Will HPC ever come?

[Maghull Mike]

WE need:-

High Rates:- (Not yet)

High unemployment (No chance)

Tec Revolution:- (A.I is just hype)

 

So, no its not coming.................change my mind?

Mike

 

[AppleBob]

If everyone believes there will be a crash, and talks it up, it is more likely to happen.

[70PC]

5 minutes ago, Maghull Mike said:

WE need:-

High Rates:- (Not yet)

High unemployment (No chance)

Tec Revolution:- (A.I is just hype)

 

So, no its not coming.................change my mind?

Mike

 

Builders have led the charge on higher prices. All I see now is builders reducing their numbers. A few can afford current numbers. Most cannot. 

[nero120]

19 minutes ago, Maghull Mike said:

WE need:-

High Rates:- (Not yet)

High unemployment (No chance)

Tec Revolution:- (A.I is just hype)

 

So, no its not coming.................change my mind?

Mike

 

Wrong. The marginal price is set by the availability of credit. So, all you actually need is higher rates than were previously available for prices to fall. The higher the rates go, the more prices fall. Crash is a subjective term, so define it however you like. Prices are falling.

[shlomo]

29 minutes ago, AppleBob said:

If everyone believes there will be a crash, and talks it up, it is more likely to happen.

If there is a crash this site will close and we will all have to immigrate to Mumsnet 

[AppleBob]

The consensus is that the MPC have not raised rates quickly enough, and now we have people worrying about inflation, and talking about inflation, which (apparently) eventually leads to inflation becoming a self fulfilling prophecy, and an even greater recession, and worse industrial actions...

I think we'll begin to see sharp rises at some point in the future. 

 

 

[nuts]

Nope.   But there will be meaningful drops.

[AppleBob]

7 minutes ago, nuts said:

There will be meaningful drops.

Why?

 

[Extreme_biker0]

Inflation is just getting going. People saying it'll come down because of fuel prices falling... Yeah right that just leaves even MORE money in people's pocket chasing everything else in the basket.

Prices will go up even as fuel inputs come down because 'why not', everyone else is doing it, and customers struggle to find alternatives in a lot of cases. In other words it's thoroughly engrained now.

All to say... Patience 🙂 They have to deal with this and it won't be pretty for asset prices 

[Nomadd]

4 minutes ago, AppleBob said:

Why?

 

Because Average Joe & Jane do not earn £200k a year to buy a three bed dump in Outer London. And now, the banks won't lend it to them. And even if the banks would lend it, they can't afford the mortgage.

Unless you believe something's changed?

Edited May 1, 2023 by Nomadd

[petetong]

Nope ... 

[AppleBob]

(I thought Nuts meant there will be drops in interest rates, you thought he meant there will be a drop in house prices?)

Interest Rates are the fundamental force driving inflation, and they will keep going up. 

 

[henry the king]

2 hours ago, Maghull Mike said:

WE need:-

High Rates:- (Not yet)

High unemployment (No chance)

Tec Revolution:- (A.I is just hype)

 

So, no its not coming.................change my mind?

Mike

 

Define crash.

Is 6.5% wage growth and 0% HPI over 3 years a "crash"? It would mean prices down 20% in real terms vs earnings.

Or does crash mean prices falling to 4x earnings, because that won't happen imo.

Nominal crash happens if the inflation IR spike causes a financial crisis. Could easily happen. Could happen this year. Or could happen when they early relax rates and then have to hike harder a second time (like the 1970s). Even then we aren't going back to 4x earnings though. 

 

But be happy that rampant HPI is over and we have seen 10% falls vs wages already. We are almost back to 2020 levels vs earnings.

[Maghull Mike]

Yes they try to inflate into it like the 70s..............but NO collapse.

Mike

[Maghull Mike]

We need some other factor to come to pass

Mike

[24gray24]

The crash has several initial phases: 

Stalling market

Lenders reining in. 

Cries for government subsidies

Increasing auction selling. 

Increasingly desperate ramping propaganda. 

All this before some small sectors start capitulating.  

It's all here already, like the top of the roller coaster, the breathless pause...

[AppleBob]

https://www.frbsf.org/economic-research/publications/economic-letter/2015/august/measuring-monetary-policy-effect-on-house-prices-speech/

The data seems to suggest that for every 1%  increase in long term interest rates, its reasonable to expect up to a 10% drop in house prices, two years after the IR decision, and that the ratio increases as house prices continue to fall and that for every 1% drop in GDP, expect a 4% fall in house prices, and a lot of other external factors come into play.

Quite encouraging really.

 

 

 

[Aidan Ap Word]

3 hours ago, Maghull Mike said:

WE need:-

High Rates:- (Not yet)

High unemployment (No chance)

Tec Revolution:- (A.I is just hype)

 

So, no its not coming.................change my mind?

Mike

 

High rates? Maybe not yet ... but they (main market mortgage rates at 80% LTV or better) are 400% of what they were ... 1%->4% ... so they might not be high, they are a huge increase on what they were.

High unemployment required? Well, that would certainly drive sentiment. But other things drive sentiment too.

Tech revolution? Why on earth is that even relevant to house prices? Unless you mean a revolution in home energy ... but no, we are not going to let this thread descend into the "hydrogen will save us" madness.

Interest rates and sentiment drive house prices. <- you may differ on this point, but interest rate changes and sentiment changes are the only global things

Interest rates have been increasing significantly and will likely plateau or increase more.

Sentiment may be turning.

Sentiment could be rescued by bailouts. But in terms of the bailouts of 2008/09 - one of the very biggest mechanism for the bailouts (even making loose monetary policy even possible) was to assert ZIRP <- and ZIRP shouldn't be anything we see any time soon unless the entire game is up, in which case HPC (or not) is the least of our worries.

 

As regards the international situation ... the unemployment rate and HPC are not linked in Australia.

Australian House prices are tanking ... but this is what is happening to the Australian unemployment rate:

 

 

Edited May 1, 2023 by Aidan Ap Word

[Maghull Mike]

1 minute ago, Aidan Ap Word said:

High rates? Maybe not yet ... but they (main market mortgage rates at 80% LTV or better) are 400% of what they were ... 1%->4% ... so they might not be high, they are a huge increase on what they were.

High unemployment required? Well, that would certainly drive sentiment. But other things drive sentiment too.

Tech revolution? Why on earth is that even relevant to house prices? Unless you mean a revolution in home energy ... but no, we are not going to let this thread descend into the "hydrogen will save us" madness.

Interest rates and sentiment drive house prices. <- you may differ on this point, but interest rate changes and sentiment changes are the only global things

Interest rates have been increasing significantly and will likely plateau or increase more.

Sentiment may be turning.

Sentiment could be rescued by bailouts. But in terms of the bailouts of 2008/09 - one of the very biggest mechanism for the bailouts (even making loose monetary policy even possible) was to assert ZIRP <- and ZIRP shouldn't be anything we see any time soon unless the entire game is up, in which case HPC (or not) is the least of our worries.

 

As regards the international situation ... the unemployment rate and HPC are not linked in Australia.

Australian House prices are tanking ... but this is what is happening to the Australian unemployment rate:

 

 

 

Tech revolution? Why on earth is that even relevant to house prices? Unless you mean a revolution in home energy ... but no, we are not going to let this thread descend into the "hydrogen will save us" madness."

 

Nope, On top of out of control inflation & Mega rates & a lot of Baby boomers the end of the 1970's gave us the MICROPROCESSOR...........suddenly machines could spray/weld cars& vast numbers of manual labour jobs could be done by computer control............the BBC were good enough to make a TV program call "The chips are down"  & warning of a massive job losses as a result.

 

A.I threatens the same, but i checked it out & frankly its just hype.

Mike

[Aidan Ap Word]

1 minute ago, Maghull Mike said:

Tech revolution? Why on earth is that even relevant to house prices? Unless you mean a revolution in home energy ... but no, we are not going to let this thread descend into the "hydrogen will save us" madness."

 

Nope, On top of out of control inflation & Mega rates & a lot of Baby boomers the end of the 1970's gave us the MICROPROCESSOR...........suddenly machines could spray/weld cars& vast numbers of manual labour jobs could be done by computer control............the BBC were good enough to make a TV program call "The chips are down"  & warning of a massive job losses as a result.

 

A.I threatens the same, but i checked it out & frankly its just hype.

Mike

The changes from 2004 to 2012 in terms of tech revolution, I wonder how much you know of those.

Cloud computing, containerisation, advances in assymetric encryption (including - but in no way limited to - TLS standards development and growth in compliance), telecommuncations growth (esp. important in the growth of MFA, but many other things besides), JIT and logistics changes and improvements, web traffic control and monitoring.

All of those ^^^^^ - and many more - went mainstream in the period 2004 to 2012 and house prices may (possibly) have been impacted very slightly by those - and the vapid nature of MBS exposed better maybe - but the house price roller coaster rolled on unaffected. Serverless, by example, but that went mainstream post 2012 ... And then there is platform independence best illustrated by the open source nature of VSCode (below which is sea change in technology world).

And all that before we get into the working from home stuff entrenched by cov1d response (that many of use engineers knew has been possible (in the UK) for more than a decade anyway).

And most of the changes in industrial use of microprocessors were centred around the use of PLCs which really only started coming on mainstream in 1993 - ref - and there were at least 3 peaks and troughs in the period 1970 to mid 1990s ... this from the land registry data:

[bartelbe]

Yes, it is inevitable, history shows us that. There isn't a single asset bubble that hasn't imploded. Basic maths shows it will crash, neither mortgage costs nor rents can outrun wage growth forever. To believe a crash won't come is to think house prices can reach salary multiples of 18,30 or 40 times average earnings, which is crazy.

The problem is predicting when it will happen. There are powerful vested interests who will do anything to avoid it crashing. The sheer important the housing market has assumed is distorting both economic and political policy. The Bank of England won't do what is needed to fight inflation because of fear of crashing the market. The government keeps bailing the market out. The media keeps talking the market up.

However once again economic history shows us that fighting against market forces is futile, at least when it comes to an asset bubble. You can delay a crash but you can't prevent one and by delaying it the result is normally to make the crash bigger when it does happen.

[scottbeard]

3 hours ago, Maghull Mike said:

WE need:-

High Rates:- (Not yet)

High unemployment (No chance)

Tec Revolution:- (A.I is just hype)

 

So, no its not coming.................change my mind?

Mike

 

A little over a year ago many people here were scoffing at the idea interest rates would ever get above 2% again. EVER. Negative rates were discussed.

Now they are at 4,25% and rising, which a year ago WOULD have been considered high rates

Why do we need a tech revolution, or for that matter High unemployment?

 

[“Nasty Piece of work”]

Simply less to spend (IR, CoL, Inflation) = less funny money.

No sale at space cadet prices.

[MerchantNavy]

1 hour ago, 24gray24 said:

The crash has several initial phases: 

Stalling market

Lenders reining in. 

Cries for government subsidies

Increasing auction selling. 

Increasingly desperate ramping propaganda. 

All this before some small sectors start capitulating.  

It's all here already, like the top of the roller coaster, the breathless pause...

Which is why those with cash will be winners, they will grab bargains from desperate sellers. Those of us who rely on mortgages will be left hanging.

[btd1981]

Maybe it won't.  The sheer number of people that want to buy a house vs. availability is too high and getting worse. 

People with the highest spending power are just lowering their expectations, so you've got doctors fighting to buy houses from retired binmen.

I'm not sure house prices will fall significantly,  when there's always somebody to step in at a particular price level.