Did Anyone See Panorama Last Night

[thedebtisreal]

What happens if you don't need a mortgage? This makes up a larger part of house sales nowadays.

Source?

As far as I can see this housing boom has coincided neatly with the biggest mortgage boom of all time.

Do you really think one can survive without the other?

Do you really believe that?

I'm serious. Do you?

[iamnumerate]

There is masses of immigration in California and Florida, hasn't stopped their HPC. Immigration didn't stop the HPC here last time.

It's not relevant. Move on.

Two points

1) In California they do not have the same house building controls

2) There was not nearly as much immigration last time before the crash.

[Guest Charlie The Tramp]

Source?

As far as I can see this housing boom has coincided neatly with the biggest mortgage boom of all time.

Do you really think one can survive without the other?

Do you really believe that?

I'm serious. Do you?

Well they are only lending out chicken feed for mortgages.

Banks and building societies will hand out £1 billion every day this year in the biggest-ever home loan bonanza in Britain. The Council of Mortgage Lenders said 2007 will be a record year with an extraordinary £360 billion borrowed in mortgages.

Pushing up the Personal debt to around £1,600,000,000,000.00

[thedebtisreal]

Two points

1) In California they do not have the same house building controls

2) There was not nearly as much immigration last time before the crash.

1) Wrong. LA central is crammed with housing and jobs. And it's crashing badly. San Francisco exactly the same.

2) True. But it still won't stop the crash for the reasons outlined above unless it is very highly paid immigration.

[Bull-Rider]

Source?

As far as I can see this housing boom has coincided neatly with the biggest mortgage boom of all time.

Do you really think one can survive without the other?

Do you really believe that?

I'm serious. Do you?

1) i haven't got the stat in front of me but i believe the LR have the figures

2) There's an assumpton that everyone needs a mortgage - its simply not true. My parents/ work colleuge are examples.

[Ologhai Jones]

ponies and ferraris aren't essential to survival

What are you saying? Ponies aren't essential?!

I tell you, if I didn't have Trumper, I'd quite simply die!

[Bull-Rider]

Here we go again:

But for my record here's why this type of unskilled, mass immigration is not going to save yours house.

1) They pay little rent and are densely packed into very low rent housing, which takes the demand down.

2) They do not bring in enough money to actually buy the houses they occupy. Is that £330,000 terrace house really going to go up in price because of the competition of a few desperately poor immigrants.

3) Immigration depresses wages.

4) Most do not plan to stay long.

5) This immigration is also likely to fall in the event of a recession as the reason they come here isn't to scrounge of the state, but to WORK.

There is masses of immigration in California and Florida, hasn't stopped their HPC. Immigration didn't stop the HPC here last time.

It's not relevant. Move on.

I think your missing something. The immigrates won't sustain HPI because they are purchasers, rather they are restricting the supply of accommodation for people who can.

[cynic]

2) There's an assumpton that everyone needs a mortgage - its simply not true.

No such assumption is necessary, and no one here is making it.

[Guest Charlie The Tramp]

1) i haven't got the stat in front of me but i believe the LR have the figures

Here`s some excellent stats:

Lest We Forget

[ScaredEitherWay]

Those particular 10 people?

Seriously, how many households are this packed?

Where I just moved from in Cornwall this was VERY common. Lots of houses with certainly 6 in a 13'x14' room - 3 sets of bunkbeds. Polish builders, daffodil pickers and strawberry pickers. £40/week each was the rate in thatmy neighbour's house 2 years ago.

He had 3 in his rough old shed 10'x12' too - with one powerpoint running out to the shed from the house. Still £40/week each.

And he even put the house on the market advertising how many he'd squeezed in (although he only admitted to 2 in the shed on the sales particulars)

I also had a friend living in a garage. Not properly converted. Just your average garage, up and over door still in place - and inside it had just been boarded out. It was cold as hell and damp as f**k in there. £80/week he was paying in 2005.

There were 2 people found dead in sheds round my way in the last few years too - people who had been living in those sheds.

Not just immigrants, but Brits too that had gone to Cornwall to work. In all manner of jobs. My friend in the garage was working for a temp agency in the kitchens at the Eden Project. He was being mini-bussed over there each day. Hell of a long day to live in a garage. But he considered himself lucky because he had a place - and he wasn't sharing it.

The problem for him came when he was laid off at the end of the season - it was all "illegal" and the landlord said no housing benefits as he didn't want the authorities to know about the garage let/income.

He dossed on somebody's floor, then got another seasonal job - was then in another HMO. Again, when that job finished he had to leave as the landlord was pocketing the cash and so he wasn't allowed to sign on from that address.

[thedebtisreal]

1) i haven't got the stat in front of me but i believe the LR have the figures

2) There's an assumpton that everyone needs a mortgage - its simply not true. My parents/ work colleuge are examples.

1) The Land Registry do mortgage figures now? Are you sure? Please find these stats for me. It is the basis of your own argument.

2) Not everyone needs a mortgage, of course. That's why we need these stats of yours are important to let us know the extent this cash rich group of people are distorting the market. Unless you think your mortgage-free parents and work colleagues can sustain a £6 trillion housing market on their own. Take a look at a mortgage growth chart, over lap it with an HPI graph then try to convince us that the two are not connected.

[thedebtisreal]

I think your missing something. The immigrates won't sustain HPI because they are purchasers, rather they are restricting the supply of accommodation for people who can.

Again. Doesn't matter. It's all about affordability and debt load.

Mortgage growth rises = HPI.

Mortgage grwoth drops = HPC.

If you want historical data for this, spline's graphs which correlate HPI with the BOE's mortgage approvals are excellent.

[Heavily Armed Gorilla]

Excellent points. I didn't see the show but we should bear in mind that Europe was expanded in order that 'illegal' immigration would lessen. (At least that was one of the political reasons.)

I don't believe immigration in itself is such a big problem. The real problem is our 'nationals' who no longer work because immigrants do it more cheaply. Then our 'nationals' go on the dole forever, then buy their council houses for tupence and sell for a fortune. Lottery wins await people who have kids instead of working. Social security and national health were never meant to be so abused. Local governments are going mad for money and expanding in a very British style of corruption. We could rip out the bottom of buy-to-let tomorrow if we had a will to introduce protection for tennants in the private sector.

These are huge generalizations but these things are real and they are happening.

Our politicians and our system is letting us down. I'm wondering how long the working middle-classes can continue to support these insane levels of pork.

How many layers of government do we have to pay for? How many pensions do we have to supply to local and national civil servants? How many 'artists' live on the fat of the land?

When the economy turns there may be more trouble than we can imagine. I hope we can find a better way than simply fueling the ultra-nationalists.

We really need to overhaul everything. We need to cut back government hugely. We need to get tougher on both dole scroungers and corporate scroungers.

But most of all we need to get rid of an awful lot of political scroungers.

Absolutely. Couldn't agree more. As I see it, this relates to incentives. In extremely general terms, until the carrot / stick balance favours putting some kind of productive input into the system, as opposed to taking it out of the system, economic stagnation is guaranteed. Take it far enough back and you end up with interesting parallels to game theory and the Prisoner's Dilemma. My understanding is that once enough people cease cooperating, on a very basic operational level, and regard society as a 'resource' to be 'exploited', it's but a matter of time before this shows up in the (majorly lagging) macroeconomic indicators.

As you pointed out, this applies equally to the top of the tree as to the bottom. Our present system rewards failure, on many levels - including social services, government, privatised utilities / infrastructure, etc etc. To me this is a serious warning signal - something, given some time, I'm interested in looking at more closely. At present, we have an entirely screwed up reward structure operating purely in favour of the financial sector, to the exclusion of just about everyone else. At the other end of the pay scale, the gap between minimum wage and the dole is seemingly insufficient to prevent what looks like a fair bit of unemployment (I have this strange tendency to regard 'economic inactivity' as, bizarrely enough, a sub-set of 'unemployment'. Am I alone in this regard?). Against the backdrop of the current UK trade balance, a likely end to Chinese deflation, oil prices remaining high, a tightening credit market, and a seriously backward approach to educational policy already filtering through into the economy (20 year lag, remember, for kids to grow up) we do appear somewhat screwed.

Public sector spending, and perhaps more importantly, public sector attitudes to spending have become bloated, possibly to the point where effective (and economic) management is simply beyond the capablities of the individuals and the structures tasked with doing the job.

Mr Stars is right - this is not about immigration. UK's always had lots of it, it's nothing new. (although of course, employment sustained by current credit binge misallocation will hike public service requirements, which must be a factor of sorts) All the problems here are deeply structural, and unless I've been somehow infected with HPC pessimism and am missing some major cause for optimism, this stuff will eventually hit home.

I know pretty much nothing about currencies, and am extremely interested in dstars' 'buy sterling for the forseeable future' thinking. If you're about, I for one would be very interested in understanding that one a bit better.

[Als]

It was interesting to see the illegal accomodation which has developed in Slough. The sheds and bungalows in the back gardens. I saw the same type of thing in the Netherlands in the 1990s but nowhere near to this extent. The council seemed almost powerless to do anything about it.

[Bull-Rider]

1) The Land Registry do mortgage figures now? Are you sure? Please find these stats for me. It is the basis of your own argument.

2) Not everyone needs a mortgage, of course. That's why we need these stats of yours are important to let us know the extent this cash rich group of people are distorting the market. Unless you think your mortgage-free parents and work colleagues can sustain a £6 trillion housing market on their own. Take a look at a mortgage growth chart, over lap it with an HPI graph then try to convince us that the two are not connected.

Im sorry - it was not the LR but DCLG

The department of Communties and Local Government (DCLG) estimates that only 77% of all residential purchases require a mortgage, with the other 23% requiring no mortgage at all. The Council of Mortgage Lenders estimates that about 85% of buyers of homes valued at £200k or less require a mortgage but only 60% of those buying homes over £200k need to borrow

[dstars]

I think it should read " the availability of credit influences the demand for housing" which is not strictly true as you can purchase property without the need of credit

Yes, I think you're right, but he's also right in that, in the actual world that exists, central bankers expand credit to increase demand and tighten credit to dampen demand.

The relationship sounds strange when declared as a function but demand probably is a function of credit (sometimes). Let's not forget that money, or cash, is credit. When we have more of it we demand more but we still demand things if we have none (except in Japan, where they used to demand lots and lots when they had lots of money, but then it all came tumbling down and now they don't demand much at all, even though they still have lots of money).

But the recent relationship in housing in the UK does suggest more than strongly that credit decides all. (So, for a while, at least, demand was a function of credit. And when the credit dries up the lack of availability will 'influence' demand in the House-Prices-Crashing department.)

Interestingly, this relationship is unlikely to hold very strong in the aftermath of a crash even if credit is expanded in an effort to stimulate the economy. By then, other factors will have become more (apparently) important.

I'm always rabbiting about this but it's the crux of my arguments about the limitations of economics. Different metrics change differently according to different situations in different ways.

I observed this as a trader in the micro world of currency movements ignoring 'economics'. But I believe the very same thing happens in the macro world. (Unfortunately, 'economics' needs to see big, amplified effects, and even then economists call this stuff 'noise'. (And here's another crock of... gold: "There is no noise in the markets. All of it matters. Explaining it away to make equations work, to elevate assumptions, to clean the slate, simply does not work in the messy world of human interaction.))

Even stray prices that have to be normalized before pouring into models have some real reason to exist. I wouldn't want them in my neural network but I'd look at the raw data for patterns (using my own squelchy neural network in my bonce.)

Our central banks, our politicians, think they're looking at 'back data' when they make prognostications but often they're looking at irrelevances. They're often more like dogs trying to catch flies. Anyone who ever owned a dog knows that a dog only ever catches a fly by luck. He sees it, he snaps at it, and if the fly takes one more trip around the room he might, if he's unlucky, fly into the dog's closing mouth.

Our economic betters are more about 'seriousness' and 'gravity' than actually 'seeing'.

I listened to a bit of Mervyn King on Saturday and, like any politician, he thinks he's doing a fine job. Six months ago he said inflation would be back at 2% right now and he'd probably have to lower rates by the middle of the year.

He was wildly wrong but he thinks he's about to be right. These people seem to get away with trying their best as if their best is as good as it gets. It is not, and they are not. But they will be the people we call on when things go very bad.

Why aren't there any journalists getting this? Do we here, seem like madmen to the media? In the same show, Joe Public was asking questions like "Do you ever have big arguments on the MPC?" instead of: "Have you ever read the market correctly, and if so, please provide the evidence, and if not, please resign and tell the world why."

[WiseBear]

Yea - its not looking good for a HPC particularly with so much demand for housing

Don't confuse more people with more demand - common error.

In fact more people, if lower paid, tends to reduce wages (more competition) and reduce the ability of many afford housing.

[Realistbear]

It looked as if the landlords had 10 working adults in everyroom out in the garden and under the stairs.

If thats the case there will not be a HPC.

I am not anti immigration but i would guess we need a count done and an annual quota based on skills

What do you think?

Its Brown's secret plan to keep his miracle going.

My question: whose interests do our government serve?

It seems to me that indigenous peoples of this nation, of whatever ethnicity, are saying ENOUGH! :angry:

The next question: what is it going to take to get Brown to listen to the people of this nation?

Edited July 24, 2007 by Realistbear

[Bull-Rider]

Don't confuse more people with more demand - common error.

In fact more people, if lower paid, tends to reduce wages (more competition) and reduce the ability of many afford housing.

Your right - i should have been clearer. I meant household formation rather than people will sustain the market

[Guest tbatst2000]

It looked as if the landlords had 10 working adults in everyroom out in the garden and under the stairs.

If thats the case there will not be a HPC.

I am not anti immigration but i would guess we need a count done and an annual quota based on skills

What do you think?

Interesting programme. The thing it didn't address though is wtf so many people would want to go to Slough of all places?

http://www-cdr.stanford.edu/intuition/Slough.html

[thedebtisreal]

Im sorry - it was not the LR but DCLG

The department of Communties and Local Government (DCLG) estimates that only 77% of all residential purchases require a mortgage, with the other 23% requiring no mortgage at all. The Council of Mortgage Lenders estimates that about 85% of buyers of homes valued at £200k or less require a mortgage but only 60% of those buying homes over £200k need to borrow

That still means 3 out of every 4 buyers are reliant on the mortgage market. If 30% of mortgage capital is withdrawn from the market (as in the US subprime blowout), I doubt the rest of the mortgage free buyers could support the current price levels.

However as far as HPI is concerned, it is only the new entrants that add to housing demand. (ie. BTLers expanding portfolios or FTBs). Those just trading up are merely swapping one house for another. If you broke the mortgage numbers down for the new entrant group, I'll think you'll find nearly all of them are getting mortgages.

[Bull-Rider]

That still means 3 out of every 4 buyers are reliant on the mortgage market. If 30% of mortgage capital is withdrawn from the market (as in the US subprime blowout), I doubt the rest of the mortgage free buyers could support the current price levels.

However as far as HPI is concerned, it is only the new entrants that add to housing demand. (ie. BTLers expanding portfolios or FTBs). Those just trading up are merely swapping one house for another. If you broke the mortgage numbers down for the new entrant group, I'll think you'll find nearly all of them are getting mortgages.

i agree with what you are saying however, with only 3 out of every 4 purchasers needing a mortgage, perhaps IR rises will not have the impact which people may expect and clearly not bring the market 'crashing' down

Edited July 24, 2007 by Bull-Rider

[bucks hopeful]

1) i haven't got the stat in front of me but i believe the LR have the figures

2) There's an assumpton that everyone needs a mortgage - its simply not true. My parents/ work colleuge are examples.

With regard to tenure the DCLG provide the following:

Tenure % of total

own with mortgage 8,501 40%

own outright 6,497 31%

privately rent 2,326 11%

rent from LA 2,059 10%

rent from RSL 1,752 8%

Total 21,134

Or cut another way - 43% of homeowners don't have a mortgage.

More in DCLG data link which shows outright ownership climbing slightly

However it would be a highly flawed logical leap to suggest that anything like this proportion of people can afford to buy without a mortgage.

What I also like about this thread in general and bull-rider's posts in particular is how well they tie in with behavioural finance theory - e.g. confusing availibility and probability (if my parents and some of my work colleagues can buy for cash then it must happen a lot")

This reassures me no end as these so-called "judgemental heuristics" are the basis of bias and irrational decisionmaking that lead to bubbles building and ultimately bursting.

So to see a bull conforming to type is just the reassurance I need as the grey clouds roll in outside the window once more!!

And I'm in Slough today

[Bull-Rider]

With regard to tenure the DCLG provide the following:

Tenure % of total

own with mortgage 8,501 40%

own outright 6,497 31%

privately rent 2,326 11%

rent from LA 2,059 10%

rent from RSL 1,752 8%

Total 21,134

Or cut another way - 43% of homeowners don't have a mortgage.

More in DCLG data link which shows outright ownership climbing slightly

However it would be a highly flawed logical leap to suggest that anything like this proportion of people can afford to buy without a mortgage.

What I also like about this thread in general and bull-rider's posts in particular is how well they tie in with behavioural finance theory - e.g. confusing availibility and probability (if my parents and some of my work colleagues can buy for cash then it must happen a lot")

This reassures me no end as these so-called "judgemental heuristics" are the basis of bias and irrational decisionmaking that lead to bubbles building and ultimately bursting.

So to see a bull conforming to type is just the reassurance I need as the grey clouds roll in outside the window once more!!

And I'm in Slough today

So 43% of homeowners do not have a mortgage and 1 in 4 house purchasers do not need a mortgage. How then can the market crash through increased IR?

[NotMyHouse]

Well, things have moved on since Betjeman

To quote:

"A house for ninety-seven down

And once a week a half a crown

For twenty years. "

£97 deposit and then 50p a month for 20 years. We should be so lucky!

More like:

"A house for nigh on nothing paid

Then once a month at half your wage

For forty years"

or even:

"A house for interest only loaned

And then your life by banks is owned

For forty years"

(OK, so I'm not the Poet Laureate)