Bo E Assessment Of Property Market Gloomy

[Realistbear]

http://www.telegraph.co.uk/finance/economics/houseprices/8275708/Bank-of-Englands-Adam-Posen-warns-over-lack-of-mortgage-lending.html

:41PM GMT 22 Jan 2011

Comment

House prices rebounded last year from their

worst slump since the early 1990s

, as the Bank's Monetary Policy Committee held the interest rate at a record low of 0.5pc, however demand for mortgages weakened. Data last week from the Council of Mortgage Lenders showed mortgage advances for 2010 sunk to their lowest level in a decade.

“You look at the difficulty many first-time buyers or younger people have in getting mortgages [and the] very low volume of transactions – these to me are things saying ‘I am much more worried about a downside risk to the housing market from here than any further appreciation,’” Mr Posen told Bloomberg.

“My view is two things have supported the UK housing market in the last couple of years,” Mr Posen said. “One is our interest-rate cuts and quantitative easing directly affecting mortgage affordability” and the second that the level of UK homebuilding was “relatively small for the size of the economy compared to Spain or Ireland or the US”.

“You have both a demand factor through aggressive monetary ease and a supply factor in that the oversupply was much less,” he said. “That to me is a very straightforward explanation for why housing prices have been relatively resilient.”

Mr Posen has repeatedly urged his Bank of England colleagues not "overreact" to inflation remaining over target by increasing interest rates and in recent months has argued for policy to move in the opposite direction – to provide further stimulus.

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He previously said he thinks the economy still has a long way to go to run at full tilt in the wake of the recession

. "The workers of the United Kingdom did not wake up one morning ... and find that their left arms had fallen off and half of their offices had disappeared," he said last month. A total of just £136.3bn was lent during the year, the lowest level since 2000, and 5pc below the 2009 figure, which was the lowest total for nine years, according to the CML.

The group, which is predicting total advances of around £135bn for 2011, also warned that consumer demand could be even weaker than previously expected if inflationary pressures led to an early rise in interest rates.

Advances during the final month of the year were also low, with just £11bn lent in December,

the most subdued figure for the month since 2000,

and 6pc down on November's total.

It was also the

fourth consecutive month during which lending levels had been the lowest

for the month in question for a decade.

But while December is traditionally a quiet month for the mortgage market, there were

few signs that lending levels would pick up

during January.

The Bank of England's Trends in Lending report showed that the number of mortgages approved for house purchase by the major lenders had dropped to just 40,000 during the month, the

lowest level since March 2009

and down from 45,000 in November.

The number of homes changing hands also fell during December, with just 75,000 properties sold for more than £40,000, down from 77,000 in November, according to figures from HM Revenue & Customs.

Paul Sabbato, a director of broker First 4 Bridging, said: "

The near-paralysis of the mortgage market continues

. December is always a quiet month but this was a quieter December than usual.

"There's no doubt that

many people who may have been considering buying a couple of months ago have shelved their plans

until there is more clarity on when, and by how much, rates will rise."

Howard Archer, chief UK and European economist at IHS Global Insight, said: "Latest data suggest that housing market activity ended 2010 very much on the back foot, which suggests that house prices will remain under pressure in the early months of 2011 at least.

"This evidence of ongoing

very weak housing market activity reinforces our belief that house prices will fall further in 2011

, although current mounting signs of fewer houses coming on to the market could provide some support to prices."

Although any increases to interest rates are likely to be small, the move would have a big impact on the confidence of potential buyers

.

CML economist Peter Charles said: "Money market rates have recently moved higher in anticipation of a rise in base rate and some lenders have recently reflected these increases in their product pricing.

"Against this backdrop,

consumer demand may be weaker than we would otherwise have expected

. Higher interest rates will also hit the budgets of existing borrowers, although the expected modest rises in base rate will result in a relatively small proportionate rise in monthly payments for most mortgage holders."

He added that the group did not think this would have a big impact on the number of people who struggled to keep up with their mortgage, and it did not anticipate revising its current arrears forecast.

Gloom and doom. *

__________________________

* Yeah baby

[sbn]

Posen

Yup - that's right, supported by ultra low interest rates and QE. Think a little further Posen.... What is the effect of that you Fat, Ginger-beardy OAF????

Isnt he supposed to be an economics academic or something?

Its astounding isn't it? How these stuffed shirts rise so high.......

[fellow]

Gloom and doom.

Hope and joy.

[Democorruptcy]

Why is someone who has received grants by the European Commission and US foundations helping to form policy in the UK?

I don't think someone so closely allied to another country's central banker like Bernanke should be on our MPC.

Adam S. Posen (born in Brookline, Massachusetts) is an American economist, a member of the Monetary Policy Committee of the Bank of England (2009 - present) and senior fellow at the Peterson Institute for International Economics (1997 - present, deputy director 2007 - 2009). He also sits on the panel of economic advisers to the United States Congressional Budget Office.[1]

Posen's other positions include being a member of the Council on Foreign Relations and theTrilateral Commission, a research associate of the Center for the Japanese Economy and Business of Columbia University, a fellow of the CESifo Research Network.[2] He has been the recipient of major research grants from the European Commission, the Sloan Foundation, the Ford Foundation, and the German Marshall Fund of the United States

Posen also writes monthly columns for the German newspaper Welt am Sonntag and Eurointelligence syndicate, and has previously contributed to the Financial Times, Foreign Affairs, National Journal, New York Times, Wall Street Journal, Washington Post, Die Zeit, and Nihon Keizai Shimbun. His most cited publications include the books Restoring Japan's Economic Growth (1998) and Inflation Targeting: Lessons from the International Experience (1999, co-authored with Ben Bernanke, Chairman of the Board of Governors of the Federal Reserve System in the US, et al), and a series of articles on the political economy of central bank independence, as well as more recent works on the global role of the euro.

http://en.wikipedia.org/wiki/Adam_Posen

[The Masked Tulip]

Saw a nice drop from 345K to 300K overnight on a fairly newbuild in a nice part of the Mumbles. Alas, it is still 50K over-priced IMPO.

What do you think my chances of getting it for 240K? Highly unlikely.

That aside I don't see much gloom and doom when a 2 up 2 down terrace that shoul be 175K in the best of times coming on the market for the first time this week at 275K asking.

[Bruce Banner]

Saw a nice drop from 345K to 300K overnight on a fairly newbuild in a nice part of the Mumbles. Alas, it is still 50K over-priced IMPO.

What do you think my chances of getting it for 240K? Highly unlikely.

That aside I don't see much gloom and doom when a 2 up 2 down terrace that shoul be 175K in the best of times coming on the market for the first time this week at 275K asking.

Wait for a bit and I would think it highly likely .

[The Masked Tulip]

Wait for a bit and I would think it highly likely .

I hope so.

Interestingly, in two separate little estates a house in each has dropped below 300K this week - the above from 340K down to 300K and the other down from 340K at the beginning of the year in 10K increments where it hung around at 310K for the past 4 or 5 months... but dropped to 280K asking last week also.

I mention this because each has 2 other houses nearby, almost identical, each still on the market for 340K asking... so I imagine that is the cat amongst the pidgeons for those sellers.

[onesmallstep]

I personally don't care what the experts say, all the figures are saying we are heading for an almighty crash.

What amazes me is how quickly people have come to think interest rates at 0.5% and inflation at 3.7% is normal. To me it shows absolute desperation.

The number of job losses being announced is crazy. Yeah sure this economy can support 200k for a 3 bed semi.

My prediction is now 3.5mil unemployed and 40% hpc by the end of this parliament. (assuming it runs full course).

There is a strong possibility the jellied eels will jump ship though.

[Democorruptcy]

I hope so.

Interestingly, in two separate little estates a house in each has dropped below 300K this week - the above from 340K down to 300K and the other down from 340K at the beginning of the year in 10K increments where it hung around at 310K for the past 4 or 5 months... but dropped to 280K asking last week also.

I mention this because each has 2 other houses nearby, almost identical, each still on the market for 340K asking... so I imagine that is the cat amongst the pidgeons for those sellers.

I love the smell of vendor fear in Wales.

[The Masked Tulip]

I love the smell of vendor fear in Wales.

I am sensing it also... Some appear to be getting worried whilst the majority continue in complete denial.

There is quite a mix that have come on the market in my area in the past fortnight - some have changed EAs and the asking prices have shot up... nuts IMPO... others such as the 2 up 2 down terrace on a busy road for 275K asking is just ludicrous IMPO... and then you have those like above...

I suspect that some of thr price droppers are either desperate to sell now or are trying to get out before it goes tits up.

You like the smell of vendor fear in Wales? I think you need a nice chianti with that.

[wild card]

http://www.mortgageintroducer.com/ccstory/239372/5/Gross_mortgage_lending_dropped_by_6_per_cent.htm

Paul Sabbato, a director of master broker, First 4 Bridging, said: "The near-paralysis of the mortgage market continues. December is always a quiet month but this was a quieter December than usual.

Even the mortgage brokers know it know regardless of what they say.

[easy2012]

http://www.telegraph.co.uk/finance/economics/houseprices/8275708/Bank-of-Englands-Adam-Posen-warns-over-lack-of-mortgage-lending.html

Maybe he can recommend that BoE forms a UKLIMAE to make mortgage lending at 0.1% and zero down and I am pretty sure that will reactivate

the lending boom. I am also pretty sure when the next crash comes around, he will be somewhere else..

[mattyfc]

Not sure Gloomy is the right word. House prices correcting is a very positive economic development and not gloomy at all. Rampant irresponsible mortgage lending is what caused the crisis in the first place.

The lack of responsibility being taken by reckless borrowers is the real problem. Blaming the banks for risk taking, lending far too much money, liar loans, no deposit 120% mortgages etc. Not equating this debt creation with the housing market and private credit running out of control for a decade to fuel consumption based growth and Gordon's spending plans.

Good to see the mortgage market is returning to sanity.

[wild card]

Good to see the mortgage market is returning to sanity.

Not for the want of trying:

http://www.mortgageintroducer.com/mortgages/239370/5/Industry_in_depth/Jupp_launches_specialist_distributor.htm

The firm will offer intermediaries across the market access to exclusive specialist mortgages from its lender partners as well as help to place specialist cases ranging from bridging, secured loans, commercial Buy-to-let and first charge for clients with credit blips on their records.

[“Nasty Piece of work”]

It is starting to filter to Joe Public. A local property paper had the flavour of more recent pricing starting to have a hint of reality. 2011 pricing, rather than buying the instruction. Give it a while, reality stalks the market, and is just edging ahead from a Space cadet.

[NW11]

Sorry guys the "crash" is not coming. Too many vendors are refusing to put their properties on the market and banks are refusing to repossess. Even if they do they're still holding on to their assets to deliberately slow the fallout.

Until the government demand banks start selling their properties and capitalise themselves I dont see any heavy falls coming.

Sales volumes are so low that "average house prices" are meaningless

Edited January 22, 2011 by Earthling10

[Pent Up]

Posen

Yup - that's right, supported by ultra low interest rates and QE. Think a little further Posen.... What is the effect of that you Fat, Ginger-beardy OAF????

Isnt he supposed to be an economics academic or something?

Its astounding isn't it? How these stuffed shirts rise so high.......

Couldn't have put it better myself. Posen is a dick

[Pent Up]

Sorry guys the "crash" is not coming. Too many vendors are refusing to put their properties on the market and banks are refusing to repossess. Even if they do they're still holding on to their assets to deliberately slow the fallout.

Until the government demand banks start selling their properties and capitalise themselves I dont see any heavy falls coming.

Sales volumes are so low that "average house prices" are meaningless

Are they? Loads coming on near me and we are already 15% up year on year.

It's looking good for crashtastic year

[onesmallstep]

Sorry guys the "crash" is not coming. Too many vendors are refusing to put their properties on the market and banks are refusing to repossess. Even if they do they're still holding on to their assets to deliberately slow the fallout.

Until the government demand banks start selling their properties and capitalise themselves I dont see any heavy falls coming.

Sales volumes are so low that "average house prices" are meaningless

like all house owners who are in it for the money, banks will race to the market when they think they could lose money. The trouble is it's too late by then and a race to the bottom.

The crash will happen this year and prices then stagnant for 10 years.

[NW11]

like all house owners who are in it for the money, banks will race to the market when they think they could lose money. The trouble is it's too late by then and a race to the bottom.

The crash will happen this year and prices then stagnant for 10 years.

The banks have more distressed properties in their over inflated "portfolios" than the number of houses on the market today. See all those unfinished new build developments up and down the country? The banks could call those debts in (or agreed payments from the developers who replied on sales to service their debts) whenever they want but they'd rather hold on to them. If all the distressed properties in the country were actually on the market we would already have the crash. The crash could be allowed to happen, prices would stagnate and then begin rising before the next election but the decision has been made to hold off releasing all these properties in one fell swoop and so the "crash" will be drawn out and as a result, the stagnation you predict will materialise. We will still have falling falling prices by the next election.

Like I said, make a disconnect between what you "want" to happen vs what you "believe" will happen based on the facts.

[Realistbear]

Sorry guys the "crash" is not coming. Too many vendors are refusing to put their properties on the market and banks are refusing to repossess. Even if they do they're still holding on to their assets to deliberately slow the fallout.

Until the government demand banks start selling their properties and capitalise themselves I dont see any heavy falls coming.

Sales volumes are so low that "average house prices" are meaningless

Stubborn vendors only sell when they must due to:

1. Higher IR and inability to pay their mortgages

2. Job loss--uneployment is climbing rapidly with part time jobs making it look better than it is. Part timers have to sell.

3. Divorce (rises in econmic downtunrs), death, family growth, downsize etc etc.

4. Job moves

5. Bowel scouring panic--they see pricesd falling everywhere so they drop their price

[Blod]

Posen is trying to set out the case for further QE and either holding rates or even dropping them. The problem he has is trying to avoid talking the market down whilst still arguing his position. What this illustrates is that they know the end game is near and are going to do all they can to delay that if the vain hope that the economy might try. I don't think that the economy is going to turn for two or three years.

What they fail to notice from lofty Threadneedle Street is that the country has become addicted to cheap credit and that as soon as the cost of that rises the public will get a severe case of the DTs. Any bad economic data that does come out you get a round of denial from all and sundry, if they actually knew the state of things there would be panic.

It'll be interesting to see what happens when their hand is force and reluctantly they raise rates you will still be sitting on the MPC.

[onesmallstep]

The banks have more distressed properties in their over inflated "portfolios" than the number of houses on the market today. See all those unfinished new build developments up and down the country? The banks could call those debts in (or agreed payments from the developers who replied on sales to service their debts) whenever they want but they'd rather hold on to them. If all the distressed properties in the country were actually on the market we would already have the crash. The crash could be allowed to happen, prices would stagnate and then begin rising before the next election but the decision has been made to hold off releasing all these properties in one fell swoop and so the "crash" will be drawn out and as a result, the stagnation you predict will materialise. We will still have falling falling prices by the next election.

Like I said, make a disconnect between what you "want" to happen vs what you "believe" will happen based on the facts.

No, the change in sentiment is here and it will lay the plans of the bankers to waste. Once it starts to go it is unstoppable. The next 2 years are going to be unique in the last 30.

TPTB are desperate to keep the ball rolling, but they can't.

I own my house and if anything I want to downsize so financially it is not in my interests to have a HPC, however my house is my home, I am just looking at what I see.

There is no magic growth, there is inflation, there is unemployment, there are lots of BTLs that will panick.

Cameron thinks small businesses will take up the slack, they won't, they will close in their hundreds.

The QE and interest rate cut pots have been emptied they bought Brown and Merv another year, but that's it done, no more.

The general perception of TPTB of how to make an economy work is fundamentally wrong. They think that if you get the money moving, it will all be ok so they do all they can to make that happen. But the money they use is all borrowed and the supply will (has) run out. Plus nobody really wants to borrow any more any way.

What's more, when all this has finished we will owe 1.4trn and have a deficit circa 120bn (the plan is zero deficit) unemployment will be 3.5mil and the banks will be being bailed out left right and centre.

Mortgage lending down, retail sales for December down and that was the last hurrah to beat the VAT rise. 125k council jobs at risk already.

[The Masked Tulip]

No, the change in sentiment is here and it will lay the plans of the bankers to waste. Once it starts to go it is unstoppable. The next 2 years are going to be unique in the last 30.

TPTB are desperate to keep the ball rolling, but they can't.

I own my house and if anything I want to downsize so financially it is not in my interests to have a HPC, however my house is my home, I am just looking at what I see.

There is no magic growth, there is inflation, there is unemployment, there are lots of BTLs that will panick.

Cameron thinks small businesses will take up the slack, they won't, they will close in their hundreds.

The QE and interest rate cut pots have been emptied they bought Brown and Merv another year, but that's it done, no more.

The general perception of TPTB of how to make an economy work is fundamentally wrong. They think that if you get the money moving, it will all be ok so they do all they can to make that happen. But the money they use is all borrowed and the supply will (has) run out. Plus nobody really wants to borrow any more any way.

What's more, when all this has finished we will owe 1.4trn and have a deficit circa 120bn (the plan is zero deficit) unemployment will be 3.5mil and the banks will be being bailed out left right and centre.

Mortgage lending down, retail sales for December down and that was the last hurrah to beat the VAT rise. 125k council jobs at risk already.

Great posts - except that businesses will close in their tens of thousands.

[onesmallstep]

Great posts - except that businesses will close in their tens of thousands.

yes I did think about that.