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Interesting Articles From U.s.

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I know from past experience that many of you have no interest in what's going on in the U.S. housing market, but there are some interesting articles in today's NYTimes and Washington Post that I think should interest you. I'm wondering if parallel things are going on in Britain.

Here, for example, is an article about a couple who are upgrading their home, knowing that they probably won't be able to sell the home for what they put into it. (Click on the video for a quick and fascinating summary, including a mention of slowing housing prices.)

http://nytimes.com/2006/01/02/business/02h...artner=homepage

Notice how much house you get in the U.S. (even in a very expensive New York suburb) compared to what you get in Britain. This is why I'm holding off buying in England. There's no value in homes there right now.

There's also a fascinating article in the Washington Post about how IT companies are moving their businesses to small towns. (The article talks primarily about small towns in southern Virginia; Northern Virginia is a suburb of Washington, D.C., where homes are overpriced.)

http://www.washingtonpost.com/wp-dyn/conte...6010101034.html

Why isn't this happening in Britain?

Finally, Paul Krugman (my favorite economist) has written a great column today called "No Bubble Trouble?"

Unfortunately, you have to subscribe to the Times to read the whole thing. Here are some excerpts. (His "Zoned Zone" includes the Northeast Corridor, coastal Florida, much of the West Coast and "a few other locations." Slightly under 30% of Americans live in the Zoned Zone, he says, and this is where the housing bubble is occurring.)

"In spite of record home prices, housing in most of America remains surprisingly affordable, thanks to low interest rates. That fact may seem to say that there's no housing bubble. But it doesn't. To see why, we need to brush up on our economic geography and economic history...

...if we want to ask whether housing values make sense, data on the median house nationwide are irrelevant. We need to focus on houses in the Zoned Zone. And there the numbers are anything but reassuring.

In the Zoned Zone, the story that rising home prices have been offset by falling interest rates is all wrong: prices have risen so much that housing has become much less affordable. According to Economy.com, the cost of owning a home in the New York metropolitan area went from 25 percent of median income in 2000 to 38 percent today. In Miami, the numbers were 21 percent and 42 percent, respectively; in Los Angeles, 31 percent and 55 percent.

Even so, the current cost of owning a home in the Zoned Zone isn't entirely unprecedented. Roughly similar percentages of median family income were needed to afford houses in the early 1980's.

But that's hardly a comforting comparison, which is where the economic history comes in. You see, the unaffordability of housing in the early 1980's led to an epic collapse in the housing industry. Housing starts fell from more than 2 million in 1978 to only 1.06 million in 1982. And the housing implosion was one of the main factors in the worst economic slump since the Great Depression, which brought the unemployment rate to a peak of 10.8 percent at the end of 1982.

It's also worth noting that the reason housing was so expensive in 1981 and 1982 was that mortgage interest rates were extremely high. That made recovery easy, because all it took to make housing affordable again was for interest rates to return to normal levels.

This time, with interest rates already low by historical standards, restoring affordability will require a big fall in housing prices.

So here's the bottom line: yes, northern Virginia, there is a housing bubble. (Northern Virginia, not Virginia as a whole. Only the Washington suburbs are in the Zoned Zone.) Part of the rise in housing values since 2000 was justified given the fall in interest rates, but at this point the overall market value of housing has lost touch with economic reality. And there's a nasty correction ahead."

That's it. I'm under deadline. Have to get back to work....

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what happens over the pond is of great interest to us yankee.

the closest model to UK house prices is CA.

you guys are lucky overe there because you also have the lead currency for the world,whereas we are pulled in this bloody tug of war between US and EU interests.

personally I would plump for the US economic model,it has far better dynamics.alas the powers that be seem intent on selling out and subjecting us to a life of 10%+ unemployment and sky-high taxes....some of us are none to fond of the idea.

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There's also a fascinating article in the Washington Post about how IT companies are moving their businesses to small towns. (The article talks primarily about small towns in southern Virginia; Northern Virginia is a suburb of Washington, D.C., where homes are overpriced.)

http://www.washingtonpost.com/wp-dyn/conte...6010101034.html

Why isn't this happening in Britain?

The South East of England is a dreadful place. I am amazed that more companies do not rellocate outside of there. Sadly, the issue of airports with international links is one as is the clout of the City.

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I know from past experience that many of you have no interest in what's going on in the U.S. housing market, but there are some interesting articles in today's NYTimes and Washington Post that I think should interest you. I'm wondering if parallel things are going on in Britain.

Here, for example, is an article about a couple who are upgrading their home, knowing that they probably won't be able to sell the home for what they put into it. (Click on the video for a quick and fascinating summary, including a mention of slowing housing prices.)

http://nytimes.com/2006/01/02/business/02h...artner=homepage

Notice how much house you get in the U.S. (even in a very expensive New York suburb) compared to what you get in Britain. This is why I'm holding off buying in England. There's no value in homes there right now.

There's also a fascinating article in the Washington Post about how IT companies are moving their businesses to small towns. (The article talks primarily about small towns in southern Virginia; Northern Virginia is a suburb of Washington, D.C., where homes are overpriced.)

http://www.washingtonpost.com/wp-dyn/conte...6010101034.html

Why isn't this happening in Britain?

Finally, Paul Krugman (my favorite economist) has written a great column today called "No Bubble Trouble?"

Unfortunately, you have to subscribe to the Times to read the whole thing. Here are some excerpts. (His "Zoned Zone" includes the Northeast Corridor, coastal Florida, much of the West Coast and "a few other locations." Slightly under 30% of Americans live in the Zoned Zone, he says, and this is where the housing bubble is occurring.)

"In spite of record home prices, housing in most of America remains surprisingly affordable, thanks to low interest rates. That fact may seem to say that there's no housing bubble. But it doesn't. To see why, we need to brush up on our economic geography and economic history...

...if we want to ask whether housing values make sense, data on the median house nationwide are irrelevant. We need to focus on houses in the Zoned Zone. And there the numbers are anything but reassuring.

In the Zoned Zone, the story that rising home prices have been offset by falling interest rates is all wrong: prices have risen so much that housing has become much less affordable. According to Economy.com, the cost of owning a home in the New York metropolitan area went from 25 percent of median income in 2000 to 38 percent today. In Miami, the numbers were 21 percent and 42 percent, respectively; in Los Angeles, 31 percent and 55 percent.

Even so, the current cost of owning a home in the Zoned Zone isn't entirely unprecedented. Roughly similar percentages of median family income were needed to afford houses in the early 1980's.

But that's hardly a comforting comparison, which is where the economic history comes in. You see, the unaffordability of housing in the early 1980's led to an epic collapse in the housing industry. Housing starts fell from more than 2 million in 1978 to only 1.06 million in 1982. And the housing implosion was one of the main factors in the worst economic slump since the Great Depression, which brought the unemployment rate to a peak of 10.8 percent at the end of 1982.

It's also worth noting that the reason housing was so expensive in 1981 and 1982 was that mortgage interest rates were extremely high. That made recovery easy, because all it took to make housing affordable again was for interest rates to return to normal levels.

This time, with interest rates already low by historical standards, restoring affordability will require a big fall in housing prices.

So here's the bottom line: yes, northern Virginia, there is a housing bubble. (Northern Virginia, not Virginia as a whole. Only the Washington suburbs are in the Zoned Zone.) Part of the rise in housing values since 2000 was justified given the fall in interest rates, but at this point the overall market value of housing has lost touch with economic reality. And there's a nasty correction ahead."

That's it. I'm under deadline. Have to get back to work....

South Florida has a real problem with affordability, where I work I'm told people are turning jobs down because they can't afford to move / live in the area and it's too far to comute.

it's not easy for everyone down here especially the immigrants from South America

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As I have very little knowledge of economics etc, this may seem a dumb question from a dumb ass.....

But I just wondered, if/when the US Housing market crashes, would this have any effect on the UK house prices???

What happens financially in the USA seems to usually have some effect in the UK...would/could a house price crash be included???

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But I just wondered, if/when the US Housing market crashes, would this have any effect on the UK house prices???

Its a very difficult question to answer as there are lots of aspects to it. If *all* that happened was house prices in the US crashing, ie no other affect (spending the same, ir unchanged etc) then there is no *real* reason for UK house prices to change. Now, because US house price would be reported it might change sentiment in the UK and sentiment is very very important in the housing market - so even without any real ecnomic changes in the US even sentiment might change the landscape in the UK.

However, a house price crash in the US would result in other changes - you can't have a crash in a sector without lots of other things happening, and its these other changes that would be more likely to affect UK housing sector. The changing value of the $ vis the £ would be the major thing that can affect UK housing prices. There are many others.

For the simple answer, I think a major crash in US house prices would follow through to the UK, more because of sentiment changing than the real undelying economics of it. House prices are horribly overvalued in the UK (they are way way more expensive than in the US, even in california) and are only held up by sentiment. Knock that out and watch em tumble.

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I would tend to concur with padders - a crash in the US will have an

effect on the percieved risk of securitised debt.

Since both the UK and US markets are relying on this, the the UK

will also be affected by the contagion.

ABB

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What I find surprising is that in the US there is a lot more talk about prices going down whereas house prices are far more over valued in the UK.

Ironically, the US pundits I have seen on CNBC

point to the UK for reasssurance, saying 'they have

a property bubble, but had a soft landing in 2005'

Go figure :)

Yikes

ABB

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Bored Train Driver:

But I just wondered, if/when the US Housing market crashes, would this have any effect on the UK house prices???

My layman’s view point is ‘as’ the USA housing collapses, and I believe their

media to be more honest than ours (...not saying much!...)

it would be documented better.

Panic would lead sentiment here, without a doubt. None of this; O.. it will

pick-up in the spring, type of thingy.

We need that kind of honesty Blair would never allow here.

We get snippets of honest news followed by spin in the other direction.

Leaving home owners confused / greedy / hopeful and without sales.

I’m sure if there was a poll, home owners would want lower prices

to move up the ladder, but no one will budge!, or are afraid to.

encase they miss out, and sell too low.

So my view is these chains’ in property can only result in a crash.

Edited by burnt before

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  • 337 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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