Is It Paranoid?

[apom]

This is a poll, but opinions would be appreciated.

By the way, we have been promissed no wage push inflation by the MPC, so do not panic about the recessions that we saw pre-1989-1995 housing downturn.

[benjamin]

which time line please?

[Brian Potter]

Disagree. I think Houseprice corrections are a consequence of recession. As long as people can pay, even a large mortgage they will be ok. Other factors such as unemployment and poor consumer confidence drive a recession.

All this happened in early nineties. House prices came down as a result of the worst recession in living history. The price of houses was not the reason for the recession.

[gasket37]

Disagree. I think Houseprice corrections are a consequence of recession. As long as people can pay, even a large mortgage they will be ok. Other factors such as unemployment and poor consumer confidence drive a recession.

All this happened in early nineties. House prices came down as a result of the worst recession in living history. The price of houses was not the reason for the recession.

hmm - i think it was the other way around

there was a brilliant graph posted by someone on here (durch?) showing recessions since the 1950's plotted vs house price movements.

it clearly shows houseprices tanking before the start of the last 3 recessions and continuing through it as the economy unwound.

PM me if you want a copy - i have it on my home PC somewhere....

[apom]

hmm - i think it was the other way around

there was a brilliant graph posted by someone on here (durch?) showing recessions since the 1950's plotted vs house price movements.

it clearly shows houseprices tanking before the start of the last 3 recessions and continuing through it as the economy unwound.

PM me if you want a copy - i have it on my home PC somewhere....

Exactly.

The time line shows, house price inflation followed by house prices dropping against average salary followed by recession.

The order is staggering.. but very clear.

I did a post on my thories around this..

I will dig it out and link it.

http://www.housepricecrash.co.uk/forum/ind...showtopic=22153

Here you go

Edited February 10, 2006 by apom

[Guest]

It's easy:

A combination of housing sucking sudden unfair share of monies out of the economy, on a background of no commensurate wage rises.

Sudden presence and then sudden absence of MEW monies.

Increasing savings as deposits required for house purchase are enourmous.

The presence of the boom causes the recession / job losses / correction. But bloody unfair it is in its indiscriminate nature too.

Edited February 10, 2006 by megaflop

[BandWagon]

Disagree. I think Houseprice corrections are a consequence of recession. As long as people can pay, even a large mortgage they will be ok. Other factors such as unemployment and poor consumer confidence drive a recession.

All this happened in early nineties. House prices came down as a result of the worst recession in living history. The price of houses was not the reason for the recession.

This is the view expounded by the general media. Unfortunately it's incorrect.

Looking at the last 50 years, the housing market slump has preceded recessions in the UK economy.

It has always been the housing market that has turned down first, usually followed about 2 years later by a full blown recession.

Your other assertion that unemployment exacerbates the problem is true, however it is the slowdown in the housing market that causes the rise in unemployment.

Exactly as we are seeing now.

http://www.statistics.gov.uk/cci/nugget.asp?id=12

Gordon Brown has been honest enough to acknowledge that it is the volatility in the housing market that has caused most of the British economy's recent problems.

I believe it will cause them again.

Edited February 10, 2006 by BandWagon

[Guest]

I wish they'd give the ******* thing a kick and we can be done with this by 2010. I don't fancy turning Japanese.

(Although they do have nice chocolate!)

Edited February 10, 2006 by megaflop

[OnlyMe]

Banks hijack the real economy via housing. They have been doing this for deacdes. It has played a large part in the stop go economics of the country and the dismal level of investment in British business.

Every so often the banks push it far enough before we go over the edge. This time around we are approaching the cliff at record speed.

[Brian Potter]

hmm - i think it was the other way around

there was a brilliant graph posted by someone on here (durch?) showing recessions since the 1950's plotted vs house price movements.

it clearly shows houseprices tanking before the start of the last 3 recessions and continuing through it as the economy unwound.

PM me if you want a copy - i have it on my home PC somewhere....

I think a doubling of interest rates and a loss of £20 billion proping up the pound as we struggled with the ERM may have contributed more than the fact a semi was 30% over priced

[Guest]

A loss of £20bn propping up the pound...

If we hadn't spent that money, then what else would we have used to prop up the pound?

Yup: Higher interest rates anyway.

This is why we don't need an ERM to 'crash' the market as such this time around.

[BandWagon]

I think a doubling of interest rates and a loss of £20 billion proping up the pound as we struggled with the ERM may have contributed more than the fact a semi was 30% over priced

The ERM mess was in September 1992. By then most of the housing crash had happened.

Interest rates are definitely a factor in bursting that bubble.

But bubbles have burst without interest rate rises, Germany and Japan.

Edited February 10, 2006 by BandWagon

[gasket37]

I think a doubling of interest rates and a loss of £20 billion proping up the pound as we struggled with the ERM may have contributed more than the fact a semi was 30% over priced

i'll agree it didn't help matters but the graph i mentioned is in bandwagon's post #7 above and is very interesting.

look how relatively stable things are in the 1950's + 1960's.

then fiat currencies are introduced at the start of the 1970's and the roller coaster begins...

Edited February 10, 2006 by gasket37

[Brian Potter]

A loss of £20bn propping up the pound...

If we hadn't spent that money, then what else would we have used to prop up the pound?

Yup: Higher interest rates anyway.

This is why we don't need an ERM to 'crash' the market as such this time around.

Lest we forget the pound was falling out ot the perameters set by the European bank. The idea is that all euro nations 'buy' the falling currency in order to raise its value. Except we kept buying and they kept selling. So we were trying to prop up a failing currency whilst others sold.

Its funny how being made redundant at 22 focusdes the mind on the reasons for it. Builders ran out of work - not because of the lack of demand for housing, but the general downturn investment due to interest rates being sky high.

People lose there jobs. other people sh*t themselves and put off the house move - market in housing drops.

Thats how it works.

[Smell the Fear]

which time line please?

Benjamin - I feel you must be congratulated on your choice of avatars, and the frequency with which you update them.

[Guest]

Lest we forget the pound was falling out ot the perameters set by the European bank.

I don't understand why this matters. If we hadn't partaken in the ERM in the first place, the pound would have fallen against those currencies anyway because of our domestic situation at the time?

Import trade with those EU countries (and others outside for that matter!) clearly was important otherwise interest rates wouldn't have gone up afterwards.

[Brian Potter]

I don't understand why this matters. If we hadn't partaken in the ERM in the first place, the pound would have fallen against those currencies anyway because of our domestic situation at the time?

Import trade with those EU countries (and others outside for that matter!) clearly was important otherwise interest rates wouldn't have gone up afterwards.

we could have set the currency at a lower level. We were forced by EU banking rules to prop up the currency. Resulting in huge losses and stupid interest rates. The exchequer had to make the pound more attractive hence the high rates. No coincidence we pulled out.

The economy was run by muppets in the early nineties.

[MarkG]

The economy was run by muppets in the early nineties.

And the late nineties.

[benjamin]

Benjamin - I feel you must be congratulated on your choice of avatars, and the frequency with which you update them.

why, thank you.

[Mr_Sminty]

My take.

Recessions are caused by oversupply, leading to lower prices, leading to lower profits meaning lower return on capital, leading to reduction in money supply leading to less flexible economy, leading to a correction in supply. Oversupply is caused by loose credit and overinvestment in certain areas of the economy.

Loose credit and overinvestment are both characteristics of the UK housing market.

[apom]

Right.. I was surprised to see that so many share my point of view..

Trust Mervin King now?

he has dropped the ball to allow this inflation.

but he has warned everyone when his hads were tied..

[Brian Potter]

My take.

Recessions are caused by oversupply, leading to lower prices, leading to lower profits meaning lower return on capital, leading to reduction in money supply leading to less flexible economy, leading to a correction in supply. Oversupply is caused by loose credit and overinvestment in certain areas of the economy.

Loose credit and overinvestment are both characteristics of the UK housing market.

that does not, however, mean that house prices are the cause of a recession. I still think they are merely the litmus paper of public economic sentiment.

[gasket37]

that does not, however, mean that house prices are the cause of a recession. I still think they are merely the litmus paper of public economic sentiment.

quite possibly

but if there is the start of a house price slide then people who have read this thread can have a fair idea of what will happen 18 months or so down the line and try and plan for it accordingly

O/T - it looks like only 1 person voted the OP Apom as being insane and paranoid.

i was quite surprised by that

Edited February 10, 2006 by gasket37

[Brian Potter]

quite possibly

but if there is the start of a house price slide then people who have read this thread can have a fair idea of what will happen 18 months or so down the line and try and plan for it accordingly

O/T - it looks like only 1 person voted the OP Apom as being insane and paranoid.

i was quite surprised by that

I agree that a correction in house prices is inevitable. But in my opinion the reason will be either a credit crunch due to excess bad debt or higher interest rates (or a combination of the two). These will drive down prices as people take economic cover. This is already happening as it is noticable how people are tightening their belts.

I suffered during last recession but did not own property - thank God

[frugalista]

Lest we forget the pound was falling out ot the perameters set by the European bank. The idea is that all euro nations 'buy' the falling currency in order to raise its value. Except we kept buying and they kept selling. So we were trying to prop up a failing currency whilst others sold.

This was in 1992, well after most of the last crash had happened.

frugalista