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munimula

So Where's This Housing Crash Then?

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So where's this housing crash then? Back in 2004, a housing crash was predicted on these pages. So where is it? Just around the corner, says James Ferguson

3 page article in this weeks edition.

Summarising paragraph at the end;

The storm clouds are gathering, taxes and utility bills are rising, while jobs security is falling. We're on the cusp of what could still turn into a full-blown recession and things could get a lot worse before they get better. In such an environment it pays to look forward with a bit of imagination rather than base your forecasts on what happened before. Remember the famous Gary Larson cartoon, which shows a dinosaur addressing a symposium of complacent looking peers from the lectern: "Brains the size of walnuts, large lumbering bodies, a rapidly changing environment. Gentlemen, the outlook is bleak".
...Anecdotal evidence reports that off-plan and buy-to-let investors are already choosing to return their keys to the mortgage lender rather than face a rental stream that doesn't cover the interest, especially now that capital gains are a pipedream...
The 12-month moving average(of house prices) is still heading inexorably south
..these things take a long time to unwind. The early Eighties housing market 'crash' took seven years to unfold.
Weaker house prices feed into economic slowdown
..so MEW has fallen, which has led to debt-financed consumption dropping and economic growth halving. The process hasn't ended - indeed, it has possibly barely begun. If this is a vicious, spiralling circle, what should we expect next?...the next thing we would expect to see is a big contraction in overall lending. Sure enough, as chart 4 on the previous page shows, total loans, mortgages and credit on plastic from banks have dropped sharply. The trend is now negative for the first time in 12 years. Without the oxygen of debt consumers can't spend...
Edited by munimula

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It is an excellent article. The obvious is stated but it needs stating again and again - the 'vicious circle' of MEW, consumer spending, house prices, the wider economy are all covered. This kind of thing needs to be explained, IMPO, in very simplistic terms though for the general population.

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A large part of the article is about the US housing market and economy and how that could affect us in the UK

..Behind the scenes (US) the debt-financed spending spree is being stretched to breakig point
healine inflation figures (US) at 13-year highs
US new home sales fell 3.4% in Feburary
Prices (US) were down 2.9% in Feburaray
in the economically vital Western US, new home sales in Feburary plummeted 29% compared with same period last year
Americans have increasingly moved away from the safety of their treasured 30-year fixed rate mortgages, into the high-risk world of interest-only and adjustable rate mortages (ARMS). Survey evidence revealsthat Americans are generally unfamiliar with the consequences of rising interest rates on ARMS and many seem unaware that their monthly payments can and will be increased after the reset period.

This article is superb, excellent analysis by the economist James Ferguson and very very bearish reading. Full scale bear pornography. Everything most of the sensible and intelligent users of this site have seen coming for a few years now....the global fall out from low interest rates and consumer debt is going to be huge. Batten down the hatches while you can. House prices will be going down for 10 years+

Edited by munimula

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Most people are looking in Rear-view Mirrors...

Halifax and Nationwide indices are reported AFTER the fact, based upon

loan commitments given for property purchases.

Unfortunately, the press gets ahold of this lagging data and then fills their columns with stories

that are out-of-date by the time they are published.

This is why you should watch the charts of UK Builders (on HPCycle) and also keep an eye on

Asking prices. If you think you are going to get the truth from EA's, then good luck

A lot of time on this site we go over the same thing, exasperated by any bullish view that come along. What this site needs is an article that summarises all the current data available that people can go to as a one-stop-shop for all the data and the view of most people on this site. An article similar to this MoneyWeek article, data updated on a monthly basis. Currently site shows only HPI figures, it would be useful if it also showed total lending, MEW rates, unemployment rates etc etc so that users could get an overall picture of the UK and perhaps even US economy to back up the predictions for the UK housing market

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I`m struggling to find this on-line, they do sometimes have a lag between the mag. and the site. Have you got a link?

Two month lag if you're not a suscriber (used to be one month but upped fairly recently), though I can't see it in the Property section at all yet:

http://www.moneyweek.com/file/98/property.html

I believe these articles, as opposed to the Expert Comments, are normally updated on Thursdays.

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  • 301 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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