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Realistbear

Hometrack Issue A Housing Warning--its Slowing Down

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http://www.citywire.co.uk/News/NewsArticle...uKey%3dNews.IFA

The first concrete signs of a slowdown in the UK housing market became apparent during May, market analyst Hometrack has claimed.
Sale prices rose 0.6% over the month, down from 0.7% in April, while the
annual rate of growth fell from 6.8% to 6.7%.
The number of completed home sales rose by 4.3% compared to 9.6% in April and the number of postcode areas reporting rising prices has fallen almost 7% since March.
‘The steady ratcheting up of interest rates was bound to take its toll eventually,’ said Hometrack director of research Richard Donnell.
We expect growth to slow relatively quickly
over the rest of the year towards 4% as affordability pressures put a continued squeeze on purchasing power.’
next page...
The number of buyers registered with agents remained static over the month,
while the number of new sellers rose 6% in May
, compared to 5.7% in April and 4.7% in March.

Headed in the right direction. The annual rate of growth will continue to slow until it reaches YoY negative which we should see as Winter sets in. The process has begun, the ship has turned, and Great Crash 2 is already under way.

But---give it time. Its a slow process and begins with slowing. The 6% rise in sellers is healthy--might account for the growing numbers of properties on Findaproperty. 6% is a lot by any measure.

2nd Q 2007 it is.

Edited by Realistbear

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It will probably be a little slow for a few months yet, but all the signs are there. Sentiment is really changing now and even the BBC have cracked. The Titanic has left port of that there is no doubt. Once the party people (BTL'ers) on board realise it has hit an iceberg they will be after their lifeboats to leave.

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Translation "Please don't put up interest rates"

Too late retards, the inflation you have been instrumental in fostering is spilling out all over the place, the BOE look increasingly like useless bubble blowers rather than defenders of the value of the pound. Sooner or later the markets are going to hammer it unless it is protected and the BOE stop broad money supply polluting the economy.

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Maybe the market will do what the BOE won't.

As for "modest valuations" maybe the gilt and bond people are finally taking notice of the money supply figures and putting 2 and 2 together.

http://investing.reuters.co.uk/news/articl...ITAIN-GILTS.XML

British gilts resume slide, yields at new highs

Fri May 25, 2007 1:35 PM BST143

Email This Article | Print This Article | RSS

[-] Text [+]

LONDON, May 25 (Reuters) - British government bonds resumed their slide on Friday, lifting benchmark yields to a new three-year high, as U.S. stock futures rose and data reinforced worries over inflation.

Gilts had opened on a firm footing but the market succumbed to a fresh bout of selling at midday as U.S. stock futures turned higher and investors bet a two-month downtrend in global bond markets had further to run.

"The market clearly needs weak data and strong buying to sustain it and is unable to cling even to current modest valuations," said John Wraith, strategist at Royal Bank of Scotland.

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So what happens this time when the MPC pushes the panic button as prices slide into decline?

That's a really good question!

I assume it would just give us more problems again later on with inflation and the pound.

Can anyone with economics knowledge answer this one please?

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That's a really good question!

I assume it would just give us more problems again later on with inflation and the pound.

Can anyone with economics knowledge answer this one please?

If I could tell the future of the markets my butler would be typing this, not me.

However a lot ot the late stage of the property boom is based on a rock ribbed confidence that property prices can only go up. If property prices are well known to be falling (which would be presumably when the BoE would panic) then this disappears like spring mist.

Buy to Letters will suddenly look at their house as an income generating investment and not some sort of cash machine. Few will buy at current yields, and the smarter ones will sell when they compare what they could get from high interest bank accounts.

Similarly FTBers won't be under the insane pressure to buy now or never.

Interest rates are going to have to come down a long way to make buying a house a paying proposition. If house prices are falling then a falling interest rate shouldn't affect sentiment.

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Am I right in thinking that rate rises are affecting the housing market, but not the retail market, where prices are rising? If so, oh dear.

Curiously, it appears not.

Although it would be logical to assume that increasing commodity prices are finally feeding through and forcing up prices it also seems to be the case that retail is putting up prices because consumers will go with them. I'm slightly baffled by this unless the 9-12 month lag in the effect of rising IRs on the broader economy is correct. In which case house prices really are stuffed if a decline begins before the impact of IR raises makes itself fully felt.

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So what happens this time when the MPC pushes the panic button as prices slide into decline?

If by "push the panic button" you mean lower interest rates in the face of rising inflation then things would get hectic.

Unlike Aug 2005 the markets are expecting interest rates to continue rising. By going against the market the BoE would risk a severe decline in the value of the pound, which would push up inflation and make "the cost of living" more expensive.

House prices could remain nominally static because of lower IRs, but the price of everything else would rise to meet them. A HPC by proxy. This would be a bad scenario for many, given that wage inflation is already lower than RPI and may continue to struggle to pick up (due to outsourcing, immigration etc.)

Of cause this situation could never happen because the BoE's remit it to keep inflation at 2%.

Could it? :unsure:

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Am I right in thinking that rate rises are affecting the housing market, but not the retail market, where prices are rising? If so, oh dear.

It's the product of a decades boiled frog for the retail market only with many retailers deciding jump rather than die.

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Hometrack director of research Richard Donnell = nob cheese.

You have a way with words, J2T! :lol:

On a serious note, I'm getting spooked by all this talk of the pound crashing.....

Would it be a good idea to change half of my "savings" into dollars? This may sound dumb to some of you but I have a feeling sentiment in many areas in the US is changing.... it would only take something as simple as impeaching bush to rally confidence in the dollar.

Any thoughts?

Edited by Dubai

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If by "push the panic button" you mean lower interest rates in the face of rising inflation then things would get hectic.

Unlike Aug 2005 the markets are expecting interest rates to continue rising. By going against the market the BoE would risk a severe decline in the value of the pound, which would push up inflation and make "the cost of living" more expensive.

House prices could remain nominally static because of lower IRs, but the price of everything else would rise to meet them. A HPC by proxy. This would be a bad scenario for many, given that wage inflation is already lower than RPI and may continue to struggle to pick up (due to outsourcing, immigration etc.)

Of cause this situation could never happen because the BoE's remit it to keep inflation at 2%.

Could it? :unsure:

Now rates are higher and may go higher still economic growth is in question (but no real reports of this yet), wait for these reports to KNOW we are in the sh!t.

If economic growth slides (which it will) = BOE should lower rates.

Lower Rates expectation = lower pound

Lower pound = Higher inflation (stagnation)

higher inflation with low growth = major predicament as to what to do with interest rates. Lower rates at this point may keep growth up but hyperinflation is then on the cards. The long term stability answer economics 101 is to control the most evil factor (inflation), this leads to low or negative growth, a recession.

Either way it fccuucckss the housing market.

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You have a way with words, J2T! :lol:

On a serious note, I'm getting spooked by all this talk of the pound crashing.....

Would it be a good idea to change half of my "savings" into dollars? This may sound dumb to some of you but I have a feeling sentiment in many areas in the US is changing.... it would only take something as simple as impeaching bush to rally confidence in the dollar.

Any thoughts?

Go Gold, expect the last years consolidation to mark a major next move up. A consolidation over the last year without a fall from long term trend means the market is strong.

This is even though central banks have sold more gold in the last six or seven weeks than they have in the last 6 months.

The normal technical analysis says a consolidation of this length and this type usually moves in the same direction before we entered the consolidation. Gold and silver entered the consolidation after a major upward move. Expect a move up by Autumn.

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Go Gold, expect the last years consolidation to mark a major next move up. A consolidation over the last year without a fall from long term trend means the market is strong.

This is even though central banks have sold more gold in the last six or seven weeks than they have in the last 6 months.

The normal technical analysis says a consolidation of this length and this type usually moves in the same direction before we entered the consolidation. Gold and silver entered the consolidation after a major upward move. Expect a move up by Autumn.

Thanks for the advice... there are a few on here that swear by it, and others that think it is not a good bet.

Regardless, (and this will sound extremely naive, which unfortunately I am in financial matters).... if I decided to buy it, what is the best way? A certificate, actual gold coins, or something else?? How much does a broker take?

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Thanks for the advice... there are a few on here that swear by it, and others that think it is not a good bet.

Regardless, (and this will sound extremely naive, which unfortunately I am in financial matters).... if I decided to buy it, what is the best way? A certificate, actual gold coins, or something else?? How much does a broker take?

there are 4 main ways.

Physical

Gold held on account for you - goldmoney.com, bullionvault.

ETF

silver/gold stocks.

A lot do not trust the ETF, neither do I as i don't think it's even audited.

I have an account with goldmoney but they do charge above spot to purchase and a holding fee. I am moving into junior mining stocks over the coming months but have not put all my capital in PM's, about 20% and do not intend on spending much more.

Fee varies based on how you chose to invest, basically you have to do what you think is best.

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Thanks again.... I'll do some research. Looks more and more like the good old pound may be in for a "correction".

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I don't reckon they'll be able to drop IRs, instead they'll buy back gov't bonds thus sacrificing the £.

America will do the same this summer...

I guess it depends whether you are an inflationist or a deflationist. Given that deflation is a central bankers (and politician's) nightmare and money supply has been running at double digit growth for some time now, it seems hard to believe that deflation is around the corner.

However, if credit tightening kicks in hard, all bets are off.

My brain hurts when I think about it too much!

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Go Gold, expect the last years consolidation to mark a major next move up. A consolidation over the last year without a fall from long term trend means the market is strong.

This is even though central banks have sold more gold in the last six or seven weeks than they have in the last 6 months.

The normal technical analysis says a consolidation of this length and this type usually moves in the same direction before we entered the consolidation. Gold and silver entered the consolidation after a major upward move. Expect a move up by Autumn.

I agree, go gold, I went down the Perth Mint certificate route, although I plan to buy some physical as well. Silver is a good shout as well, possibly even better as it has not had such a bull run yet. Generally silver is 1/14th the value of gold (historic average) currently it is something like 1/50th.

kitco.com have a good forum for gold, but do you own research.

Edited by Lord Lister

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