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Itulip: Housing Bubble Correction.

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'Housing Bubble Correction' [January 2005]:


Housing bubbles don't collapse suddenly. They go through a long series of self-reinforcing deflationary stages that typically last five to seven years. Given the extreme and unprecedented nature of the current housing bubble, I expect a ten- to fifteen-year downturn to follow this boom. The government will step in with all manner of supports and bailouts along the way, similar to those that created the bubble in the first place, so the exact trajectory of the decline is impossible to predict. Here I estimate how and over what time period the decline may occur.

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Am I right in thinking house price growth has never fallen below 0 in the states from that graph? [undersupply]

That appears to be the case although the article mentions prices declining. As the graph is for the US as a whole then specific regions may well have declined.

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Nice find.

Am I right in thinking house price growth has never fallen below 0 in the states from that graph?

It is one of the absolute mantras of the US NAR (National Association of Realtors, the RE Agents Trade Union).

The full quote is "US nationwide median house prices have never fallen year on year since the NAR started keeping comprehensive statistics in 1968".

Realtors frequently shorten this to "US house prices have never fallen" <_< .

There has been some discussion in US blogs whether this means median monthly prices compared to the corresponding month of the previous year, or median (calendar) yearly prices compared to the previous full year.

This distinction could matter within the next few months, as the last reported monthly prices (February) are 6% up on February 2005, but last year there were significant price increases in March and again in June, so the February prices are 5% or so below June 2005.

Given the play they have given this statistic, the NAR would be mortified to have to report a first time ever year on year fall, and IMHO would be quite capable of changing their definition to avoid or even to delay it.

The March 2006 numbers will be reported a few hours from now. I am waiting with bated breath.

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Now there's so much money invested in property, even if sentiment changed and a slump got underway, it would take so long for all the investors to pull out (if they even wanted to) that a crash appears to be unlikely.

To me (no economist) it looked like the market was chased down in the last crash by OOs getting out/cutting losses/repossessed and new OOs buying in as it went into backwardation (price going down over time).

Now amateur BTLetters would be getting out and a much smaller number of OOs would try to get in (much less is affordable even if prices slide) - no new BTLetters would try as it'd look like a bad buy. Slow melt.

Loads of properties floating around not selling wouldn't lead to a crash (though individual buyers might be able to haggle a bargain), just a stagnation and some very unhappy BTL mortgage lenders.

Waiting for an IR rise doesn't appear to be trusting a market cycle. Surely a market cycle only turns when the commodity is unaffordable?

Start putting money elsewhere and try and join a housing association?

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  • 302 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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