Jump to content
House Price Crash Forum
Darkman

Is A Housing Crash Possible Without A Recession?

Recommended Posts

So is a housing crash possible without a recession?

Reading the paper today, and noticing an unbelievable amount of economic gloom, I did wonder if we could ever have had the crash without the other negative events. I consider a housing crash as a positive of course.

But a cheap house will still be out of reach if you have no employment, or viable mortgage.

People such as myself will benefit. But many others will not. Prudent savers who invested in an ISA for example are about to discover some nasty surprises. Stocks are taking a real hiding. It's a bear market now. Pensions will be hit too of course.

Having never bought a house, never had a pension, and never acquired an ISA, I feel really vindicated for being so feckless haha

Share this post


Link to post
Share on other sites
So is a housing crash possible without a recession?

Reading the paper today, and noticing an unbelievable amount of economic gloom, I did wonder if we could ever have had the crash without the other negative events. I consider a housing crash as a positive of course.

But a cheap house will still be out of reach if you have no employment, or viable mortgage.

People such as myself will benefit. But many others will not. Prudent savers who invested in an ISA for example are about to discover some nasty surprises. Stocks are taking a real hiding. It's a bear market now. Pensions will be hit too of course.

Having never bought a house, never had a pension, and never acquired an ISA, I feel really vindicated for being so feckless haha

Yes, it would be possible for house prices to crash without a recession, but not after a bubble this big.

Share this post


Link to post
Share on other sites
Yes, it would be possible for house prices to crash without a recession, but not after a bubble this big.

This mother of bubble, i'd call it the big bang.

Share this post


Link to post
Share on other sites
So is a housing crash possible without a recession?

Reading the paper today, and noticing an unbelievable amount of economic gloom, I did wonder if we could ever have had the crash without the other negative events. I consider a housing crash as a positive of course.

But a cheap house will still be out of reach if you have no employment, or viable mortgage.

People such as myself will benefit. But many others will not. Prudent savers who invested in an ISA for example are about to discover some nasty surprises. Stocks are taking a real hiding. It's a bear market now. Pensions will be hit too of course.

Having never bought a house, never had a pension, and never acquired an ISA, I feel really vindicated for being so feckless haha

Unfortunately, the current government became so dependant on house price inflation from exposing it's rather weak economic policies that it actually started to create policy to keep the boom running as long as possible and we are now at the point where they are inseparable.

This will probably continue in the future unless there is some sort of shakedown and we start to balance out the economy by making things again firstly for domestic consumption and then for export. As emerging economies become richer and we become poorer the possibility of this happening grows -painful process however

Share this post


Link to post
Share on other sites
So is a housing crash possible without a recession?

Reading the paper today, and noticing an unbelievable amount of economic gloom, I did wonder if we could ever have had the crash without the other negative events. I consider a housing crash as a positive of course.

But a cheap house will still be out of reach if you have no employment, or viable mortgage.

People such as myself will benefit. But many others will not. Prudent savers who invested in an ISA for example are about to discover some nasty surprises. Stocks are taking a real hiding. It's a bear market now. Pensions will be hit too of course.

Having never bought a house, never had a pension, and never acquired an ISA, I feel really vindicated for being so feckless haha

Do you include Cash ISA's? I appreciate there are stocks/share type ISA's out there. But is there some reason to be worried about Cash ISA's?

Edit: I should add that I mean beyond the usual worries about bank failure and currency collapse that worries us all anyway.

Edited by Khayl

Share this post


Link to post
Share on other sites
So is a housing crash possible without a recession?

It depends what you mean by 'crash' and 'recession' but personally I think not.

Firstly, houses are bought with borrowed money. Secondly, for them to reach a level where they can crash implies that much of that borrowing has been unwise. So either the borrowers are going to have to retrench, or the lenders are going to suffer default. Either way, there has to be pain in the wider economy.

If houses were not bought with borrowed money then it would be different ... debt-inflated bubbles wouldn't form, for a start.

Share this post


Link to post
Share on other sites
Do you include Cash ISA's?

Well I was reading the Torygraph, and it mentioned Child Trust Funds, Individual Savings Accounts and pensions.

How do Cash ISAs make their money? That should give you the answer.

Here's a quote for you -

Someone whose cumulative investment in an ISA was worth 20K last summer, would now be 4.4K worse off

I should investigate all the areas a bear market hits. I suspect it's very far reaching.....

Share this post


Link to post
Share on other sites

Any chance you could spell this one out in dummyspeak for me?

I'm not seeing how cash ISA's have lost 20% of their value in a year... from what I've seen the interest rates on those have been rising.

Share this post


Link to post
Share on other sites
How do Cash ISAs make their money? That should give you the answer.

That wasn't a rhetorical question. I do not know the answer.

Share this post


Link to post
Share on other sites

Since the consumer boom was financed in large part by people remortgaging, the housing crash is causing consumption in general to plummet So, while it may in theory possible to have a housing crash without a recession, in practice, in this case, the two are inextricable.

Like love and marriage they go together like a horse and carriage.

Oh no, I think I'm about to burst into song. I'm beginning to feel cheerful. :lol:

Share this post


Link to post
Share on other sites

I believe it will create a recession, because of the multiplier effect of new money created through bank credit. Every time a mortgage is lent out, the bank gets to make new credit, which is redeposited into someone else's bank, creating more deposits. This is of course subject to capital adequacy limits (the bank can't create limitless money), but still creates a lot of economic activity with all the new money into the system. When this goes into reverse, money becomes scarce. There is a close link between drops in M4 and recessions. Plus the UK economy is too dependent on housing - white van man, builders, estate agents etc. etc. It isn't only housing causing problems - all the energy rises, food fuel and static wages are going to accelerate the problems as affordability drops through the floor.

Share this post


Link to post
Share on other sites

I think it is possible. A recession is 2 quarters of negative growth and the figures along with inflation figures are easily manipulated by the government stats office. So I don't think we will technically go into recession but effectively we will.

Also very like companies if you are used to growing at 2% then that becomes the baseline. The amount of times I have heard 'Company X' has had the worst year for 10 years only to read that the rate of growth has fallen from say 6% to say 2% i.e. it is their best year ever but the rate of growth is smaller that over the last 10 years.

When it comes to fake figures however the market eventually prices everything in so currently the banks, companies and most people realise inflation is really 10%. The market actually begins to behave like inflation is 10%. Libor is a good example of this, higher rates are need to mitigate risk the bank could now cut IR to 0% and the market would probably ignore.

Share this post


Link to post
Share on other sites
Yes, it would be possible for house prices to crash without a recession, but not after a bubble this big.

HPC gets it spot on once again. And all that VI "no crash without a recession" BS finally stamped out.

Share this post


Link to post
Share on other sites

It's very simple.

As house prices rise, they suck money out of the economy.

Eventually house prices suck out so much money that they COLLAPSE the economy.

The collapsing economy is then unable to support high house prices.

Share this post


Link to post
Share on other sites

Have you ever thought that recessions are CAUSED by housing slumps?

Its pretty obvious if you look at the stats that housing slumps are leading indicators as to the severity of recessions and their start points...

Share this post


Link to post
Share on other sites
So is a housing crash possible without a recession?

Yes a house is just a commodity and subject to the normal rules of supply and demand. So if you build so many 4 bed detached houses that everyone has one the price comes down.

This HPC is a side effect of the Credit Crunch, people still want houses, they are still envious of people with nice expensive houses, its just that they can't get the money to buy them at the price the seller wants.

Only when houses are at an affordable level will things move again. It was the obscene attitude of banks which drove house prices out of reach of only the very rich or very stupid i.e. those who thought 4x, 5x, 6x salary or 125% mortgage was a good idea.

Share this post


Link to post
Share on other sites
Since the consumer boom was financed in large part by people remortgaging, the housing crash is causing consumption in general to plummet So, while it may in theory possible to have a housing crash without a recession, in practice, in this case, the two are inextricable.

Like love and marriage they go together like a horse and carriage.

Oh no, I think I'm about to burst into song. I'm beginning to feel cheerful. :lol:

Yes, I agree with this. For the vast majority of people in the UK, home ownership is part of the DNA, so the the economy and house prices are linked. The link might not be as tight in the rest of Europe, but as with most assets they are still linked.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 395 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.