illiquidity and opacity of this specific market).

If there's no steady supply of new lending activity (increasing buy-side depth) and no increasing supply of properties (increasing sell-side depth) then the middle of the book gets knocked out, the midpoint then moves to the next highest pricepoint or the next lowest essentially depending on whether sell-side needs to sell more than buy-side needs to buy or vice versa (the increasing probability of increases in price moves in such a market gives rise to increased price volatility).

No "industry", no "needing to make money".

It's just how markets work.

Innit.

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On a five year term I think a crash in 2 years time, i.e. mid-term, would suit them quite well. You can't put 1 million extra on the dole overnight. Plus the BofE seems set on low interest rates and more QE so my bet remains more extend and pretend followed by a crash in about 2 years.

A property price "crash" does not happen in just one year. Usually bubbles have a "roller coaster" shape. (Though never completely smooth of course.) I think we are now just starting to come down, and in the next 2-3 years we should see prices coming down by 20-30%. Then some mild falls or stabilisation in the following years.

The coalition government has already informed the mortgage industry that they would see positively a fall of around 25%. Please do read the news about it, on that thread. It should still be on the front page.

Mortgage rates and volumes can easily be controlled by the FSA, despite BoE base rates. The new government is pressing for loans to be re-directed to businesses.

Edit to add this:

I've posted this chart on here before:

mwk_property_B-5.gif

From here:

http://www.fsponline-recommends.co.uk/page.aspx?u=mwpropertyIIe&tc=NMYKL401&PromotionID=2147066763&

Which compares the inflation adjusted Nationwide figures against the classic bubble graph, across the last boom and bust and the current one. Whilst the theoretical curve isn't being followed exactly, I think it's close to enough to support the theory.

Edited by Tired of Waiting

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This would indeed be good news. I just wonder if they will and if they can.

The policy of the last 10 years has been to aggressively pursue house price inflation. Interest rates have been cut as soon as HPI faltered (even if it meant CPI bursting through supposed targets). When houses became unaffordable public sector pay was hiked to compensate (primary school teachers in London getting 250K, GPs 150K etc etc). Tax credits were used to increase pay, in effect giving away money wityh little or no control (overpayment scandal). LHA has been abused to keep house prices artificially high. The list goes on. The house price tail has been wagging the treasury/central bank dog for so long now that I wonder if anyone can stop it. I guess the test will come soon, now that HPs are falling.....................will BoE restart QE/special liquidity in response to this when RPI is 5% and CPI 50% above its supposed upper limit? Are they targetting inflation or house prices?

I agree completely with you that the last government was central in causing, inflating, and propping up the bubble. And that is it extremely good news that the new government WANT to TRY to channel funds in a more productive direction.

And I also agree that we can't be sure if they will manage to do that. They do have the tools, but will they have the nerves to stay on course, under the barrage of criticism and attacks they will suffer? Will they have the balls? That is the question.

I do hope so.

the best chance is if they can see that it will be impossible to keep the bubble inflated for 5 years. Hence, their only choice is: burst now, or just before the election.

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A property prices "crash" does not happen in just one year. Usually bubbles have a "roller coaster" shape

If you're interested in this sort of thing, it can be enlightening to model the order book itself...

I'd expect to see liquidity increase under the last crossing price as a precursor to any move down (and above it, preceeding moves upward).

Or in layman's terms, the proverbial "flood of properties" being offered at less than regional averages (or alternatively, "queues of buyers" "regestering interest" above it).

(data on the former probably has less skew than the latter; it's relatively easy to form a spin-free view on asks, but given that the industry's own buy-side metrics - regarding offers and open interest - are 90% garbage, you'd need to model this from lending data series instead)

Edited by ParticleMan

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A property prices "crash" does not happen in just one year. Usually bubbles have a "roller coaster" shape. (Though never completely smooth of course.) I think we are now just starting to come down, and in the next 2-3 years we should see prices coming down by 20-30%. Then some mild falls or stabilisation in the following years.

The coalition government has already informed the mortgage industry that they would see positively a fall of around 25%. Please do read the news about it, on that thread. It should still be on the front page.

Mortgage rates and volumes can easily be controlled by the FSA, despite BoE base rates. The new government is pressing for loans to be re-directed to businesses.

indeed - another way of looking at the psychological drivers:

  1. Denial – "I feel fine."; "This can't be happening, not to me."

    Denial is usually only a temporary defense for the individual. This feeling is generally replaced with heightened awareness of situations and individuals that will be left behind after the house price falls.

  2. Anger – "Why me? It's not fair!"; "How can this happen to me?"; "Who is to blame?"

    Once in the second stage, the individual recognizes that denial cannot continue. Because of anger, the person is very difficult to care for due to misplaced feelings of rage and envy. Any individual that symbolizes life or energy is subject to projected resentment and jealousy.

  3. Bargaining – "I'll do anything ...."; "I will give my life savings if..."

    The third stage involves the hope that the individual can somehow postpone or delay . Usually, the negotiation is made with a higher power in exchange for a reformed lifestyle.

  4. Depression – " why bother with anything?"; "What's the point?"

    Because of this, the individual may become silent, refuse visitors and spend much of the time crying and grieving. It is not recommended to attempt to cheer up an individual who is in this stage. It is an important time for grieving that must be processed.

  5. Acceptance – "It's going to be okay."; "I can't fight it, I may as well prepare for it."

    In this last stage, the individual begins to come to terms with their mortality or that of their loved one (or their house price)

Kübler-Ross claimed these steps do not necessarily come in the order noted above, nor are all steps experienced by all patients, though she stated a person will always experience at least two. Often, people will experience several stages in a "roller coaster" effect—switching between two or more stages, returning to one or more several times before working through it.

I think we are vaccilating between Denial and Bargaining stages currently - at some point the depression / acceptance dynamic will set in and they'll really really hate you and me for it

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indeed - another way of looking at the psychological drivers:

  1. Denial – "I feel fine."; "This can't be happening, not to me."

    Denial is usually only a temporary defense for the individual. This feeling is generally replaced with heightened awareness of situations and individuals that will be left behind after the house price falls.

  2. Anger – "Why me? It's not fair!"; "How can this happen to me?"; "Who is to blame?"

    Once in the second stage, the individual recognizes that denial cannot continue. Because of anger, the person is very difficult to care for due to misplaced feelings of rage and envy. Any individual that symbolizes life or energy is subject to projected resentment and jealousy.

  3. Bargaining – "I'll do anything ...."; "I will give my life savings if..."

    The third stage involves the hope that the individual can somehow postpone or delay . Usually, the negotiation is made with a higher power in exchange for a reformed lifestyle.

  4. Depression – " why bother with anything?"; "What's the point?"

    Because of this, the individual may become silent, refuse visitors and spend much of the time crying and grieving. It is not recommended to attempt to cheer up an individual who is in this stage. It is an important time for grieving that must be processed.

  5. Acceptance – "It's going to be okay."; "I can't fight it, I may as well prepare for it."

    In this last stage, the individual begins to come to terms with their mortality or that of their loved one (or their house price)

Kübler-Ross claimed these steps do not necessarily come in the order noted above, nor are all steps experienced by all patients, though she stated a person will always experience at least two. Often, people will experience several stages in a "roller coaster" effect—switching between two or more stages, returning to one or more several times before working through it.

I think we are vaccilating between Denial and Bargaining stages currently - at some point the depression / acceptance dynamic will set in and ...

Good post, until here, but then...

they'll really really hate you and me for it

:huh: Me?! You?! For the property bubble?! :blink:

Or for the bursting of it?! Me?! You? :blink:

:(

The worst is: You are probably right.

Oh well... Life eh? :rolleyes:

Better play the long game. In 10 years all this will be... sorry, I have no idea how all this will play out in the long term, or how it will be remembered.

Better keep focus on the fundamentals: financial security, health, family and friends, etc.

Edited by Tired of Waiting

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Better keep focus on the fundamentals: financial security, health, family and friends, etc.

don't forget - family and friends will hate you - you will have to rely on an understanding partner and health and financial security only. even your kids will probably think you're a crank.

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I think you're right.

Because BoE/Treasury have pursued a policy of stopping HPC at any cost. The slightest hint of house price falls and BoE will reduce interest rates yet further (another 2 months negative on Haliwide and we'll see more QE to bring virtual IRs down well into negative territory). They are ignoring inflation to keep the HPI pyramid from collapsing.

If your graph's Y axis was labelled consumer prices with a nice low amplitude sine wave around a neutral line we would applaud BoE for maintaining price stability. But instead prices/inflation are heading to exponential growth and BoE will do nothing to stop it. I expect lots of printing and high inflation (including wages and public sector because there will be crippling industrial action). I agree that house prices will be kept from falling in nominal terms because this is a policy that they will pursue to the death. They will only get away with it because US and EU have even bigger problems.

I think YOU are right.

The slightest hint of a HPC and the government will step in and do anything that needs to be done to try to keep HPI on track. Why? Because the UK is totally dependent on inflating house prices to stay afloat. If houses drop the IMF will be on the doorstep within months.

Of course, it will end in a huge crash because a country cannot survive on HPI as its main industry. In fact, HPI is not an industry at all but a parasitic poison that threatens to send us to Banana Republic status within a generation. I do not believe the government has the ammunition to stop the crash once it has taken hold (let's say 3 months in a row of more than 1% drops).

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The first decent argument I've heard for a two-year delay, good point your evilness.

They must get the bad news out now and induce a crash otherwise their timing for a second term will be lost, remember governments are only interested in power and that means another term . 4 Years from now they will hope that there is an improvement and then start the same conn game by telling us and giving us a few crumbs to vote for them. Same old story.

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  • 141 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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