What's Going On?

[Mooncat]

I read the 'We were wrong about house prices, admits Capital Economics' article and I have to say that this has really worried me. Is there anyone else this has affected in the same way and is there an upside to this???

[smiley]

There's a saying on wall street which is something like (I paraphrase): the bull-run ends when the last bear admits defeat.

[Fudge]

There's a saying on wall street which is something like (I paraphrase): the bull-run ends when the last bear admits defeat.

I thought the aim of a press release was to influence the audience in some way.

So what is the point of this news ?

Calm fears and encourage people to keep buying?

Call the end of the bull run?

Get his face in the paper and repair credibility?

Who knows whats going on in these peoples minds!

[Time to raise the rents.]

What's going on is that CE got it wrong and had to own up eventually or forever be the fool. It has FA about the last bear turning bull. You lot haven't turned bull yet and considering you're potential homeowners, that says something.

What about Andrew Oswald now then?

[red]

I read the 'We were wrong about house prices, admits Capital Economics' article and I have to say that this has really worried me. Is there anyone else this has affected in the same way and is there an upside to this???

Not in the least bit worried. Why trust one prediction and not another? They are what they are, simply predictions. You might as well ask a cabbie...

[karhu]

There's a saying on wall street which is something like (I paraphrase): the bull-run ends when the last bear admits defeat.

Hahaahha. I had to comment on this. This statement is often true in real life.

The way to win IMO, after years of investment, is to form a reasoned opinion and persevere.

Also, keep your ideas to yourself and your trusted friends.

There will be a house price moderation, but only a fool would put a date on it.

[ILikeBigBoobs]

Honey, I shrunk that house doom forecast

We were wrong, say house price gloom mongers

Tony Dye, the famously gloomy fund manager who quit PDFM in 2000 just as his long-held bearish market forecast was about to come true, was living proof of Keynes's observation that "the market can remain irrational longer than you can remain solvent".

It requires strong nerve to go against the consensus for an extended period. And when long-term bears finally capitulate it's often a sign that their unpopular view is about to be vindicated.

Should we be worried then that Capital Economics, the Dr Doom of the housing market, has back-tracked on its widely publicised forecast that house prices are set for a 20pc slump over three years. Their view now is a less headline grabbing 5pc slide over two years.

Why the U-turn? First Capital reckons lenders have abandoned income multiples as a basis for lending decisions. As long as you can afford the repayments, they'll stump up the loan. With interest rates persistently low in nominal terms that's likely to provide support.

Capital also believes the undersupply of new housing is having a bigger impact on prices than it previously thought. And the economy has stayed more robust than it expected, with employment growth still solid.

That doesn't mean that house prices are not grossly overvalued and the ratio of prices to average earnings is off the top of the historic scale at 5.6.

That multiple is bound to revert to the mean over time. It's just that Capital now thinks the correction will come from a leisurely rise in earnings to meet stagnating prices rather than a violent drop in prices to plug the gap in shorter order.

If that's how it pans out, home-owners will be happy and Capital will have enjoyed the publicity of all those blood on the streets headlines. Do you want to be right or noticed?

[karhu]

I read the 'We were wrong about house prices, admits Capital Economics' article and I have to say that this has really worried me. Is there anyone else this has affected in the same way and is there an upside to this???

Just to put some logic into this. If they were wrong about their predictions last year, why should be believe anything they say?

[Guest Charlie The Tramp]

What about Andrew Oswald now then?

My kinds of forecasts about the national housing market have so far

been incorrect. But for how long?

Well this quote was taken from his paper November 2004, but how was he to know the debt thingy would take off in a big way and mess up his predictions, be fair to the man. I reckon he will make his next prediction when the chickens come home to roost in a big way later next year.

[Fudge]

What's going on is that CE got it wrong and had to own up eventually or forever be the fool. It has FA about the last bear turning bull. You lot haven't turned bull yet and considering you're potential homeowners, that says something.

What about Andrew Oswald now then?

It all seems a bit premature of people calling soft landing yet.

I only got on the HPC bandwagon mid 2004 so to me it appears that house price inflation has hit a ceiling.

So I am waiting to see if prices are going to stick or fall in 2006.

Only time will tell.

"What the thinker thinks, the prover proves"

Dr. Lenard Orr

[IPOD]

A much-touted house price crash has failed to materialise in 2005,

Debatable. HPI has gone from 20%+ to zero in a single year (and is now negative on some indices).

forcing one of the harshest pessimists in the market to renounce its forecast for a 20% slide in property values, according to the Daily Telegraph.

1) If they were forecasting 20% real falls in a single year then that was unrealistic. Even in the most desperate periods of the last crash it did not reach that rate.

2) If they were forecasting 20% real falls over 5 years this is an extremely moderate forecast and I see no reason why they would renounce it now (as opposed to last week or last month or last year).

[Culpability Brown]

The Capital Economics forecasts were wrong, that's true, but how wrong were all of those commentators touting a continuation of the 20% annual gains for 2005!

From there we really have come a million miles.

Personally I always thought CE were expecting too much too soon.

2006 will present different challenges to 2005 and for sure there will be significant BTL off loading, respossessions and heavy discounting going on.

What the figures look like, as presented to us via the vi led media, we'll just have to wait and see.

There will be much to talk about on this board I'm sure.

[oracle]

I read the 'We were wrong about house prices, admits Capital Economics' article and I have to say that this has really worried me. Is there anyone else this has affected in the same way and is there an upside to this???

oh yes there is!!!!

....there are some seriously good economic egg-heads on bloomberg that are looking at the US housing going a bit pete-tong next year.

...funnily the UK pundits are saying "soft-landing",without one iota of thought to what happens to consumption in the states when THEIR punters dry up.

....capital spending AIN'T happening stateside....so when they weaken it's gonna hit hard.

.....check out my theory onj why WE will see a HPC more viscious than the states....it's got lots to do with this,and also Iran!!!!

...yes we will see a HPC here because we are closely allied to the US$(which will be under threat if the iran oil bourse kicks off in the spring.......which is why we will be joining in the punch-up!!!!)

[Realistbear]

Even if CE are right a 5% fall is not bad considering that we have inflation around 3% which translates into 8% drop in real terms. If you STR'd and have the proceeds of the sale in a 5% interest bearing account you will make an effective 10% return in 2006.

Problem is that CE are wrong--at least as far as the West Midlands are concerned (and the West Country if all the anecdotal reports of huge drops are to be believed). Around my neck of the woods (West Midlands) prices are already down by at least 20% compared with a year ago. The figures are not being reflected in the VI spin because fewer houses are selling which is skewing the stats.

[Without_a_Paddle]

Debatable. HPI has gone from 20%+ to zero in a single year (and is now negative on some indices).

1) If they were forecasting 20% real falls in a single year then that was unrealistic. Even in the most desperate periods of the last crash it did not reach that rate.

2) If they were forecasting 20% real falls over 5 years this is an extremely moderate forecast and I see no reason why they would renounce it now (as opposed to last week or last month or last year).

CE have been a joke when it comes to predicting HPI for quite a few years now.

They were predicting up to 30% falls within 4 years back in 2002.

Instead, prices have rocketed since 2002.

Bunch of doom mongering muppets. They should stick to predicting interest rates. They seem to be better at that.

[van hoogstraten]

I thought they'd got it wrong on interest rates as well - didnt Roger Bootle say they'd be falling by the end of the year.

[Guest Winners and Losers]

Sorry everyone, spoke to a friend today who sold a flat in London in 48 hours for full asking price.

Just to put some logic into this. If they were wrong about their predictions last year, why should be believe anything they say?

[oracle]

Debatable. HPI has gone from 20%+ to zero in a single year (and is now negative on some indices).

1) If they were forecasting 20% real falls in a single year then that was unrealistic. Even in the most desperate periods of the last crash it did not reach that rate.

yes I agree!!!...

I think the big one is more to do with the RATE of change(differential equations in mathematical terms)

.....it's possible that we have seen a steep -ve rate,followed by a dead-cat bounce....but that does not mean the overall trend has changed.....indeed with such a steep decline,it probably hasn't.

...if a "soft landing" was to occur I would have expected a slower decline in RATE and a much longer "tailing off"

this is not the end!!!!.......we've got 2 or 3 more bouts of negative to come.

[Mooncat]

I thought they'd got it wrong on interest rates as well - didnt Roger Bootle say they'd be falling by the end of the year.

I think CE said the interest rate would be 4.5% at the end of the year...

http://news.bbc.co.uk/1/hi/business/4072901.stm

[Time to raise the rents.]

I thought they'd got it wrong on interest rates as well - didnt Roger Bootle say they'd be falling by the end of the year.

I believe you'll find that they did fall in August 2005. Here is an old article predicting IR's by RB.

http://www.telegraph.co.uk/money/main.jhtm...requestid=45536

So how far could interest rates fall? I have pencilled in 4 per cent by the end of 2006, which is way below what the markets are anticipating. Even so, I am worried that 4 per cent will prove to be too high.

Edited December 23, 2005 by Time to raise the rents.

[IP Newcomer]

Sorry everyone, spoke to a friend today who sold a flat in London in 48 hours for full asking price.

Yes, I hear raffles are getting to be quite popular these days.