"it Does Look Like A Bubble Ready To Burst" John Authers - Ft

[Corruption]

You'd almost have to forget that values in the housing market are set by transaction prices between buyers and sellers each month - not just affecting individual houses, but entire market. And money is getting tighter.

Debt is getting looser though.

http://www.telegraph.co.uk/finance/personalfinance/houseprices/10911128/Mortgage-lending-flattens-as-rate-rise-threat-deters-buyers.html

This is the same level as gross lending in April and 12pc higher than May last year (£14.8bn).

So a 12% rise in a year, which is a similar amount to what prices have gone up by over the past 12 months.

Im dying for a HPC but your comment is wrong.

http://www.telegraph.co.uk/finance/personalfinance/houseprices/10911128/Mortgage-lending-flattens-as-rate-rise-threat-deters-buyers.html

Edited June 19, 2014 by Corruption

[Venger]

Debt is getting looser though.

http://www.telegraph.co.uk/finance/personalfinance/houseprices/10911128/Mortgage-lending-flattens-as-rate-rise-threat-deters-buyers.html

This is the same level as gross lending in April and 12pc higher than May last year (£14.8bn).

A final pre MMR surge in May ? Clever buyers, not wanting to go through the MMR process? (I'm about to watch football, so just skim read the stories).

Quotes from your two articles...

...potential home buyers are now rethinking their ability to make monthly repayments. ...The MMR is definitely having an impact as it is taking longer to get a mortgage application through and the threat of interest rate rises is weighing on sentiment."

The Mortgage Market Review, which came into force in April and put more demands on bank to ensure customers can repay loans, has appears to have tightened up lending. While some of the traditional high street lenders, such as Lloyds, have been using interest rate stress testing for the last six months, the MMR guildelines have now been adopted more broadly across all lenders with anecdotal evidence showing that some credit-worthy freelancers, self-employed people and those with a commission-based income, are now struggling to get a mortgage.

There are also two sides to the lending equation - requires borrowers. Lets see what happens to appetite on the borrowing side, *for the few still positioned able to borrow*, once price softening becomes clear. Now we're getting Halifax giving press releases that offer a bit more balance for caution, and even stories which may have been totally pro-housing-buy offering bit more sense. One of RK's true housing investors, sold up 2006 for multi-millions in cash, and feted for his clever move, said 2 years ago to avoid the market - that it's not valued on any stable measure. Although he looks to have disregarded his own advice, doing up a London mansion and having already had to cut its super high asking price, not sold last I looked. Only very few owners sell to money at 90% of peak value in a bear market. Others sell for 80%, others 70,60 and 50. In every case, they are transferring future losses to buyers.

THE ADVICE

The best advice for buyers with small deposits is to drive a hard bargain – particularly on new-build homes.

http://www.dailymail.co.uk/money/mortgageshome/article-2644658/Generation-Rent-housing-laddermos-template.html#ixzz356spc212

*Rightmove Index June 2014

Shipside notes: “Many serious buyers who were waiting in the wings have now bought and moved in, taking a slug out of the

pent-up demand for a few years to come, and the consequent chatter on the street is that quality buyers are now thinner on

the ground. The next wave of buyers may have less motivation or ability to buy and sellers are going to have to be sensitive to

their local market and not pitch their asking prices too high as choosy buyers will not arrange to come and visit.”

[Digsby]

No, and I don't think I'm being pedantic: a 12% rise (not accounting for inflation) in 11 months, and flat for the 12th post MMR.

[Venger]

No, and I don't think I'm being pedantic: a 12% rise (not accounting for inflation) in 11 months, and flat for the 12th post MMR.

Can you explain the context?

Past is the past.

[zugzwang]

They add to rental demand and rental demand adds value to BTL'ers yeilds. They still play a small part in the market.

I think you are right about some BTL'ers not caring about yields and only looking for capital gains. What sort of correction will change the believe that house prices double ever 10 years? In my eyes it has to be a long peroid of falling values and yields (aka japan) with yields on other investment rising, so only a mug would want to buy a house as rents will be so much cheaper than a mortgage.

Very true. But these are ponzi actors not investors. What pension fund would entertain a risky 3% yield on domestic property over a riskless 10yr gilt yielding 2.8%? Similarly, if you're trading on margin the spread is never going to be sufficient to justify the cost of your investment. OTH if you're a know nothing boomer retiree with a modest pot generated via a lifetime of HPI the temptation to give bricks and mortar one last spin might prove irresistible.

[Digsby]

Can you explain the context?

Past is the past.

Sorry Venger I should have quoted Corruption whom I was replying to, but you beat me to it (dammit man don't you ever sleep?).

Basically a similar point to yours: the game changed in April

[Venger]

Very true. But these are ponzi actors not investors. What pension fund would entertain a risky 3% yield on domestic property over a riskless 10yr gilt yielding 2.8%? Similarly, if you're trading on margin the spread is never going to be sufficient to justify the cost of your investment. OTH if you're a know nothing boomer retiree with a modest pot generated via a lifetime of HPI the temptation to give bricks and mortar one last spin might prove irresistible.

It has been irresistible to them. Will it continue to be so, into a softening? Landlords on radio talking about passing increased funding costs onto tenants.

BTLs and Bomad; straight in there during the reflation. Timak saying his parents-in-law different for getting into BTL because it was low rates on savings which forced them too, and pointing to their circa 12% capital gain since they bought.

They've only known a super long wave of HPI (with a few hiccups along the way) forgotten. Not earning anything in the bank. "Supply and demand." Small island. I know solicitor who acts for the lenders and for landlords - renting himself, awaiting value. It's a hard world, and we make our own decisions. Landlords all over not in cosy financial positions, and others will be willing to betray other investors, and sell for "less than it's worth" to escape with an excellent pre-crash price. (imo)

This one is small time, and jsut a quick link for it's the last one I read ("2nd home" when immediately rented out) but loads of these honey for the lenders, and rightly so: http://forums.moneysavingexpert.com/showthread.php?t=4991555

For the first time in their lives they thought they would join the millions of 2nd home owners and bought a tiny little flat for either holidays or renting. They were advised (or maybe they chose, sorry don't know) to take out an interest only mortgage about 5 years ago with Mortgage Express (who have now been bought over by Santander I think)

At first they had rented it (attracted DSS mainly) but due to ill health they simply didn't want to hassle so decided to put it on the market. That was over a year ago. No interest (although they've advertised it with estate agent & solicitor and I've put on Gumtree) at £10k under the home report price.

[Corruption]

Sorry Venger I should have quoted Corruption whom I was replying to, but you beat me to it (dammit man don't you ever sleep?).

Basically a similar point to yours: the game changed in April

May figures were when MMR had came into play. They were the same as the final push of April 2014 and 12% higher then a year prior.

The game that is the BoE, Government and assortment of VI keeping the prices high has not changed in the slightest.

[Digsby]

May figures were when MMR had came into play. They were the same as the final push of April 2014 and 12% higher then a year prior.

The game that is the BoE, Government and assortment of VI keeping the prices high has not changed in the slightest.

You've just repeated my point. The figures we're the same as April, the April MMR came into play. All of that 12% gain was made from May 2013 to April 2014. Lending tightened and the figures reflect that.

I suspect that lenders are not as unhappy with MMR as your average DM or mumsnet reader is either.

It's not uncommon in business to make a sale you otherwise wouldn't, even at a loss, just to prevent the competition from doing so. Write it off as a marketing expense, because market share is the name of the game.

In fact I daresay they *demanded* MMR so that those they would rather have never lended to are taken out of the market so that they don't have to compete for customers nobody wants except through fear of loosing market share.

They'll be gleefully cleaning up their books now, the game has changed drastically, it was never about keeping house prices high, not as an end unto itself, only about protecting the banks.

This is all conjecture.

[mmt]

It has been irresistible to them. Will it continue to be so, into a softening? Landlords on radio talking about passing increased funding costs onto tenants.

BTLs and Bomad; straight in there during the reflation. Timak saying his parents-in-law different for getting into BTL because it was low rates on savings which forced them too, and pointing to their circa 12% capital gain since they bought.

They've only known a super long wave of HPI (with a few hiccups along the way) forgotten. Not earning anything in the bank. "Supply and demand." Small island. I know solicitor who acts for the lenders and for landlords - renting himself, awaiting value. It's a hard world, and we make our own decisions. Landlords all over not in cosy financial positions, and others will be willing to betray other investors, and sell for "less than it's worth" to escape with an excellent pre-crash price. (imo)

This one is small time, and jsut a quick link for it's the last one I read ("2nd home" when immediately rented out) but loads of these honey for the lenders, and rightly so: http://forums.moneysavingexpert.com/showthread.php?t=4991555

"You have missed it Mr K - second home/investment property so 'sale of property' is perfectly acceptable repayment vehicle for many lenders both now and then."

A perfectly acceptable investment that has landed them in complete FUBAR.

[winkie]

......btl want both income and capital/equity growth.......they can afford to lose one but not both.....sells? All depends on how long term they are in it for and what else is available that they can trust......people will hold on to property that depreciates in value.... It is the costs of running and maintaining it including taxes that will more likely force a sale.

[Corruption]

You've just repeated my point. The figures we're the same as April, the April MMR came into play. All of that 12% gain was made from May 2013 to April 2014. Lending tightened and the figures reflect that.

I suspect that lenders are not as unhappy with MMR as your average DM or mumsnet reader is either.

It's not uncommon in business to make a sale you otherwise wouldn't, even at a loss, just to prevent the competition from doing so. Write it off as a marketing expense, because market share is the name of the game.

In fact I daresay they *demanded* MMR so that those they would rather have never lended to are taken out of the market so that they don't have to compete for customers nobody wants except through fear of loosing market share.

They'll be gleefully cleaning up their books now, the game has changed drastically, it was never about keeping house prices high, not as an end unto itself, only about protecting the banks.

This is all conjecture.

It was 12% higher then a year ago, and the same rate as April the month there was a rush to get mortgages through before MMR, yet somehow you manage to think that this means that banks are putting the breaks on the credit bubble.

Some of you on HPC just bullshyt yourselves into believing there is an end to the bubble, and then a chum on here who is equally blind to reality agrees with your pathetically weak attempt at twisting the figures which leads you to believing the end of the bubble is nigh.

How about instead of having 1 month where lending was the same as that to the one prior you come up with something a little better to convince me that the credit bubble is ending.

[Billy Ray Valentine]

It was 12% higher then a year ago, and the same rate as April the month there was a rush to get mortgages through before MMR, yet somehow you manage to think that this means that banks are putting the breaks on the credit bubble.

Some of you on HPC just bullshyt yourselves into believing there is an end to the bubble, and then a chum on here who is equally blind to reality agrees with your pathetically weak attempt at twisting the figures which leads you to believing the end of the bubble is nigh.

How about instead of having 1 month where lending was the same as that to the one prior you come up with something a little better to convince me that the credit bubble is ending.

I too think it's too early to tell what impact MMR will have, though I'm optimistic it will have a positive impact in creating price falls.

This has it's own thread, but worth posting here:

http://www.bbc.co.uk/news/business-27920279

[Venger]

It was 12% higher then a year ago, and the same rate as April the month there was a rush to get mortgages through before MMR, yet somehow you manage to think that this means that banks are putting the breaks on the credit bubble.

Some of you on HPC just bullshyt yourselves into believing there is an end to the bubble, and then a chum on here who is equally blind to reality agrees with your pathetically weak attempt at twisting the figures which leads you to believing the end of the bubble is nigh.

How about instead of having 1 month where lending was the same as that to the one prior you come up with something a little better to convince me that the credit bubble is ending.

You need to give it a bit of time.

Perhaps some agreed bank/building society mortgages from previous month or two came through in latest May figures from Council of Mortgage Lenders.

The new rules are "likely to have disrupted the normal patterns of activity, creating statistical 'fog' around the published figures," he said.

"As this lifts over the coming months, a clearer picture as to any lasting impact of the MMR rules on lending activity should emerge," he added.

http://www.bbc.co.uk/news/business-27920279

Yes; but at least I can be hopeful, and have more reason to be, whereas you are sounding a bit defeated. We've got more reason for hope towards better value - although I admit we still need to be very cynical, as you are, of all the VI in the system.

I just think the real VI, the real power, are on the side of lower house prices - but are having to play a smoothing process out in the meantime - although that's yet to be proven.

...knives laid against and inside the body of an over-extended, worn-out enemy, just ready to cut...

Edited June 19, 2014 by Venger

[Digsby]

I think you missed my last sentence, and perhaps your last dose of diazepam.

My opinions are flexible, I'm here to have them changed, if they are wrong. Don't be so damn judgemental.

[Digsby]

How about instead of having 1 month where lending was the same as that to the one prior you come up with something a little better to convince me that the credit bubble is ending.

I can't really be bothered after that tirade, but I'm going to make one more attempt at having a grown up conversion.

May 2014 was up 12% on May 2013.

April 2014 was up 36% on April 2013.

Good enough for ya?

[Digsby]

March - 37%

Feb - 43%

Jan - 33%

And for a bit of seasonal perspective:

April 2013 - May 2013 - 21%

[Billy Ray Valentine]

March - 37%

Feb - 43%

Jan - 33%

And for a bit of seasonal perspective:

April 2013 - May 2013 - 21%

Can you explain these numbers?

Do you mean for example that Feb 2014 was up 43% YOY, or up 43% since April/May 2013?

[Digsby]

Can you explain these numbers?

Do you mean for example that Feb 2014 was up 43% YOY, or up 43% since April/May 2013?

The former, each is YOY

[Venger]

My opinions are flexible, I'm here to have them changed, if they are wrong. Don't be so damn judgemental.

Being right isn't a democracy, no matter if Corruption is (heart in the right place) annoyed by some of our optimism for house prices softening into the rest of the year. It's not like there is that much agreement on the forum. Lots of VI here too, and softies defending every reckless individual debt cause going, to claiming old grannies have no incentive to downsize from large family homes peaked up to be worth £1m because of the stamp duty to move to a smaller place.

And I expect more supply hitting the market, and staying on it as fewer and more picky proceedable buyers, for increased inventory. They're attacking the greedy complacent home-owners, giving them a big nudge to come to market.

Latest main speech: On the housing market, Carney warned that despite mortgage approvals falling in the last three months, "surveys suggest some slowing could reflect would-be sellers holding back properties from the market in anticipation of higher future prices – an early sign of extrapolative price expectations."

I take the view the majority of houses owned outright, equity rich, are not much use to the banks. Existing debt on the rest a drag, but crashed market then volume lending (on much much lower house prices) to younger people, 25 year mortgages. Debt is the problem, but it's also the solution (against much lower house prices). Banks need to lend to make their profits. 20,000 HTBs not much even at super high prices, and now past year or so seen more people leveraging their positions to BTL, playing Bomad, convinced of HPI. Pump and dump. Crash and lend.

[Digsby]

Not just banks, but investors too. You can't buy in the lows and sell in the highs when there's no lows.

They *have* to sell to realize any profit, and they need the market to deflate to retain that profit while buying back in.

There's no money to be made from a constantly inflating market.

[bankstersparadise]

Wrong

It's utter complacency, imo. There's loads of older owners who haven't really felt a thing of this economic situation, not just since 2008 to now, but for decades. Nothing has really impinged on their long-wave HPI reality, incomes and pensions.

Away in fantasy land about the value of their homes. Not even recognising previous crashes have been about cost of money / availability of money / real proceedable demand for debt. And dismissed as these events not being a good thing for many non-owning/upsizer hopeful market participants. The money never runs out, to pay higher prices, until it totally does.

No seriously, I am getting worried.......my parents told me prices only go up for ever! Chaps, seriously, stop joking around.

[Digsby]

No seriously, I am getting worried.......my parents told me prices only go up for ever! Chaps, seriously, stop joking around.

Seriously seriously?

Yes, with the occasional bust here and there, prices will go up forever... nominally, in the sense of general inflation i.e. the erosion of the purchasing power of each pound. In real terms - of course not!

Imagine it... each increase in price would give everybody a little less to spend on anything else. Eventually, it would suck every penny of capital in the world until nobody has any money left, at all.

How long would a casino stay in business if every punter was a winner?

[Billy Ray Valentine]

Thanks.

The drop off is indeed massive.

And all that money withdrawn from ISA's in April as well. Can't help but wonder how much of that money found it's way into deposits for mortgages approved in May......................

[R K]

Not just banks, but investors too. You can't buy in the lows and sell in the highs when there's no lows.

They *have* to sell to realize any profit, and they need the market to deflate to retain that profit while buying back in.

There's no money to be made from a constantly inflating market.

Duke of Westminster begs to differ.