Realistbear Posted September 15, 2010 Share Posted September 15, 2010 http://uk.finance.yahoo.com/news/boe-can-respond-if-economy-falters-king-reuters_molt-50304db5d36f.html?x=0 BoE can respond if economy falters - King David Milliken and Kylie MacLellan, 12:54, Wednesday 15 September 2010 MANCHESTER (MNCS.OB - news) , England (Reuters) - Britain's central bank stands ready to act if the economic recovery turns out to be weaker than expected, Bank of England Governor Mervyn King told trade unions in a speech on Wednesday. Given the expectation I daresay they are ready to roll the presses with a few billion to fill a mutli-trillion sized-hole. Makes one wonder how long the FTSE and Sterling can remain "bouyant." Called in to see an EA today about a commercial lease I am dealing with and he said he had been speaking to his EA colleagues and they are saying a 25% drop is easily foreseeable given overall market conditions. Advised me stay away until at least December. Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted September 15, 2010 Share Posted September 15, 2010 yep, thats gonna work....NOT! Quote Link to comment Share on other sites More sharing options...
sympatex Posted September 15, 2010 Share Posted September 15, 2010 http://uk.finance.yahoo.com/news/boe-can-respond-if-economy-falters-king-reuters_molt-50304db5d36f.html?x=0 BoE can respond if economy falters - King David Milliken and Kylie MacLellan, 12:54, Wednesday 15 September 2010 MANCHESTER (MNCS.OB - news) , England (Reuters) - Britain's central bank stands ready to act if the economic recovery turns out to be weaker than expected, Bank of England Governor Mervyn King told trade unions in a speech on Wednesday. Given the expectation I daresay they are ready to roll the presses with a few billion to fill a mutli-trillion sized-hole. Makes one wonder how long the FTSE and Sterling can remain "bouyant." Called in to see an EA today about a commercial lease I am dealing with and he said he had been speaking to his EA colleagues and they are saying a 25% drop is easily foreseeable given overall market conditions. Advised me stay away until at least December. More printed money would mean interest rates kept lower for longer? If so, how will this affect house sales & prices RB? Quote Link to comment Share on other sites More sharing options...
interestrateripoff Posted September 15, 2010 Share Posted September 15, 2010 Excellent what is the BoE going to produce other than magic money? Quote Link to comment Share on other sites More sharing options...
fluffy666 Posted September 15, 2010 Share Posted September 15, 2010 Excellent what is the BoE going to produce other than magic money? MORE magic money. Quote Link to comment Share on other sites More sharing options...
Realistbear Posted September 15, 2010 Author Share Posted September 15, 2010 More printed money would mean interest rates kept lower for longer? If so, how will this affect house sales & prices RB? IR is one of the 3 pillars that determine house prices: 1. Jobs (biggest factor) 2. Credit (2nd biggest factor) 3. IR All three are needed to support a housing bubble. Lose one and it wobbles. Lose 2 and it keels over violently. All three and you have a Japanese style crash where you are talking generational house price depression. I think a further 20% off is the minimum we shall see. Depending on region, it could be 20-50% more down from here. Quote Link to comment Share on other sites More sharing options...
sympatex Posted September 15, 2010 Share Posted September 15, 2010 (edited) IR is one of the 3 pillars that determine house prices: 1. Jobs (biggest factor) 2. Credit (2nd biggest factor) 3. IR All three are needed to support a housing bubble. Lose one and it wobbles. Lose 2 and it keels over violently. All three and you have a Japanese style crash where you are talking generational house price depression. I think a further 20% off is the minimum we shall see. Depending on region, it could be 20-50% more down from here. Ok, supposed IR stayed low because of the loose monetary policy decision of the BOE. One pillar not affected? (all assumptions, they could raise IR of course, i am not merv or andrew s) Credit (not availability of) would be increased by more money being printed, no? And according to the news today record job creation. see bbc.... These don't tie up with 20%+ falls. Need more evidence for your argument RB! I think the haliwide indexes will be down 1-4% from now until January. I have no evidence to really support it though. I don't see any changes in that time frame. Very short time frame! Edited September 15, 2010 by sympatex Quote Link to comment Share on other sites More sharing options...
Realistbear Posted September 15, 2010 Author Share Posted September 15, 2010 Ok, supposed IR stayed low because of the loose monetary policy decision of the BOE. One pillar not affected? (all assumptions, they could raise IR of course, i am not merv or andrew s) Credit (not availability of) would be increased by more money being printed, no? And according to the news today record job creation. see bbc.... These don't tie up with 20%+ falls. Need more evidence for your argument RB! I think the haliwide indexes will be down 1-4% from now until January. I have no evidence to really support it though. I don't see any changes in that time frame. Very short time frame! I am currently registered for property details in my area. I have already seen 10% drops on houses in the mid £200k range. The EA said they expect another 25% down. I am afraid I have to agree. The houses are simply overpriced that is all. The figures just don't add up. Average house around here is about £270,000. Without 10X salary loans and 125% mortgages new buyers are gone. No banks are lending without big deposits and people are losing jobs at an increasing rate daily. I see chains collapsing all the time because of no FTBs. House says "sold" and two months later they are back on at a reduced price. Unemployed people must sell for what they can get. IMO the conditions are perfect for a collapse of significant magnitude. 10% so far this year and lots more to come by Crimbo. Quote Link to comment Share on other sites More sharing options...
aa3 Posted September 15, 2010 Share Posted September 15, 2010 Jobs are a very important part of the equation that somehow is being forgotten by most analysts. If for young people good jobs are few and far between, it doesn't matter how low interest rates go, they cannot afford much of anything. What is being seen in crashing US areas is even when homes fall 50% in price, young people still cannot buy them. Honestly even if they fall 90% in price in value.. young people still might not be able to buy them. Because the cost of insurance, property tax and maintenance are more than can be afforded on the subsistence level wages companies are paying. Fairly routine maintenance like a new roof, new siding.. let alone something like drainage problem or structural issue.. simply can never be afforded by the people making like £10 an hour. That is why unless good jobs start being created there is ultimately no floor in how far prices can fall. As I said there are US areas which are down 50 and 60%.. and they still cannot find anyone to sell the houses to, so the prices just keep falling, and houses sitting there unsold. Quote Link to comment Share on other sites More sharing options...
bogbrush Posted September 15, 2010 Share Posted September 15, 2010 (edited) Jobs are a very important part of the equation that somehow is being forgotten by most analysts. If for young people good jobs are few and far between, it doesn't matter how low interest rates go, they cannot afford much of anything. What is being seen in crashing US areas is even when homes fall 50% in price, young people still cannot buy them. Honestly even if they fall 90% in price in value.. young people still might not be able to buy them. Because the cost of insurance, property tax and maintenance are more than can be afforded on the subsistence level wages companies are paying. Fairly routine maintenance like a new roof, new siding.. let alone something like drainage problem or structural issue.. simply can never be afforded by the people making like £10 an hour. That is why unless good jobs start being created there is ultimately no floor in how far prices can fall. As I said there are US areas which are down 50 and 60%.. and they still cannot find anyone to sell the houses to, so the prices just keep falling, and houses sitting there unsold. That's only because those other factors are hanging on as if nothing has changed. Why insure a cheap house? Stuff property tax. Pool knowledge and effort to address maintenance. Once we start building the apparatus of home ownership from the bottom up it'll be fine. EDIT to add: and if that means prices down 90% then that's fine too. The process needs to find a level at which it can operate; what that level is doesn't really matter. Edited September 15, 2010 by bogbrush Quote Link to comment Share on other sites More sharing options...
LittleSteroid Posted September 15, 2010 Share Posted September 15, 2010 guys, doe's QE really affects HPI? I think termination of SMI in january could have a bigger impact. Quote Link to comment Share on other sites More sharing options...
Dorkins Posted September 15, 2010 Share Posted September 15, 2010 Jobs are a very important part of the equation that somehow is being forgotten by most analysts. If for young people good jobs are few and far between, it doesn't matter how low interest rates go, they cannot afford much of anything. What is being seen in crashing US areas is even when homes fall 50% in price, young people still cannot buy them. Honestly even if they fall 90% in price in value.. young people still might not be able to buy them. Because the cost of insurance, property tax and maintenance are more than can be afforded on the subsistence level wages companies are paying. Fairly routine maintenance like a new roof, new siding.. let alone something like drainage problem or structural issue.. simply can never be afforded by the people making like £10 an hour. That is why unless good jobs start being created there is ultimately no floor in how far prices can fall. As I said there are US areas which are down 50 and 60%.. and they still cannot find anyone to sell the houses to, so the prices just keep falling, and houses sitting there unsold. Good post. I think this will come into play in the UK too. My feeling is that there is a good chance we will see £1 properties a la Detroit, maybe even in London/SE when the financial bubble finally pops. High cost of subsistence living and low wages means no margin for landowners. Quote Link to comment Share on other sites More sharing options...
jonboy2010 Posted September 15, 2010 Share Posted September 15, 2010 Surely printing more will cause higher inflation and with the vat rise next year and that the banks have to pay back the money, i can see IR going up to kerb inflation. Quote Link to comment Share on other sites More sharing options...
Tonkers Posted September 15, 2010 Share Posted September 15, 2010 Printing or photocopying? Quote Link to comment Share on other sites More sharing options...
Caveat Mortgagor Posted September 15, 2010 Share Posted September 15, 2010 (edited) Jobs are a very important part of the equation that somehow is being forgotten by most analysts. If for young people good jobs are few and far between, it doesn't matter how low interest rates go, they cannot afford much of anything. What is being seen in crashing US areas is even when homes fall 50% in price, young people still cannot buy them. Honestly even if they fall 90% in price in value.. young people still might not be able to buy them. Because the cost of insurance, property tax and maintenance are more than can be afforded on the subsistence level wages companies are paying. Fairly routine maintenance like a new roof, new siding.. let alone something like drainage problem or structural issue.. simply can never be afforded by the people making like £10 an hour. That is why unless good jobs start being created there is ultimately no floor in how far prices can fall. As I said there are US areas which are down 50 and 60%.. and they still cannot find anyone to sell the houses to, so the prices just keep falling, and houses sitting there unsold. I think you have identified where the biggest battleground is for determining the direction of future prices, but i disagree with your analysis. Prices will have to come down to let usual volumes of new entrants in, ie FTB's. But it only takes a few reckless FTB's to maintain the fallacy of the last 18mths that prices can be sustained at present levels. The issue you have missed - and most of the hpc posters overlook the importance of this as well - is that there is no regulation on salary multiples. This is far more important than LTV regulation. Take your example of the low paid - 2 people on £10ph will earn £40k pa and that will get them £200k mortgage with a 5x salary multiple. The most powerful factor that could prevent a strong correction in house prices is the absence of salary multiple regulation. If there was a regulation on multiples at say 3 x joint salary, they would be limited to a £120k mortgage. This would help ensure the falls to sensible lending levels that we all want to see. Furthermore, the salary regulation needs to ensure mortgages limits are based on earned income and not benefits. ie if a family get 10k in benefits, this should be spent on whatever the benefit was granted for, and not have any basis in calculating the size of mortgage offer thus making housing more expensive for the taxpayer funding those benefits. A correction is certainly due. A big correction. But the fly in the ointment is that banks obviously dont want it to happen and it only takes a small number of reckless buyers to maintain the facade of the last 18 months that house prices can be maintained at current levels. Unless we stop the banks, they will find a few reckless buyers and they can easily circumvent any LTV regulation if the really need to, in order to maintain impression of price sustainability. Edited September 15, 2010 by Caveat Mortgagor Quote Link to comment Share on other sites More sharing options...
babesagainstmachines Posted September 15, 2010 Share Posted September 15, 2010 It's so reassuring that one man can heroically save the economy. Question is, what was he doing during the long recession? Oh that's right, he was saving the economy. Worked well didn't it? Quote Link to comment Share on other sites More sharing options...
Phil S Posted September 15, 2010 Share Posted September 15, 2010 Makes one wonder how long the FTSE and Sterling can remain "bouyant." The FTSE100 is lower than it was 10 years ago - hardly "buoyant"! Quote Link to comment Share on other sites More sharing options...
erranta Posted September 15, 2010 Share Posted September 15, 2010 Jobs are a very important part of the equation that somehow is being forgotten by most analysts. If for young people good jobs are few and far between, it doesn't matter how low interest rates go, they cannot afford much of anything. What is being seen in crashing US areas is even when homes fall 50% in price, young people still cannot buy them. Honestly even if they fall 90% in price in value.. young people still might not be able to buy them. Because the cost of insurance, property tax and maintenance are more than can be afforded on the subsistence level wages companies are paying. Fairly routine maintenance like a new roof, new siding.. let alone something like drainage problem or structural issue.. simply can never be afforded by the people making like £10 an hour. That is why unless good jobs start being created there is ultimately no floor in how far prices can fall. As I said there are US areas which are down 50 and 60%.. and they still cannot find anyone to sell the houses to, so the prices just keep falling, and houses sitting there unsold. This is what I dont understand - why the hell do USA students pay rent when they are surrounded by empty houses? Quote Link to comment Share on other sites More sharing options...
aa3 Posted September 15, 2010 Share Posted September 15, 2010 Good post. I think this will come into play in the UK too. My feeling is that there is a good chance we will see £1 properties a la Detroit, maybe even in London/SE when the financial bubble finally pops. High cost of subsistence living and low wages means no margin for landowners. I think in large parts of the UK we will eventually see the £1 properties. Detroit imo foreshadows what is coming for America and the western nations. Its not all bad, obviously the city proper of Detroit is basically destroyed.. but in the large urban area surrounding the city it is suburbia like any other place. But asset values have totally collapsed to nothing. We see in the UK the declining margin your average 20-40 year old young adult can spend on non-subsistence things. With the cost of oil, food and basic utilities taking up so much. And their wage staying low. The first phase in the collapse of asset prices is that the central bank takes rates to 0%. That of course allows more room to manage debts without such an interest expense. And we see they did that and it slowed down the crash that was starting. But now things are clearly cresting over and heading down again, even with rates at 0%. Quote Link to comment Share on other sites More sharing options...
ken_ichikawa Posted September 15, 2010 Share Posted September 15, 2010 If it collaspes they will ensure fiat means fiat, i.e they will use FORCE to ensure that you continue to use it and to seize metals. All they have to do is make the annoucement on a non xfactor night and nobody will make a peep, if somebody does make a noise you just torture them on live TV to make an example of them to cow the rest of the people to agree. Fiat means force don't cha know? Quote Link to comment Share on other sites More sharing options...
aa3 Posted September 15, 2010 Share Posted September 15, 2010 This is what I dont understand - why the hell do USA students pay rent when they are surrounded by empty houses? Part is because the expenses of owning and operating a house are more than just paying rent. Like high proprety taxes in the US, if something like the roof goes they are looking at huge expenditure of money they dont' have.. house insurance, yard maintenance. Quote Link to comment Share on other sites More sharing options...
ken_ichikawa Posted September 15, 2010 Share Posted September 15, 2010 I think in large parts of the UK we will eventually see the £1 properties. Detroit imo foreshadows what is coming for America and the western nations. Its not all bad, obviously the city proper of Detroit is basically destroyed.. but in the large urban area surrounding the city it is suburbia like any other place. But asset values have totally collapsed to nothing. We had this in Salford and longsite in the 1990s, whole rows of terraced houses which would go for £1000. These were in places like rape town and little beiruit where the sound of gunfire was quite normal. Even police daren't go to these places, they were bought up and knocked down, now a massive mecca bingo stands on the site of them as well as a self storage place...... Quote Link to comment Share on other sites More sharing options...
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