Mr Blek Posted January 3, 2006 Share Posted January 3, 2006 (edited) Just some ramblng thoughts on what I've noticed from working in the mortgage lending industry (BUT I STRESS I AM NOT AN EXPERT IN THE INDUSTRY). Feel free to disagree: Huge, unprecedented growth in house market, all secured on debt which will be recalled. Interest only is king. First time buyers are no longer desperate to get on the housing ladder. The market has slowed considerably over the past year, with localised drops in certain places. The FTB is now waiting to see how much further the prices will drop. What has been sustaining the market is the Buy-To-Let market. But the cost of renting hasn't changed significantly which means a slight fluctuation in any of the economic variables will cause the BTL market to collapse. People with disposable incomes are investing in the housing market as trust in the pensions market has faded. This is artificially sustaining the market, as the perception is that the market will only ever go up. Gordon Brown did the right thing and pup a stop to the SIPP nonsense. Cultural factors e.g. Asians typically buy houses for their children and consider house ownership to be a necessity. There is always a natural bias of lenders to insist that the market will go up or level. The last market crash shows this in earnest. Independent economic analysis points to the contrary and it's not a question of if but more a matter of when. The psychology of investors. The smart investor will realise that market is unsustainable and will sell to cash in. The naïve investor see $$$$ signs which will encourage them to buy, buy, buy helping to sustain the market, but when buyers stop coming into the market, the debt they have accrued will be astronomical and that's when the reality hits. The last major bubble to burst was the dot.com market. Hugely inflated and overvalued, the coup de grace was administered quickly and investors were left to rue their losses. Within seconds investors can change the state of the stock market; but trades with the housing market are not so quick due to the nature of the market. One bubble is no different from the rest. Companies did plenty of accounting scandals to artificially inflate earnings, which only came to light after the crash. Similar scandals are happening today. All those TV programmes doing house renovations so "you too can become a property millionaire" are a scandal. All those Estate Agents artificially increasing house prices are part of the scandal. Lenders are part of the scandal by loaning money to anyone and everyone. Maybe the best scandal of them all is councils renting property of landlords for a 5-year term. If you look at the value of a share over a week, you will see troughs and spikes. But take a step back and look at the history over the past six months and it gets easier to spot a trend. In the housing market, that week can be a couple of months. For every action there is always the opposite. It's an undeniable law of nature. The first panic was by those desperate to get on the property ladder, the BTL market and the speculator. What's the opposite? The market stagnates, un-repayable debt and it’s the opposite panic: sell, sell, sell. When mortgage institutions start to offer loans to those with CCJs, bad credit history, and in the case of the US, illegal aliens (Citibank), you should realise that the market has run out of buyers and it’s a desperate attempt to prop up the market. There are only so many people you can rape. The 'facts' published by mortgage lenders do not support what people are seeing with their own eyes. More property on the market, estate agents empty, and Internet discussion forums filled with people moaning that they can't sell their house at some incredibly inflated price. That is not to say some areas are not prospering, but for how long? Take a reality check. People buying houses for a minimum of half a million – where's the money coming from? We can't get rich so quickly – there has to be a massive market correction. The trigger for market collapse may well have already happened. The common fallacy is to assume that the UK market is strong with low interest rates. The reality is that it’s a global market, and house prices in Spain and Australia have already started to drop. Predictions for the US market are gloomy and if the US housing market has a downturn, the ramifications for the UK market are huge. Cost of living has increased significantly. The Government has to bribe the electorate by offering money for council tax rises. Commodities such as gas and electric are on the increase. Petrol prices have been volatile, and pensions have collapsed. The public transport system is a sham, credit is at a record high. We're borrowing from tomorrow to live today. The housing market at the moment represents a legal pyramid scam. Those who got in the market early are the ones that make money. The social consequences of a market crash are huge. Family break-ups, suicide, and mental health issues will increase significantly. Bankruptcies will soar and unemployment will escalate. There isn't just a housing market bubble. There's a consumer debt bubble. And the both are linked. Everyone should watch Glengarry Glen Ross. Edited January 4, 2006 by Mr Blek Quote Link to comment Share on other sites More sharing options...
Jason Posted January 3, 2006 Share Posted January 3, 2006 Welcome to HPC Mr Blek, The economy is slowly turning... On another note, if anyone sees Glengarry Glen Ross come on Sky let us all know! Or I could go to the video shop! Quote Link to comment Share on other sites More sharing options...
ʎqɐqɹǝʞɐɥs Posted January 3, 2006 Share Posted January 3, 2006 Good points and Is it just me or are there a lot of noob's recently? Quote Link to comment Share on other sites More sharing options...
sign_of_the_times Posted January 3, 2006 Share Posted January 3, 2006 good post Mr Ble(a)k you'll like it here Quote Link to comment Share on other sites More sharing options...
khali Posted January 3, 2006 Share Posted January 3, 2006 think i know you. very familiar. Quote Link to comment Share on other sites More sharing options...
Mr Blek Posted January 3, 2006 Author Share Posted January 3, 2006 Good points and Is it just me or are there a lot of noob's recently? I found the site by accident. Spent all day yesterday reading. Great to find that there are similar minded people. I could see the dot.com bubble bursting. I can see this bubble bursting; tbh I thought it would happen a year ago but now I'm convinced we are somewhere on the peak, perched perilously near the edge. I find it highly amusing when lenders argue about how much the market will 'improve' this year. That statistic is to brainwash people. The real statistic is the huge drop since last year. Quote Link to comment Share on other sites More sharing options...
CrashConnoisseur Posted January 3, 2006 Share Posted January 3, 2006 I can see this bubble bursting; tbh I thought it would happen a year ago but now I'm convinced we are somewhere on the peak, perched perilously near the edge. [Mr Blek] The bubble did indeed start to deflate a year ago -- the sharp fall in transaction volume was a clear and unambiguous signal. Today's market is very different to what it was two years ago -- it's now a buyers market with turnover constrained by seller reservation pricing. For various technical reasons the published house price 'indices' overstate the true market, probably by between 5 and 10%. Some of these distortions will soon start to drop out of the year-on-year figures. Expect to see a slow but variable decline in prices extending over many years. This is why I prefer to use terms such as 'correction' or 'disorderly readjustment' rather than "crash". A good proxy for confidence in the value of housing and for expectations of future price rises is the amount of money home owners are willing to borrow against the increased value of their home -- Mortgage Equity Withdrawal. Take a look at the last graph in this set which shows 'MEW as a Percentage of Post-Tax Income': http://www.graphicinvestor.com/econo/UK/MO...S/Mortgages.htm If you're looking for a "crash", there it is -- a dramatic 50% drop inside a year. Expect to see a rebound of around a third of that fall -- a so-called 'dead-cat bounce' -- before the downward trajectory resumes. Quote Link to comment Share on other sites More sharing options...
IMupNorth Posted January 3, 2006 Share Posted January 3, 2006 What do you do in the mortgage lending industry ? - if you don't mind me asking. Your thoughts are not exactly rambling are they !? and they didn't just come together in a day from reading the Hysterical Pundits Club website. Quote Link to comment Share on other sites More sharing options...
Mr Blek Posted January 3, 2006 Author Share Posted January 3, 2006 What do you do in the mortgage lending industry ? - if you don't mind me asking. Your thoughts are not exactly rambling are they !? and they didn't just come together in a day from reading the Hysterical Pundits Club website. I design the systems that encourage people to borrow more and more. They are ramblings in way - I wrote them off the top of my head as I see the market. Working in the mortgage industry is an eye opener. The brainwashing of the staff is amazing. The relationship between the media and the lender you wouldn't believe. Talk about getting into bed with each other. When an organisation is worried about churn rates and has desperate measures in place to stop rate tarts, you know there's something in the air. Quote Link to comment Share on other sites More sharing options...
Culpability Brown Posted January 3, 2006 Share Posted January 3, 2006 Great post. You've summed it up nicely. Quote Link to comment Share on other sites More sharing options...
The Masked Tulip Posted January 3, 2006 Share Posted January 3, 2006 Everyone should watch Glengarry Glen Ross. Nah, they should watch: The Searchers A Matter Of Life And Death Field of Dreams It's A Wonderful Life The Shawshank Redemption And if you want one about economics then: Bicycle Thieves Quote Link to comment Share on other sites More sharing options...
BandWagon Posted January 3, 2006 Share Posted January 3, 2006 I design the systems that encourage people to borrow more and more. I wish mortgage applicants would be shown the total that they are going to pay over the life of the loan, and the payment if interest rates have to go up by 50% of their current value. It should be mandatory as part of the mortgage application. Quote Link to comment Share on other sites More sharing options...
Mr Blek Posted January 3, 2006 Author Share Posted January 3, 2006 I wish mortgage applicants would be shown the total that they are going to pay over the life of the loan, and the payment if interest rates have to go up by 50% of their current value. It should be mandatory as part of the mortgage application. They are a business. Why should they? The Govt should force them to though. A bit like the warnign on ciggies. I worked as a salesman once. I hated it. Sell the benefits and not the cost. And if they asked about the cost, break it down. "Can you afford 50p a day?" - guaranteed to get the suckers signing on the line. Quote Link to comment Share on other sites More sharing options...
VacantPossession Posted January 3, 2006 Share Posted January 3, 2006 I design the systems that encourage people to borrow more and more. Well that's honest. But if you are so (rightly) concerned why do you carry on doing it? VP Quote Link to comment Share on other sites More sharing options...
Mr Blek Posted January 3, 2006 Author Share Posted January 3, 2006 Well that's honest. But if you are so (rightly) concerned why do you carry on doing it? VP "I'm working to bring down the system from within" - Baldrick in Blackadder Its not permanent work. I'm a freelancer, so I take what's available. Its been an eye opener TBH. Quote Link to comment Share on other sites More sharing options...
ʎqɐqɹǝʞɐɥs Posted January 3, 2006 Share Posted January 3, 2006 I design the systems that encourage people to borrow more and more. That systems 'Bull-Shit' right? Quote Link to comment Share on other sites More sharing options...
VacantPossession Posted January 3, 2006 Share Posted January 3, 2006 "I'm working to bring down the system from within" - Baldrick in Blackadder Its not permanent work. I'm a freelancer, so I take what's available. Its been an eye opener TBH. Since there is so much spin going on to counter the reality, it would perhaps take just a few "insider" property professionals to spill the beans on the hype, scams, denial and manipulation of Joe Public. Fancy being a whistle blower? I concede it takes some courage and conviction but I feel sure you are up to the task, otherwise why would you be so concerned? VP Quote Link to comment Share on other sites More sharing options...
Mr Blek Posted January 3, 2006 Author Share Posted January 3, 2006 (edited) Since there is so much spin going on to counter the reality, it would perhaps take just a few "insider" property professionals to spill the beans on the hype, scams, denial and manipulation of Joe Public. Fancy being a whistle blower? I concede it takes some courage and conviction but I feel sure you are up to the task, otherwise why would you be so concerned? VP I'm concerned because I see people about to ruin their lives and that concerns me. I'd be pretty poor whistle blower tbh as I've only been in the industry for a short time and won't be there when the work completes. What you need is someone at the top of the chain to tell the people what's going on. But I doubt that's going to happen. Edited January 3, 2006 by Mr Blek Quote Link to comment Share on other sites More sharing options...
NJP Posted January 4, 2006 Share Posted January 4, 2006 First time buyers are no longer desperate to get on the housing ladder. The market has slowed considerably over the past year, with localised drops in certain places. The FTB is now waiting to see how much further the prices will drop. Unfortunately, I think too many FTBs are still desparate to get on the ladder, and this is one the the reasons we haven't seen a sharp correction yet. (Personally, I think our society as a whole has become very impatient, which had been a major factor in the debt and housing bubbles). Quote Link to comment Share on other sites More sharing options...
Mr Blek Posted January 4, 2006 Author Share Posted January 4, 2006 Unfortunately, I think too many FTBs are still desparate to get on the ladder, and this is one the the reasons we haven't seen a sharp correction yet. (Personally, I think our society as a whole has become very impatient, which had been a major factor in the debt and housing bubbles). I agree there are FTB who are jumping into the market, but that is to be expected. But the market is still overpriced for the majority. Quote Link to comment Share on other sites More sharing options...
NJP Posted January 4, 2006 Share Posted January 4, 2006 I agree there are FTB who are jumping into the market, but that is to be expected. But the market is still overpriced for the majority. Agreed. I think, though, that when prices and/or interest rates fall slightly, a new batch of FTBs or BTLs jumps in without thinking, which means we're not (yet) seeing substantial falls. Quote Link to comment Share on other sites More sharing options...
make my day Posted January 4, 2006 Share Posted January 4, 2006 Just some ramblng thoughts You have summed up the current malaise of the property market pretty well in your post. Many of the eager young bucks (I have great sympathy with the young FTB's wanting to buy) on this forum are too impatient expecting an over night HPC and therefore inviting derision from the bulls. The HPS ( house price slide) will take some time to gather momentum - current stats are pointing the way notwithstanding the hiccups along the way, and market anecdotes from those wanting to sell in the current market are very compelling indeed - throughout my working life I have always stressed the importance of getting down into the trenches and smelling the gunsmoke - and believe me the property market trenches at the moment are rapidly turning horribly putrid - there is a lot of fear out there. We STR folk need to just hang in - our rewards will undoubtedly arrive in good time. Quote Link to comment Share on other sites More sharing options...
Killer Bunny Posted January 4, 2006 Share Posted January 4, 2006 Welcome to HPC Mr Blek, The economy is slowly turning... On another note, if anyone sees Glengarry Glen Ross come on Sky let us all know! Or I could go to the video shop! I just might be the only private individual in Britain with an original copy of it. It can be yours for the equivalent of a garden shed in Kensington i.e. £2M. FP Quote Link to comment Share on other sites More sharing options...
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