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Will A Stock Market Crash Bring Down House Prices?

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Why all the happy whooping whenever the FTSE has a bad day? I'm not sure I see any clear and unequivocal relationship between share prices and house prices. Maybe stock market woes might encourage an interest rate cut?

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The basic underlying link is that mortgage lenders are either listed on the stock exchange, or owned or financed by banks which are. Therefore if significant numbers of mortgage defaults happen (e.g. credit crunch, fixed rate mortgage resets), these companies' incomes go down, and their share values with them.

That having been said, there are an awful lot of companies listed on the FTSE which have no direct link to the housing market whatsoever; so I too am not convinced of any strong correlation between share declining share values and a HPC (or vice-versa).

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Why all the happy whooping whenever the FTSE has a bad day? I'm not sure I see any clear and unequivocal relationship between share prices and house prices. Maybe stock market woes might encourage an interest rate cut?

The whole reason it is crashing is because of a credit crunch, basically the credit markets are in deep do do. Without credit, no business growth, no equity growth, no jobs, no cheap mortgages, no hpi.

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Why all the happy whooping whenever the FTSE has a bad day? I'm not sure I see any clear and unequivocal relationship between share prices and house prices. Maybe stock market woes might encourage an interest rate cut?

The general loss of confidence and "feel god factor" that comes with a SM crash spills over to all sectors of the economy. Especially "big ticket" items such as houses. Great Crash 2 will be all-encompassing with a widespread assett price melt down.

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Why all the happy whooping whenever the FTSE has a bad day? I'm not sure I see any clear and unequivocal relationship between share prices and house prices.

There isn't much long term correlation between stock and house prices except at the edges of the distribution. Very high stock prices accompany high house prices and very low stock prices go with low house prices but otherwise the relationship is not statistically significant. Personally, I see very little if any causation, just some correlation. Events in the real economy are the real thing to watch: a real live recession with firms failing and profits going down the tube will produce low house prices and low stock prices in the same way a booming economy will drive both up.

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Why all the happy whooping whenever the FTSE has a bad day? I'm not sure I see any clear and unequivocal relationship between share prices and house prices. Maybe stock market woes might encourage an interest rate cut?

I think a lot of people enjoy the stock market observations because it is confirming that many of us have not been mad while the rest of the world seems to be intoxicated on HPI and indebtedness.

After the Dotcom crash houses were inflated through loose credit, the markets are currently waking up to the fact that this was not such a smart move. This time if the stock market crashes and credit evaporates the housing market will inevitably crash. Unfortunately I think there is a lot more at stake at the moment than having to pay 50% more for houses than they really should be worth. We could end up in a world where through inflation everything is far more expensive than they should be, or we could end up in a world where things are becoming cheaper but none of us except for the people who orchestrated this have any money to pay for them.

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Guest Winnie

SM crash...City boys relieved of jobs, maseratis, bonuses and jumbo mortgages on London property...London property bursts first....rest of country can no longer say..."but London is still holding out so we will be OK..." and nor can Haliwide talk of national stats in the positive because of huge London skews......

City is key because London is key to HPC..

That's why we watch the SMs very closely on this site, though we get attacked by nervous investors for it..... ;)

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Why all the happy whooping whenever the FTSE has a bad day? I'm not sure I see any clear and unequivocal relationship between share prices and house prices. Maybe stock market woes might encourage an interest rate cut?

last time we had a SM crash IRs were cut dramatically (because businesses lost confidence and needed cheap money) - strangely enough a minor side-effect of this was that lots of people who had just seen their pensions decimated thought that bricks and mortar might be a safer bet - of course that won't happen this time

even more strangely, the thing that has caused the crash in the US is higher IRs from a stronger economy - a similar thing was happening here, although now we have market turmoil, who knows what next?

i've said this about 15 times now and no ****er listens to me - still, if prices fall and I can buy at a fair price then I don't really care that much

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last time we had a SM crash IRs were cut dramatically (because businesses lost confidence and needed cheap money) - strangely enough a minor side-effect of this was that lots of people who had just seen their pensions decimated thought that bricks and mortar might be a safer bet - of course that won't happen this time

even more strangely, the thing that has caused the crash in the US is higher IRs from a stronger economy - a similar thing was happening here, although now we have market turmoil, who knows what next?

i've said this about 15 times now and no ****er listens to me - still, if prices fall and I can buy at a fair price then I don't really care that much

as long as you still have a job

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SM crash...City boys relieved of jobs, maseratis, bonuses and jumbo mortgages on London property...London property bursts first....rest of country can no longer say..."but London is still holding out so we will be OK..." and nor can Haliwide talk of national stats in the positive because of huge London skews......

City is key because London is key to HPC..

Not necessarily true,

1. "city boys" are like estate agents, they basically make money on transactions rather than absolute prices. It doesn't matter to them if the market's going up or down, as long as there plenty of trading.

2. London is key to a home counties HPC, but London house prices have very little impact on prices elsewhere. House prices are a regional issue, even on a small island like Britain.

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Not necessarily true,

1. "city boys" are like estate agents, they basically make money on transactions rather than absolute prices. It doesn't matter to them if the market's going up or down, as long as there plenty of trading.

2. London is key to a home counties HPC, but London house prices have very little impact on prices elsewhere. House prices are a regional issue, even on a small island like Britain.

A lot of London and home counties homeowners have bought up 2nd, 3rd houses elsewhere in the country and abroad on the back of the inflated value of their main residence. eg. bank is happy to lend them £150K for that little French chalet in the Alps as their house has tripled in value since 2000 and is now worth a million.

If this group no longer have the means to buy these extra properties, the specualtion stops. Prices stagnate or fall.

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I see no direct causation. [edit: well, ok. LITTLE direct causation]

BUT the stock market is a marker for underlying problems including credit tightening or recession. Or for the expectation of those things.

Such underlying problems are indeed potential triggers for HPC.

However, I personally think the minute-by-minute commentary on the FTSE that we see here is pointless.

Edited by Selling up

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Unfortunately I think what we may see as a result of the stock market falls is a reduction in interest rates. This will be combined with a tightening of credit but it may miraculously give rise to a soft landing. Lower IRs should help to stave off a general recession. And the credit tightening will mean we won't see any significant rise in credit to fuel house price inflation.

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Why all the happy whooping whenever the FTSE has a bad day? I'm not sure I see any clear and unequivocal relationship between share prices and house prices. Maybe stock market woes might encourage an interest rate cut?

After the 87 crash, property went through the roof for its final fling. If we have a FTSE crash, you can bet your ar*se that the BOE will find reason to cut rates which will even with a certain amount of credit restriction keep house prices stable, which after all is what 80% of the population want.

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