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29% Negative Or No Equity In The Us

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Just listening to an American guy on CNBC.

He put it to the presenter that apparently 29% of people who bought in America last year using a mortgage either now have no equity, or are in negative equity.

He quoted some study as his source.

You might just get you HPC. Wrong country though!!!

:D

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Guest Winners and Losers

Just listening to an American guy on CNBC.

He put it to the presenter that apparently 29% of people who bought in America last year using a mortgage either now have no equity, or are in negative equity.

He quoted some study as his source.

You might just get you HPC. Wrong country though!!!

:D

Yeah, it could NEVER happen here. :rolleyes:

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Just listening to an American guy on CNBC.

He put it to the presenter that apparently 29% of people who bought in America last year using a mortgage either now have no equity, or are in negative equity.

He quoted some study as his source.

You might just get you HPC. Wrong country though!!!

:D

We have shared HPC with the US since 1721. <_<

Same conditions apply:

1. HPI and MEW based on low IR filled the bubble.

2. Personal debt at almost identical levels (1.2 trillion pounds vs. 11.2 trillion dollars adjusted for population size and recent bump in excxhnage rate).

3. Professional Investors left market in 2004 in US and in 2005 in UK.

4. Price to Earnings ratios highest in history and well beyond the levels seen in the joint crash of 1989-96.

5. Creative financing and IO loans characterized a significant number of mortgages in both countries with the result that slight upticks in rates are causing stress. US is slightly better off due to some loans being fixed for 15-30 years at favourable rates. All UK rates are floating or, at most, locked for 5 years.

6. UK employment picture is weaker than the US making UK market more vulnerable to a severe correction. Soaring pound may be the trigger due to export dependence and closing down of UK manufacturing.

7. Oil, a major factor in the last three HPCs in both countries, is again on the rise and its effects are still working through both economies.

My view is that the US HPC will be a walk in the park compared to what we can expect here. But timing is, as ever, about 6 months apart with the US taking the lead. And, don't forget, its not just the US that are facing a HPC its OZ and the other bubble markets all named by the IMF.

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Agreed.

Bipolar disorder:

MANIC PHASE

Feeling on top of the world. A sensation of sheer and utter happiness that nothing—not even bad news or a

horrifying event or tragedy—can change.

• Sudden or extreme irritability or rage. While mania is often portrayed as a pleasurable experience, that is not the case for many people with bipolar disorder.

Grandiose delusions. Individuals imagine that they have special connections with God, celebrities, or political leaders.

Invincibility or unrealistic beliefs in one’s abilities. The person feels that nothing can prevent him or her from accomplishing any task.

• Hyperactivity. Scheduling more events in a day than can be accomplished; inability to relax or sit still.

Excessively risky behavior. Reckless driving, outlandish spending sprees, foolish business investments, or out-of character sexual behavior.

• Uncontrollable racing thoughts/rapid speech. Ideas that abruptly change from topic to topic expressed in loud, rapid speech that becomes increasingly incoherent

It's true, the internet really does attract nutters. :o

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Personally I think everyone else's house prices will crash. Just not mine. :unsure:

My cardboard box could crash (or crumple) ...

But then I could upgrade to one of those nice 2 bed/2bath boxes with a Thames view.

:blink:

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Yeah, it could NEVER happen here.

Interestingly, I've seen a number of Americans say the same about the US market, even while it's obviously crashing. House prices won't crash there because the government won't allow it to happen, apparently.

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My cardboard box could crash (or crumple) ...

From MPFC

Cardboard box?

THIRD YORKSHIREMAN:

Aye.

FIRST YORKSHIREMAN:

You were lucky. We lived for three months in a paper bag in a septic tank. We used to have to get up at six in the morning, clean the paper bag, eat a crust of stale bread, go to work down t’ mill, fourteen hours a day, week-in week-out, for sixpence a week, and when we got home our Dad would thrash us to sleep wi’ his belt.

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The inevitable crash in California--its interesting because the EXACT smae conditions apply to the UK.

http://biz.yahoo.com/prnews/060515/lam134.html?.v=14

Press Release Source: The Norris Group

Real Estate Bubble: Fact or Hype?

Monday May 15, 5:50 pm ET

RIVERSIDE, Calif., May 15 /PRNewswire/ -- The following was written by California real estate investor, educator, and author of the California Crash report, Bruce Norris:

"The word 'bubble' has been used so often it has lost its significance. Many economists scoff at the idea while others have been waiting for this over-priced real estate market to 'crash' for years. Somewhere in the middle lies the truth and the consequences will be felt by hundreds of thousands of unsuspecting real estate owners. By the end of 2007, no one will need to ask if there had been a real estate bubble.

ADVERTISEMENT

"The United States has a few areas with significant price bubbles. One of the worst cases is right here in California. In 1997, California's real estate market was at bottom and many did not want real estate as an investment. As an investor, I personally purchased numerous three bedroom homes for $35,000. Today they sell for $300,000. One has to wonder, will someone be able and willing to pay for that home when real estate loses its 'glitter?'

"Let's paint two pictures of the 'mood' of the typical buyer of real estate. The first will be a buyer in January 1997. The median price in California was $177,600, the median income was $44,385, interest rates were 7.5%, and affordability was 40%. Ownership of real estate was within the grasp of a very high percentage of Californians. However, the years preceding 1997 had been bad for real estate. Prices had gone down and people weren't excited about real estate. They shifted their interest and money to the stock market creating a price boom there. In January 1997, I wrote a report titled The California Comeback, which predicted prices would double by 2005. It was laughed at because the 'mood' for real estate was lousy and economists and investors alike ignored the underlying statistics that mattered.

January 1997 May 2006

Median Price $177,600 $540,000

Media Income $44,385 $60,379

Interest Rate 7.5% 6.5%

Affordability 40% 14%

"In 2006, the median price stands at approximately $540,000, the median income is $60,379, interest rates are off their lows and all the way up to 6.5%, and affordability is 14% for the past few months (16% for all of 2005). To qualify for a home, many buyers are stretching their budget as if there was no tomorrow. Lenders have become a willing partner in this dance of debt. As long as prices have moved upward, everyone is lulled into thinking all of this makes sense. Tomorrow is just around the corner for many of these aggressive buyers and lenders. In 2006, there exists in the entire country 8 trillion dollars of debt. Approximately 1.3 trillion of that debt will have its first payment adjustment between now and the end of 2006. Almost 15% of all the real estate debt in the country will have payments go up in a real estate market that has lost its 'glitter.' In California, the percentage is much higher because buyers stretched so hard to 'get in' on the booming market.

"Here's how the California market will make the transition from boom to bust as outlined in our new report the California Crash. It starts with affordability getting too low. When so many people can't afford the monthly payment, our market loses velocity. Because of that we sell less real estate. The first sign of this happening will be growing inventory of available homes for sale. Inventory has already doubled between 2005 and 2006, going from a 3.3 months supply to a 6.7 months supply. The good news is that the inventory is still mostly owned by people, not banks. That will soon change.

"The increase in inventory happens to the builders as well. They have a tougher time selling homes and offer discounts, incentives and cooperation with brokers. The bottom line is that the 'mood' will have changed. Unsold inventory means less homes being built in the future. This creates a domino effect because the builder has to lay off workers. What does a drywall hanger do if all of California slows down? Most likely he'll move to where he can find work. That's the final nail in the coffin for a real estate market: negative net migration. When an area loses people, demand is gone and so is the artificial "stimulus" that caused the price boom in the first place.

"When this happens, real estate as an investment has to attract people because it creates cash flow instead of inflating in price. What percentage of our real estate market has been made up of investor purchases? Most estimates are around 20-25%. The truth is these people weren't investors, they were speculators. You might say speculation has been a marvelous investment. However, speculative markets become overpriced because they ignore the underlying numbers. Why would you buy a piece of property in California, as an investor, for $450,000 when it will only rent for $1,500 a month? The only reason is that you believe it will be worth $550,000 next year. If the inflation of real estate ceases, you've just lost a pretty healthy percentage of our so called 'demand.'

"As prices stop going up (in most California areas they already have), people who get behind in their payments have a problem. They don't have sufficient equity in their properties to pay for the cost of a sale. Many of these owners of homes financed with adjustable loans will have no choice but to lose their homes to foreclosure. When foreclosures occur in a market where the 'mood' toward real estate has changed, more often than not, the lender ends up with the property. Now, when you and I want to sell our homes, we'll be facing stiff competition from lender owned property, including HUD. These lenders can and will offer these homes at increasing discounts. This creates more problems for the seller because as values decline, equity shrinks. The last downturn saw trustee sales increase by 981%. I expect the increase this time to be 2,000%. Why? Because during the last down cycle, interest rates declined. Everyone who had an adjustable mortgage ended up with a gradually lower payment. I expect the opposite will occur this time.

"The builders will join in the party by offering their unsold inventory via auction. Since the 'mood' will have shifted, the owners who already live in the tract can expect to see the sale prices at the auction go below what they owe. It doesn't feel very good to see your down payment disappear literally overnight, but that will happen.

"How many people will be affected? In some ways, we all will be affected. When prices go down we feel less secure about spending. We'll probably go on a few less trips and spend a little less on toys. For some of us, these will be very tough times. When you lose your home to foreclosure, it's pretty tough to take. The good news is that eventually California will recover, and the boom will start all over again. If you do happen to be one of the families who are affected, keep in mind that you'll be able to buy another home in just a few short years. As it turns out, lenders are pretty forgiving."

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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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