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David Blanchflower Making Sense For Once

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I read that article this morning and did not know what to make it of it - on one hand I felt he was warning against another housing bubble. On the other hand I felt that he was arguing for a housing bubble by warning that higher IRs will cause a crash :blink:

Perhaps it is one of those articles that, whatever happens, he can refer back to 5 years from now and say:

"See, I told you so!".

:unsure:

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As I understand it, what he's saying is that if FFL further inflates the bubble, the result will be a deep house price crash when interest rates inevitably rise. Pretty much what many here have been saying for months.

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House prices are booming again but the bust that’s bound to follow will cost us dear

So we are all in it together?

Not me sunshine. I intend to pick up a bargain with cash when sanity returns.

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Didnt he say he voted (or would have voted) not to raise rates in 2006,7,8 when inflation was going above 5%...

This just sounds like saying the right thing with the luxury or knowing you dont have to do that right thing.

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Well at least he has never been in a position to do anything about interest rates and property inflation. And I am sure he was pointing out in the lead up to 2008 that property was in a bubble. So now he says there is a bubble and the bubble will increase property prices and that sometime prices will correct. He seems to forget that the government will invent as many schemes as necessary to keep prices high as the wealth of the UK is property.

If I thought they could get away with it forever, or at least for the next twenty years, I'd consider buying, but I don't.

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He seems to be covering every angle but it looks like he's basically advertising that there's a new housing boom to encourage people to get on and become wealthy (to balance their non-jobs).

To be accurate there's not even a new house price boom just a few months of positives in house prices and that's being relentlessly turned into a hoped for boom by the media - and for now a fair bit by him.

And oh by jingo the PMI's up to the same level as 2011 hurrah.

Edited by billybong

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He seems to be covering every angle but it looks like he's basically advertising that there's a new housing boom to encourage people to get on and become wealthy (to balance their non-jobs)

To be accurate there's not even a new house price boom just a few months of positives in house prices and that's being relentlessly turned into a hoped for boom by the media - and for now a fair bit by him.

Basically what I concluded.

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He seems to be covering every angle but it looks like he's basically advertising that there's a new house price boom to encourage people to get on and become wealthy (to balance their non-jobs and non-pension).

To be accurate there's not even a new house price boom just a few months of positives in house prices and that's being relentlessly turned into a hoped for boom by the media - and for now a fair bit by him.

And oh by jingo the PMI's up to the same level as 2011 hurrah.

That wouldn't encourage me to buy now as no sooner would you get settled-in than you'd be looking to sell again before you lose half your money in the "deep crash".

I agree with you that there is no boom though, just massive ramping of the few sales that have taken place.

I actually don't believe that FFL will cause a boom, but it will probably stop prices falling until the election is done and dusted.

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Well at least he has never been in a position to do anything about interest rates and property inflation. And I am sure he was pointing out in the lead up to 2008 that property was in a bubble. So now he says there is a bubble and the bubble will increase property prices and that sometime prices will correct. He seems to forget that the government will invent as many schemes as necessary to keep prices high as the wealth of the UK is property.

Horse. Stable-door. Bolted.

House prices 'could fall a further 30%' By Becky Barrow and Daily Mail Reporter

UPDATED: 08:59, 22 July 2008

House prices could plunge a further 30% in the property market crisis, a key member of the Bank of England has warned.

The assessment from David Blanchflower, a member of the Bank's interest rate- setting committee, would mean about £55,000 being wiped from the value of the average home, currently £180,350.

At this level, house prices would return to the levels of 2003, a disaster for many who have bought in the last few years. House prices have already fallen 8.6% since January, cutting the price of the average home by nearly £17,000.

Professor Blanchflower's prediction in a newspaper interview is one of the most pessimistic about the fate of house prices. His position as one of the nine individuals who decide interest rates each month means it will be taken seriously.

Before his forecast, the most negative outlook came from the consultancy Capital Economics. It has been warning house prices could fall 35% by the end of 2010 from their peak in October last year.

It is not the first time that Professor Blanchflower has made such a warning. In a speech in April in Edinburgh, he said house prices in the UK were '30% higher than justified by fundamentals'. He said: 'I am not suggesting that such a drop will necessarily occur, but it may.'

Such a house price fall would be disastrous for ms of homeowners, plunging them into negative equity, where the size of their loan is bigger than the value of their home. Negative equity traps families in their homes. Many cannot sell because they would owe money to the bank which they could not afford to pay.

First-time buyers, however, who have been hoping properties will become more affordable will welcome the predictions. Professor Blanchflower, who joined the Bank in June 2006, is calling for interest rates to be cut sharply to avert a deep and painful recession.

Rates, currently 5%, have been cut three times since December, but he thinks they should come down further.

He told the Guardian newspaper: 'I think we are going into recession and we are probably in one right now. We will probably have three or four quarters of negative growth but the risks are to the downside. It is not too late to stop it but we have to act right now. Monetary policy has been far too tight for too long.

'We can't just sit and do nothing as we have done for too long.'

http://www.thisismon...l#ixzz2dk7DVEFw

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housing isnt in a bubble..

credit for housing asset purchase IS in a bubble.

Interest rates make no difference to a house.

they make all the difference to borrowers and lenders.

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