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Here's the circle I can't square.

The housing market has been strong since re-opening in May. Doesn't matter if you are a bull or a bear, it has clearly outperformed everyone's expectations in terms of volumes and prices. 

So if everything is so good, then why the hell is Lloyds back at 28p?! This is the housing market proxy in the UK stock market. 2/3 of their loan book is mortgage lending and they have a 50bn pound BTL portfolio i.e. c.10% of their loan book. Their average Loan to value is about 45%, and they have been doing average new lending at 63% LTV. No serious money is willing to invest. 

Is it really as simple as there are a small minority of morons who are transacting like everything is normal in the housing market - because of all the props brought into the economy since march? And it is all really that obvious that when furlough ends, mortgage holidays end, landlords can't claim holidays on BTL mortgages (but tenants don't pay etc) then there will be a correction in prices? If it really is that obvious why hasn't confidence already gone - it isn't rocket science?

Anyone else find this unnerving?

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There is no market. Volumes are so low that any 'average market' figures are meaningless cr*p.

It took  2 1/2 hours after striking the iceberg for the Titanic to go underwater. The massive chaos didn't happen until the last 15mins. You had 2 illusory hours of normality, whilst the clever ones pocketed their jewellery and walked  slowly to the lifeboats and told everyone else to keep dancing.

That's where we are now.

 

 

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1 minute ago, msi said:

There is no market. Volumes are so low that any 'average market' figures are meaningless cr*p.

It took  2 1/2 hours after striking the iceberg for the Titanic to go underwater. The massive chaos didn't happen until the last 15mins. You had 2 illusory hours of normality, whilst the clever ones pocketed their jewellery and walked  slowly to the lifeboats and told everyone else to keep dancing.

That's where we are now.

 

 

Great analogy. My head agrees, but it is still unnerving.  

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4 hours ago, qejunkie said:

Here's the circle I can't square.

The housing market has been strong since re-opening in May. Doesn't matter if you are a bull or a bear, it has clearly outperformed everyone's expectations in terms of volumes and prices. 

So if everything is so good, then why the hell is Lloyds back at 28p?! This is the housing market proxy in the UK stock market. 2/3 of their loan book is mortgage lending and they have a 50bn pound BTL portfolio i.e. c.10% of their loan book. Their average Loan to value is about 45%, and they have been doing average new lending at 63% LTV. No serious money is willing to invest. 

Is it really as simple as there are a small minority of morons who are transacting like everything is normal in the housing market - because of all the props brought into the economy since march? And it is all really that obvious that when furlough ends, mortgage holidays end, landlords can't claim holidays on BTL mortgages (but tenants don't pay etc) then there will be a correction in prices? If it really is that obvious why hasn't confidence already gone - it isn't rocket science?

Anyone else find this unnerving?

Mortgage risk will be an element for sure.

But banks share prices have collapsed regardless of their mortgage loan book - hsbc, jp Morgan etc. Etc. 

There was hope before this that interest rates might creep upwards and they could make more money. 

Now the market is looking at and pricing in a prolonged period of low rates (depsite the gold crews gibberish) and any commercial loans they had to buisnesses.. Well who needs them? Its taxpayers now..so bye bye a large part of their profitable side.

Current accounts and savjnfs, if we goto negative rates will they be used? And how to make money from those customers... Tough one. 

 

 

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4 hours ago, qejunkie said:

Here's the circle I can't square.

The housing market has been strong since re-opening in May. Doesn't matter if you are a bull or a bear, it has clearly outperformed everyone's expectations in terms of volumes and prices. 

So if everything is so good, then why the hell is Lloyds back at 28p?! This is the housing market proxy in the UK stock market. 2/3 of their loan book is mortgage lending and they have a 50bn pound BTL portfolio i.e. c.10% of their loan book. Their average Loan to value is about 45%, and they have been doing average new lending at 63% LTV. No serious money is willing to invest. 

Is it really as simple as there are a small minority of morons who are transacting like everything is normal in the housing market - because of all the props brought into the economy since march? And it is all really that obvious that when furlough ends, mortgage holidays end, landlords can't claim holidays on BTL mortgages (but tenants don't pay etc) then there will be a correction in prices? If it really is that obvious why hasn't confidence already gone - it isn't rocket science?

Anyone else find this unnerving?

round where I live volumes of houses are low and plenty of people who have recession proof jobs (NHS, University academics, tradesman) want to buy. Most of those in jobs that will be lost (retail, university teaching staff on fixed term contracts etc) rent. For now at least they have some kind of support (furlough, no evictions etc).

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3 hours ago, msi said:

There is no market. Volumes are so low that any 'average market' figures are meaningless cr*p.

It took  2 1/2 hours after striking the iceberg for the Titanic to go underwater. The massive chaos didn't happen until the last 15mins. You had 2 illusory hours of normality, whilst the clever ones pocketed their jewellery and walked  slowly to the lifeboats and told everyone else to keep dancing.

That's where we are now.

 

 

Maybe. But people have been saying that on here since 2004!

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46 minutes ago, MancTom said:

Maybe. But people have been saying that on here since 2004!

Because it has been happening.  Take a look at Residential Property Transactions from the ONS Link.

Putting into a graph below:

 

 

 

Residential Property Sales.png

Edited by msi
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A record number of properties have been reaching the sales agreed stage since the Stamp Duty holiday was announced in July, agents claim.

Analysis from NAEA Propertymark has revealed the average number of sales agreed per estate agent branch stood at thirteen in July, matching the record high previously hit in 2007.

The number of sales was also up from nine in July 2019.

Agents reported 8% of properties sold for more than the original asking price last month, a fall from 10% in June.

Three in five sold for less than the original asking price in July.

Demand and supply also increased, NAEA Propertymark said.

The number of house hunters registered per estate agent branch increased from 379 in June to 428 in July, while the amount of stock per member branch increased from 37 to 43 over the same period.

Sales to first-time buyers did, however, drop from 29% of transactions in June to 25% in July.

Mark Hayward, chief executive of NAEA Property-mark, said: “It’s positive to see the market continuing to boom with clear interest from both buyers and sellers.

“Usually we would expect to see a lull in activity during the summer months, however, demand remains unabated with no signs that this will not continue.

  

 

Edited by richmondtw
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It’s at 28p because the mgmt just kitchen sinked 2020 and booked £5bn in bad loans to the P&L. Those would normally have been spread over several years but it is Covid year so might as well clear the decks.

Oh, and the government told them they can’t pay a dividend this year relating to last years profits. UK investors don’t like not getting returns.

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33 minutes ago, PalmerEldritch said:

It’s at 28p because the mgmt just kitchen sinked 2020 and booked £5bn in bad loans to the P&L. Those would normally have been spread over several years but it is Covid year so might as well clear the decks.

Oh, and the government told them they can’t pay a dividend this year relating to last years profits. UK investors don’t like not getting returns.

New accounting rules. 

You have to take the hit upfront under IFRS9 if theres a material change in circumstances (cv19 counts) even if there have been no missed payments whatsoever on the loan. 

Bit odd as can cause some huge non cash p&l swings 

For anyone particularly interested in accounting rules. Ft article below 

https://www.google.com/amp/s/amp.ft.com/content/94ff9b4c-67a3-11ea-800d-da70cff6e4d3

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6 hours ago, MancTom said:

Maybe. But people have been saying that on here since 2004!

I think the analogy is a good one. To expand it a bit more to cover your point, MancTom, I'd say some longstanding posters have done the equivalent of pointing out we've been going full steam ahead in fog with not enough lifeboats. Disaster beckons.

But it didn't.

However, this time we have actually hit the iceberg. The job losses that have happened and will happen...the rent that won't be paid...the demand sucked out of the economy when furlough ends or continues in curtailed form...

And dare I mention Brexit?

 

Edited by Voice of Doom
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1 hour ago, captainb said:

New accounting rules. 

You have to take the hit upfront under IFRS9 if theres a material change in circumstances (cv19 counts) even if there have been no missed payments whatsoever on the loan. 

Bit odd as can cause some huge non cash p&l swings 

For anyone particularly interested in accounting rules. Ft article below 

https://www.google.com/amp/s/amp.ft.com/content/94ff9b4c-67a3-11ea-800d-da70cff6e4d3

True but...

Anyone who has been through a year end audit with a large company knows that the balance sheet holds many hiding places and items that really should be written down can be disguised if needs be.

Unless it is significantly material the auditors can only dig so far.

If a massive write off is booked it’s because the mgmt either want it or can’t hide it.

Unsure what is happening with Lloyds but it’s my guess they are kitchen sinking since the government have f*cked them over on the dividends anyway.

Share price should recover in 6-12 months time. Less if there’s a vaccine soon.

 

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8 hours ago, MancTom said:

round where I live volumes of houses are low and plenty of people who have recession proof jobs (NHS, University academics, tradesman) want to buy.

'Recession-proof jobs'. That's a good one.

Vast swathes of jobs have gone away and aren't coming back. People in the NHS don't get paid for long if other people aren't paying taxes. University academics don't get paid if kids aren't borrowing money to go to university to get jobs that don't exist any more. Tradesmen don't make money if people are fixing things themselves because they can't afford to hire someone.

We're currently at the stage of the wolf running off the cliff and floating there in mid-air with his legs spinning before he realizes that the roadrunner took the ground away. We're only held up by massive borrowing and money-printing, which will either stop or destroy any remaining value in fiat currency.

Edited by MarkG
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4 hours ago, MarkG said:

We're currently at the stage of the wolf running off the cliff and floating there in mid-air with his legs spinning before he realizes that the roadrunner took the ground away. We're only held up by massive borrowing and money-printing, which will either stop or destroy any remaining value in fiat currency.

+1

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8 hours ago, PalmerEldritch said:

It’s at 28p because the mgmt just kitchen sinked 2020 and booked £5bn in bad loans to the P&L. Those would normally have been spread over several years but it is Covid year so might as well clear the decks.

Oh, and the government told them they can’t pay a dividend this year relating to last years profits. UK investors don’t like not getting returns.

They return about 3p a year before covid so that explains 3p of the 30p drop. They haven't banned banking dividends forever. 

7 hours ago, captainb said:

New accounting rules. 

You have to take the hit upfront under IFRS9 if theres a material change in circumstances (cv19 counts) even if there have been no missed payments whatsoever on the loan. 

Bit odd as can cause some huge non cash p&l swings 

For anyone particularly interested in accounting rules. Ft article below 

https://www.google.com/amp/s/amp.ft.com/content/94ff9b4c-67a3-11ea-800d-da70cff6e4d3

Yeah but this is a good thing. Because it means that the PnL better represents reality at the time i.e. the economy stopped so banks should probably make some provisions. And then the recovery in earnings will come sooner, more in line with the economic recovery. As long as they cleaned the book well enough as they went?!

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6 hours ago, MarkG said:

'Recession-proof jobs'. That's a good one.

Vast swathes of jobs have gone away and aren't coming back. People in the NHS don't get paid for long if other people aren't paying taxes. University academics don't get paid if kids aren't borrowing money to go to university to get jobs that don't exist any more. Tradesmen don't make money if people are fixing things themselves because they can't afford to hire someone.

We're currently at the stage of the wolf running off the cliff and floating there in mid-air with his legs spinning before he realizes that the roadrunner took the ground away. We're only held up by massive borrowing and money-printing, which will either stop or destroy any remaining value in fiat currency.

People often post things like this on here, which infers almost total society collapse as if its both likely to happen and also something they look foward to. 

Very odd.

Prediction.. 

Jobs will be lost, we will go into recession, new jobs will be created, we will come out of recession. 

As in.. Same as has always happened.

Total state collapse based on Debenhams going into admin, a 10% rise in deaths YoY and swapping bonds for cash on banks balance sheets is divorced from reality. 

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45 minutes ago, captainb said:

People often post things like this on here, which infers almost total society collapse as if its both likely to happen and also something they look foward to. 

Very odd.

Prediction.. 

Jobs will be lost, we will go into recession, new jobs will be created, we will come out of recession. 

As in.. Same as has always happened.

Total state collapse based on Debenhams going into admin, a 10% rise in deaths YoY and swapping bonds for cash on banks balance sheets is divorced from reality. 

So there will be lots of people with negative equity and mortgages not getting paid.  I’d be unsurprised if the government bought the bad loans and deferred payment interest free for 10 or 20 years, they will then setup the casino again and round we go to next time.  The house never loses in “Big Housing Market Casino UK”.  

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1 minute ago, satsuma said:

So there will be lots of people with negative equity and mortgages not getting paid.  I’d be unsurprised if the government bought the bad loans and deferred payment interest free for 10 or 20 years, they will then setup the casino again and round we go to next time.  The house never loses in “Big Housing Market Casino UK”.  

To be honest i cant see that happening. What's far more likely IMHO is a fall of 5 to 20% max followed by a recovery. That will put some into negative equity but given the low transaction count and recent rises, yes some will be in negative equity but not a large % of the market. I.e same as in 08.

Those that suggest money collapse.. Okay well ill suspend my disbelief at the theory but even if you accept that... The collapse in house prices is based on, assets such as "old gold coins" going to the moon as people seek to protect their wealth but the price of housing collapsing. Just nonsense. 

If you need to swap out of cash as its collapsing most people would take being left with a house as an asset when the music stops rather than ye olde gold coins purse.

The erosion of the leverage alone makes it a no brianer and interesting its thats erosion of debt at goverment level they use as it will be allowed to happen. Cant have it both ways. 

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11 minutes ago, captainb said:

To be honest i cant see that happening. What's far more likely IMHO is a fall of 5 to 20% max followed by a recovery. That will put some into negative equity but given the low transaction count and recent rises, yes some will be in negative equity but not a large % of the market. I.e same as in 08.

Those that suggest money collapse.. Okay well ill suspend my disbelief at the theory but even if you accept that... The collapse in house prices is based on, assets such as "old gold coins" going to the moon as people seek to protect their wealth but the price of housing collapsing. Just nonsense. 

If you need to swap out of cash as its collapsing most people would take being left with a house as an asset when the music stops rather than ye olde gold coins purse.

The erosion of the leverage alone makes it a no brianer and interesting its thats erosion of debt at goverment level they use as it will be allowed to happen. Cant have it both ways. 

So I didn’t mention most of what your talking about.  In a 20 percent drop scenario the government would in my opinion buy out bad mortgages.  My thinking is they would not let it collapse.  

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was it not part of the employees pack packet getting lots of shares?

it must really sting seeing it fall from 600p to 18p, but i guess that's what you get for working for the morally corrupt banking sector!

the bank heads threw the employees to the wolves and they knew what they were doing. 

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