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With Real Estate, This Time It Really Is Different

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With Real Estate, This Time it Really is Different

Reading this report brings out the similarity between the housing bubble in the USA and the one over here, which one will burst first, looks like it could be the States this time.

As evidence mounts that the real estate boom has finally peaked, most economists, analysts, and industry professionals continue to predict simply a slowing of price increases, or perhaps, modest price dips. Apparently they have taken comfort from the irrelevant fact other than during the “Great Depression” there has never been a year in which national real estate prices declined. While this ignores significant national price declines in other wealthy nations, as well as several noteworthy regional declines in the U.S. itself, it ignores the unprecedented run up in prices and credit excesses of the last six years. In fact, when it comes to real estate, this is one of the rare examples where this time it really is different.............

The recent run-up in home prices began during the latter stages of the 1990s stock market bubble, and kicked into high gear almost precisely when that bubble began to deflate. It is not without coincidence that the speculative fever born in the stock market mania seamlessly found new life in real estate. However, were it not for the irresponsible actions and omissions of the Federal Reserve, the Federal Government, Wall Street, and the mortgage industry itself, such speculation never could have produced the unprecedented national bubble just experienced..............

In the final analysis the temporary factors artificially elevating real estate prices will subside. Rising interest rates and inflation, and a resumption of savings as home equity fades, will combine to suppress consumer spending, leading to recession, job losses, and reduced demand for housing. The supply of unsold houses will continue to rise as higher interest rates, tighter lending standards, and higher down payments price more potential buyers out of the market. Without the expectation of routine cash-out refinancing, homebuyers will no longer be willing to devote staggering percentages of their incomes to mortgage payments. In addition, the expectation of lower prices will bring more sellers to the market, just as buyers are backing away.

Once the trend reverses, falling prices will purge speculative demand from the market. Once speculators become sellers, supply will overwhelm demand. As lenders see housing prices fall and inventories rise, increased default risk will result in tighter lending standards, restricting access to mortgage credit. As more mortgages go into default, the secondary market for mortgage backed securities will dry up as well. This will act as a self-perpetuating, vicious cycle, as tighter lending standards reduce housing demand, leading to lower home prices, more defaults, fewer qualified buyers, lower prices, tighter standards, ad infinitum. In addition, the collapse of consumer spending associated with higher mortgage payments and vanishing home equity, will plunge the economy into a severe recession, further exacerbating the collapse in real estate prices, worsening the recession, and continuing the vicious cycle........

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With Real Estate, This Time it Really is Different

Reading this report brings out the similarity between the housing bubble in the USA and the one over here, which one will burst first, looks like it could be the States this time.

My 21-year-old hairdresser, who's thinking about buying a house here in the States, talked (knowledgeably) about the housing bubble yesterday. She mentioned the Fed, and interest rates, and how properties in the development she's looking at have already dropped by $20,000. She's waiting a bit longer to buy. Meantime, she's working overtime to pay off her credit cards and save as much downpayment as she can.

Once young hairdressers start taking about a housing bubble, you know that the bubble has already begun to deflate.

As I've said before, there's a lot less denial about the possibility of a house price crash over here. By contrast, I heard lot of denial when I was in England last month (although the crash has already started there--asking prices were down 10% to 15% from the previous year where I was looking). Maybe that's why the U.S. crash seems to be going at a speedier clip.

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I think one fundamental difference between the UK and US in this regard is that the US Media is liberal and anti Bush so they can use the bubble to stick it to Bush but... here in the UK the mainstream Media is basically New Liebour so really does not wish to be critical... plus it seems that lots of journos have got into BTL from I read in some papers.

It will be interesting when HPs fall in the US whether any of it gets reported here in the UK. I doubt it.

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I think one fundamental difference between the UK and US in this regard is that the US Media is liberal and anti Bush so they can use the bubble to stick it to Bush but...

Huh? Are you trying to be funny? I don't care what Fox news says, the main stream media is not anti-Bush. In fact there have been studies to say the US media has no liberal bias. The media is owned by large corps. Large corps care about their bottom line. I have heard stories about, for example, news stores about the harmful effects of drugs (medicine, not street drugs) being pulled because the network got too much advertising money from the same drug companies. Think about it. How much money do you think CNN has made from... say...America quest mortgage? Tons I bet. If anything the media has been slow to see the bubble. Once it became the white elephant in the room, the media had to say something.

I think one of the big differences is that we are still building. Another is that we are more direct. We will tell you “yes, you can ask ½ a million for your house, but if you want to sell it, you better ask closer to 250K”.

Edited by Karen

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Huh? Are you trying to be funny? I don't care what Fox news says, the main stream media is not anti-Bush. In fact there have been studies to say the US media has no liberal bias. The media is owned by large corps. Large corps care about their bottom line. I have heard stories about, for example, news stores about the harmful effects of drugs (medicine, not street drugs) being pulled because the network got too much advertising money from the same drug companies. Think about it. How much money do you think CNN has made from... say...America quest mortgage? Tons I bet. If anything the media has been slow to see the bubble. Once it became the white elephant in the room, the media had to say something.

I think one of the big differences is that we are still building. Another is that we are more direct. We will tell you “yes, you can ask ½ a million for your house, but if you want to sell it, you better ask closer to 250K”.

I agree with you, Karen, about the American media. It's a myth that it has a liberal bias. (A myth spun by the right wing of the Republican Party.) Our media is mostly spineless.

I don't watch TV much, so I don't know what the US TV media are saying about the housing bubble. I think the print media, however, are doing a pretty good job on covering the story.

By the way--to all you Brits. I listen to BBC radio every day (online). You really don't know how good you have it. Your reporters are much more aggressive than almost anybody we have over here.

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By the way--to all you Brits. I listen to BBC radio every day (online). You really don't know how good you have it. Your reporters are much more aggressive than almost anybody we have over here.

what about those man'sexuals who report the hollywood gossip with camp abundance ?

in particular - fanny batters eye on america.

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By the way--to all you Brits. I listen to BBC radio every day (online). You really don't know how good you have it. Your reporters are much more aggressive than almost anybody we have over here.

Oh, I see Karen said what I wanted to say - must start reading through threads before kicking off.

Glad you like the beeb, Yankee, it is alright, isn't it, although it has been mostly rubbish about property, with the exception of the odd thing on radio 4 and bbc 2.

I listen to your Pacifica pretty often and love it but I understand that not many people there listen to it. Why not? It's so good at making time for the detail and letting people finish what they're saying - we don't actually have anything like it here, oddly enough.

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I listen to your Pacifica pretty often and love it but I understand that not many people there listen to it. Why not? It's so good at making time for the detail and letting people finish what they're saying - we don't actually have anything like it here, oddly enough.

because thats the station that plays kraftwerks das model, back to back from thurday night right through to saturday afternoons. which i usually tape.

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because thats the station that plays kraftwerks das model, back to back from thurday night right through to saturday afternoons. which i usually tape.

I think we might be talking about different Pacificas.

http://www.pacifica.org/

Unless I've been so traumatised by 48 hours of das model that I've blocked it out - fun fun fun on the autobahn was always my favourite.

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dont forget the robots.

i used to watch them for hours as they danced mechanically.

(like germans at a spanish holiday disco, only less stiff with longer shuffling).

i think ill spray myself in hammerite gold and go down to the city centre right now and perfom a robotics act. perhaps those binge drinkers will offer change for my upturned trilby as i perfom rivetting robotic automated movement that detaches any human aspect from the accepted movement spectrum. this should provide much happy, mellow and non violent street theatre. perhaps i can spook late clubbers by pretending to be a shop point of sale dummy. that (whoa) suddenly springs in to life. maybe a good spot would be by the canal near the darkened cash machine thats barely policed.

any tuppence appreciated....

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  • 301 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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