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The Masked Tulip

Is It All Over Then?

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So, is it all over then? The coming housing crash I mean?

Is this what is going to happen from now - whenever the economy or the market wobbles the boys in the Fed will simply lower the IRs and keep the market ramping along?

All those people coming to the end of their fixed 2 year deals will now be able to remortgage at the new lower rate, HPs will be egged on upwards and upwards and in two years time the Fed will reduce the IRs again if inflation hasn't eaten away at the housing bubble and the debt that people are now carrying?

They could keep on doing this for years enabling the fast to constantly remortgage.

Looks like the housing bubble will never pop?

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If so, then that would not be good for those who have STRed or those who have saved up a lumpsum in the bank in the hope of a sudden crash - their money would be eroded over time, especially if it ended up like a 10 - 15 year Japanese reocvery. Of course, we are not feeling the pain yet that the Japanese did but... maybe things will eb slightly different time and the economy stays okayish, jobs stay okayish but HPs just gradualyl decline over a period of a decade or more? If so, not good news if you are not a home owner.

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So, is it all over then? The coming housing crash I mean?

Is this what is going to happen from now - whenever the economy or the market wobbles the boys in the Fed will simply lower the IRs and keep the market ramping along?

All those people coming to the end of their fixed 2 year deals will now be able to remortgage at the new lower rate, HPs will be egged on upwards and upwards and in two years time the Fed will reduce the IRs again if inflation hasn't eaten away at the housing bubble and the debt that people are now carrying?

They could keep on doing this for years enabling the fast to constantly remortgage.

Looks like the housing bubble will never pop?

Those coming off their current fix will not find anyone to match it – nothing is getting cheaper for them and they are already maxed out.

Others wanting property will not be able to borrow the amounts allowed before this mess.

...and don't forget the soon to evaporate sentiment that 'houses only go up' (for the effect of sentiment look at how quickly many on here have caved in!)

Crash still on in my book ;)

Edited by OurDayWillCome

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Guest wrongmove
If so, then that would not be good for those who have STRed or those who have saved up a lumpsum in the bank in the hope of a sudden crash - their money would be eroded over time, especially if it ended up like a 10 - 15 year Japanese reocvery. Of course, we are not feeling the pain yet that the Japanese did but... maybe things will eb slightly different time and the economy stays okayish, jobs stay okayish but HPs just gradualyl decline over a period of a decade or more? If so, not good news if you are not a home owner.

Not true. deflation is good for savers and waiters. However, it is becoming clear that the central banks are going to do what ever they can to avoid deflation. With rates at 5.75% here and still 4.75% in US, there is potentially a lot more cutting to come before they give up .

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So, is it all over then? The coming housing crash I mean?

Is this what is going to happen from now - whenever the economy or the market wobbles the boys in the Fed will simply lower the IRs and keep the market ramping along?

All those people coming to the end of their fixed 2 year deals will now be able to remortgage at the new lower rate, HPs will be egged on upwards and upwards and in two years time the Fed will reduce the IRs again if inflation hasn't eaten away at the housing bubble and the debt that people are now carrying?

They could keep on doing this for years enabling the fast to constantly remortgage.

Looks like the housing bubble will never pop?

The housing bubble has already popped. Any further attempts at reflation would be like trying to inflate a balloon with an inch dia hole. There is no way that HPC can be avoided now.

Edited by Methinkshe

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How so if the IRs keep going down? Japan's IRs effectively became O% back in the 1990s - that would not be good for savers here.

But good if you stick it in an overseas investment or currency vehicle.

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The housing bubble has already popped. Any further attempts at reflation would be like trying to inflate a balloon with an inch dia hole. There is no way that HPC can be avoided now.

:rolleyes:

Methinkshe – Me like your way of putting it.

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Guest wrongmove
How so if the IRs keep going down? Japan's IRs effectively became O% back in the 1990s - that would not be good for savers here.

It is real IRs that matter to savers.

Getting 20% on your saving is no good if RPI is 40%.

But getting 0% on your savings is fine if RPI is -5%.

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Not true. deflation is good for savers and waiters. However, it is becoming clear that the central banks are going to do what ever they can to avoid deflation. With rates at 5.75% here and still 4.75% in US, there is potentially a lot more cutting to come before they give up .

Putting myself in Gordo's shoes, wouldn't it be just dandy to inflate/sustain moderate HPI through to the pre-Olympics feel-good period (say late 2011), thus securing re-election in 2008-9 (when all this nasty Northern Rock / credit crunch business has faded from the common man's memory) and enable him to bow out gracefully in the post-Olympic glow (hopefully with a few British gold medal winners), leaving a steaming pile of poo for his succesor or the Tories.

Plausible? (especially in the light of the past week's endeavours)

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Putting myself in Gordo's shoes, wouldn't it be just dandy to inflate/sustain moderate HPI through to the pre-Olympics feel-good period (say late 2011), thus securing re-election in 2008-9 (when all this nasty Northern Rock / credit crunch business has faded from the common man's memory) and enable him to bow out gracefully in the post-Olympic glow (hopefully with a few British gold medal winners), leaving a steaming pile of poo for his succesor or the Tories.

Plausible? (especially in the light of the past week's endeavours)

This is my worry. Watching B*****er reduce the US IRs last night I got the impression that the attitude amongst the rich and powerful now is one of that they know they can do nothing to avert a worldwide depression but they can do something - reduce IRs - to keep the party going long enough for them to get out of the kitchen, out of the way and to be able to lay the blame on others.

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So, is it all over then? The coming housing crash I mean?

Is this what is going to happen from now - whenever the economy or the market wobbles the boys in the Fed will simply lower the IRs and keep the market ramping along?

All those people coming to the end of their fixed 2 year deals will now be able to remortgage at the new lower rate, HPs will be egged on upwards and upwards and in two years time the Fed will reduce the IRs again if inflation hasn't eaten away at the housing bubble and the debt that people are now carrying?

They could keep on doing this for years enabling the fast to constantly remortgage.

Looks like the housing bubble will never pop?

House prices will fall, indeed the process is already underway and unstoppable.

If prices stagnate then BTL is no longer viable, and without a constant and rising stream of new BTL sales the wider property market will fall. Level property pricing isn't a stable equilibrium.

The events of last few weeks and months have effectively turned off the tap of new BTL landlords.

So it's happening.

The Northern Rock debacle and trivial adjustments to interest rates are a distraction, stay fixed on the fundamentals and it's clear there's now no way forward but down.

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Guest wrongmove
If prices stagnate then BTL is no longer viable, and without a constant and rising stream of new BTL sales the wider property market will fall.

Looking at the published numbers, and adding a bit on for safety, I believe that if BTL and sub-prime buying pretty well dry up, we would be down to a transaction level that implied modest modest falls in house prices.

The question is (assuming BTL really is dead, sub-prime certainly is), would modest falls suck in FTBs and mover-uppers, stabilising prices, of would it prompt mass selling by BTLs, causing a crash?

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Guest Charlie The Tramp
It is real IRs that matter to savers.

Getting 20% on your saving is no good if RPI is 40%.

But getting 0% on your savings is fine if RPI is -5%.

The last time inflation was -5% interest rates were

1887

3 Feb 4.0000

10 Mar 3.5000

24 Mar 3.0000

14 Apr 2.5000

28 Apr 2.0000

4 Aug 3.0000

1 Sep 4.0000

And £1 then is worth £91 today.

Just thought you would like to know. :)

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Is this what is going to happen from now - whenever the economy or the market wobbles the boys in the Fed will simply lower the IRs and keep the market ramping along?

I was stunned that the Fed actually managed to get rates back up from 1 to above 5%.

That was a reamarkable achievement and has their arsenal fully stocked up for another bout back down to 1 if required.

The US has been the worlds largest debtor for decades now and it appears to have no impact on the financial system.

The US economy does make billions and billions each year but until such a time as they are forced to repay their debt, (which will be never cos who's gonna make them?), then both the US and the UK for that matter can go on printing and adding billions of dollars / pounds into the system for ever more.

It's easy for the BOE to guarantee funds as all the they have to do is keep the printing presses operating for longer.

I bet that was an interesting discussion between Alistair Darling and Henry Paulson of the Fed earlier in the week!

This is a new age for economics. Throw away your O'level text books as they no longer apply or so it seems.

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I was stunned that the Fed actually managed to get rates back up from 1 to above 5%.

That was a reamarkable achievement and has their arsenal fully stocked up for another bout back down to 1 if required.

The US has been the worlds largest debtor for decades now and it appears to have no impact on the financial system.

The US economy does make billions and billions each year but until such a time as they are forced to repay their debt, (which will be never cos who's gonna make them?), then both the US and the UK for that matter can go on printing and adding billions of dollars / pounds into the system for ever more.

It's easy for the BOE to guarantee funds as all the they have to do is keep the printing presses operating for longer.

I bet that was an interesting discussion between Alistair Darling and Henry Paulson of the Fed earlier in the week!

This is a new age for economics. Throw away your O'level text books as they no longer apply or so it seems.

Good post. A new (short-term) paradigm, perhaps?

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The question is (assuming BTL really is dead, sub-prime certainly is), would modest falls suck in FTBs and mover-uppers, stabilising prices, of would it prompt mass selling by BTLs, causing a crash?

Depends on the media hype

either - house prices falling more falls to come say housing experts

or

house prices falling now 20% cheaper than last year, bottom is predicted and rises again later this year say housing experts. Fill yer boots

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Looking at the published numbers, and adding a bit on for safety, I believe that if BTL and sub-prime buying pretty well dry up, we would be down to a transaction level that implied modest modest falls in house prices.

The question is (assuming BTL really is dead, sub-prime certainly is), would modest falls suck in FTBs and mover-uppers, stabilising prices, of would it prompt mass selling by BTLs, causing a crash?

The latter

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Throw away your O'level text books as they no longer apply or so it seems.

Yes. As a society we are no longer steered by the reins of communal responsibility or Godly recompense to mitigate societal behaviour. It is every man for himself. So forget the rules if you want to stay one step ahead of the herd. In today's society it is every man for himself. Only the imagination sets boundaries. What you can imagine WILL happen.

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So, is it all over then? The coming housing crash I mean?

Is it 'eck. It's like this forum is bi-polar with its daily swings from hysteria to depression. Patience, my brethren.

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Is this what is going to happen from now - whenever the economy or the market wobbles the boys in the Fed will simply lower the IRs and keep the market ramping along?

Yes.

I agree with your post.

Any price correction could be postponed, certainly in the short term ( 10 years?) by manipulating interest rates, printing more money and guaranteeing the financial system with taxpayers' money.

All of these things willl prop up confidence and sentiment.

There's a very real chance most of us here will not see the correction we want within our working lives, or, if we do, it will be too late to take advantage of it when it comes.

However, I'm hoping this credit crunch thing will force lenders to dramatically tighten lending criteria and make sub prime lending disappear. It has in America. If it happens in the UK then we could see some dramatic reduction in prices. No amount of interest rate tinkering will save the market once genuine credit tightening takes a grip.

But we are a lifetime away from being yoy negative nationally. Once we are then we can talk about a correction with confidence.

In the meantime, prepare for regular monthly interest rate cuts and people committing themselves to even more debt.

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