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Warwickshire Lad

House Price Crash But Soft-landing For Economy

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With all the talk of interest rates rising, and people like that guy Trichet saying that rises would not harm growth, it makes me wonder whether it might actually be possible to experience a significant house price correction without too much general economic fallout.

I have found it kind of annoying when people accuse bears of actually wanting a house price crash because that inevitably means mass unemployment and recession, and shame on us for "wanting" a recession and misery.

Well, excuse me but FTBs have been going through misery from being peed on from a great height for several years by the Buy To Let brigade and other vested interests - and nothing would please me more than to see Interest Rates go just high enough to scare off and expel these highly geared fools from the market, leaving most other folk relatively untouched.

Now there would be unemployment caused in the property sector, and there would be some pain - but we're not talking about going back to the mass unemployment of decades past and people and families with children on the streets eating stale bread.

So - how about it. Can we have a crash without too much knock-on effect, or not ?

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yup.

that is why they are not allowing wage push inflation.

If wages were allowed to come up to meet house prices the required inflation would drive us to recession.

If house prices come down they reduce the recession..

Read my footer..

and all that merv and crash gordon have said about wage push inflation

only merv has said that prices will come down.

but both have said many times how they would come down

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HPI is the economy. Gordon's "Miracle" is how those who bought property were able to borrow more than they produced at extremely accomodative IR that no one thought would ever go up in the "new paradigm" of financial perpetual motion. Those who thought they had found the ellusive "free lunch" consisting of ever rising property values and debt that would never have to be repaid will see that it does not work that way because the economy is cyclical and not linear.

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There's not much left of the real economy, high HP's over generations have put paid to that. A lot of what is left can and will be done in any number of countries cheaper over the coming years/decades.

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With all the talk of interest rates rising, and people like that guy Trichet saying that rises would not harm growth, it makes me wonder whether it might actually be possible to experience a significant house price correction without too much general economic fallout.

I have found it kind of annoying when people accuse bears of actually wanting a house price crash because that inevitably means mass unemployment and recession, and shame on us for "wanting" a recession and misery.

Well, excuse me but FTBs have been going through misery from being peed on from a great height for several years by the Buy To Let brigade and other vested interests - and nothing would please me more than to see Interest Rates go just high enough to scare off and expel these highly geared fools from the market, leaving most other folk relatively untouched.

Now there would be unemployment caused in the property sector, and there would be some pain - but we're not talking about going back to the mass unemployment of decades past and people and families with children on the streets eating stale bread.

So - how about it. Can we have a crash without too much knock-on effect, or not ?

HPC = Mass unemployment = FTB's no job and no house. If you think things are bad now just wait for your HPC!!

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Read my footer..

I have done:

1) You spell Mr Kings 1st name MERVYN - it's not hard

2) When were rates at 2% in 2003??

So all in all factually incorrect and poorly presented.

How much credence do you expect anyone to give "your footer"?

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HPC = Mass unemployment = FTB's no job and no house. If you think things are bad now just wait for your HPC!!

This is the likely scenario. All previous HPCs since WW2 were followed by or accompanied by recessions. When the cash flow stops because house prices are sucking the economy dry of discretionary spending we will have a recession.

Car sales are already seeing a recession as are stores that sell housing related goods (B & Q, MFI etc.).

With IR on the way up around the world, recession cannot be avoided. If Gordon tries to avoid it by lowering the rates its hello hyper-inflation and THEN an even deeper recession as sterling tanks and imported goods, inclusing oil, skyrocket.

Just sit back and relax and enjoy the economic cycle as best you can.

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The recession is going to happen anyway - you can't borrow your way to growth indefinitely. It will be horrible but there's no ducking it. Best get it over with so we can look forward to the subsequent recovery. The sooner the nettle is grasped the smaller the recession. The inverse is also true.

Interesting thoughts above from Rich. Been thinking along similar lines myself. Gordo the Clown will spin his way out of flack for higher rates and HPC - officially IR's are nothing to do with him.

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So - how about it. Can we have a crash without too much knock-on effect, or not ?

I don't see how.

Most of the house buying power comes from borrowing. The link between ability to borrow and house prices is there to be seen. (it's not from increased wages or lower house prices)

If IRs stay low, borrowing remains easy and house prices stay inflated.

If IRs increase slightly, borrowing will become difficult, buying may decrease slighty, but no huge correction. (this is where we are now in some areas I reckon).

If IRs increase sgnificantly, we'll see the big correction in house prices. But with the record amounts of personal debt combined with people borrowing to their very limit, there will be obvious "knock-on-effect"

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I have done:

1) You spell Mr Kings 1st name MERVYN - it's not hard

2) When were rates at 2% in 2003??

So all in all factually incorrect and poorly presented.

How much credence do you expect anyone to give "your footer"?

Your right stevo....everyone, the crash is off! :P

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HPC = Mass unemployment = FTB's no job and no house. If you think things are bad now just wait for your HPC!!

That's fine. You and Padiham can both go away and work it out...

We covered this last week.

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Your right stevo....everyone, the crash is off! :P

Huzzah.

Seriously though why anyone can't correctly spell Mervyn is beyond me.

And it is important to get basic facts right so a claim re IR at 2% in 2003 devalues the rest of his argument.

Apom is vaguely right but anyone who thinks government can prevent private employers paying what they need to remain competitive is living in cloud cuckoo land. In may industries there's a huge shortage of decent recruits - wage competition should see rises soon.

So in 2 years time we'll have higher interest rates, higher wage settlements in some selected private industries, public sector employment being slashed, higher taxes and a recession. Oh yes house prices will be tumbling a finally there will be a trigger.

House price crashes and recessions are interwoven, interlinked and inextricable.

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HPC and stable economy ARE possible if:

Most home-owners are on fixed mortagages; prices crash; and IR fall - relieving the rest of the economy, but not the housing market, because of all the fixed rate mortgages!

(Nice to see the argument that fixed-rate mortgages mean no crash being used to prove the reverse!) :D

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eVEN gB HAS IDENtified that the British dependence on variable rate mortgages can play havoc with the economy.......Before the 1970s there were many arcane controls on banks and other lending and altering these meant the government never needed to alter interest rates much to control the economy......So at that time everyone being on variable rates didn't matter...However since 1970 with interest rates more volatile, the effect on the economy of IR movements has been exacerbated by most people being on variable rates...In the US and Continental Europe it has always been considered financially reckless to take out variable rate mortgages and here they have always been the norm...

Housing booms/slumps are usually triggered by un/favourable economic factors but once they gain momentum the cause and effect mechanism reverses.....so instead of the economy driving the housing market...the housing market ends up driving the economy and we seem to have been in this phase for 3 or 4 years now..............

Experience of the past 50 years would suggest you cant have a housing market slump without a general economic slump.

Even the 1962 mini-slump stalled the housing market....

Edited by Michael

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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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