Why It'll Get Worse, When It Will End & Why Usa Is Mad

[uptherebels]

Long term fundamentals look sound and I can't see the long term property bull market stopping.

Would you care to expand on that thought?

[bobby9983]

I don't think we'll get it as bad as the US. Despite all the overbuilding of flats there's still a shortage of property, especially in the South East.

A nearby council is crying out for property to house tenants.

Long term fundamentals look sound and I can't see the long term property bull market stopping.

Err, yes well, even I don't believe in that one.

[piece of paper]

I don't think we'll get it as bad as the US. Despite all the overbuilding of flats there's still a shortage of property, especially in the South East.

A nearby council is crying out for property to house tenants.

Long term fundamentals look sound and I can't see the long term property bull market stopping.

Yup, and for the foreseeable future (say three decades) the principal solution will be overcrowding. An increase in good quality housing would be an indicator of prosperity. It is inconsistent with a country whose economy has gone down the pan and is now passing through the U-bend.

p-o-p

[bobby9983]

I have to say I originally thought that it was brave of you to 'fess up to your previous mistakes in your op - but presumably only in the cold hard light of reality.

I don't mean to be rude but the power of the mind to self deceive is extraordinary. The content of your later posts prove to me that this is still at work. Try not to trust your thoughts. Try and argue the other way with yourself. All I can see is you reinforcing the prevailing remnants of your opinions.

The house price correction and its fallout has only just started. Do you not for instance recall those graphs of jobless lagging house price falls?

I would guess that houses will fall 50% in real terms over the next few years at least. This will have serious consequences for some time on the banks.

I am trying, but there is lots of information to consider, I won't accept any side of this argument for a long time to come I don't think. The evidence is severly lacking on both sides and with global factors at play I don't think anyone here can give an answer.

The only thing I am certain of so far is that property prices are coming down to a lack of credit due to a lack of confidence in the secondary market for US mortgages and as there investment houses rule the trade of such things therefore all mortgage backed securities are tarred with the same brush.

From the data I posted it clearly shows that there is an end to the US credit problems somewhere in 2011. In the UK there aren't any problems with mortgages on the same scale. In the US there are at least 10 billion per month of massive payment shock, foreclosure inducing resets.

People keep bleeting on about BTL with absolutely no evidence apart from the old 'I heard about a man at the pub who lied to get a portfolio story'. It is fact that in the US mortgage fraud and rip off contracts were endemic, the only reason their market fell was because of this, not high property prices. Over here I am yet to be convinced.

Convince me.

[Guest Winnie]

Mr Nice. It's either the time or your tired rhetoric thats making me yawn.

My stats on income multiples are from the Council of Mortgage lenders and before you jump down my throat their figures are accurate, I realise they don't count for ALL the secured lending but the other lenders make up such a small percentage.

Housing Equity withdrawal was at it's very peak 6% of POST TAX INCOME!!! That is from the Bank of England. 6% of average income is my Sky + subscription and my gym membership. Oh dear Mr Murdoch and Fitness First lose a customer it's hardly going to bankrupt the economy.

I personally think you would be mad to buy in a falling market my dear boy wait with me and I'll tell you when we reach the bottom.

Fore!

Having scanned a few of your posts this am, I notice that you use the highlighted phrases quite often. This confirms to me that you are either an 80 year old retired golfer or a wind up merchant, and the lack of logic in all your arguments suggests.....well, either!

Troll alert, folks. Don't rise to the bait.

[Neitherland]

Due to the diversity of the UK house market, both arguments on this thread are correct.

There are areas of the UK full of BTL properties, Liar Loans, 100% mortgages and 5 and 6 salary multiples.

However conversely lots of parts of the UK which have virtually none of the above and are full of properties owner occupied by the same family for 10 plus years and with very low numbers of rental properties.

An example - my parents street in a village near Windsor, 40 houses in the street, all owner occupied and in the 35 years they’ve lived there no property has ever been sold for a value lower than a previous sale.

I follow London using property bee and some areas have dropped 20% plus and some haven’t moved at all…

Unfortunately you can guess what area I want to buy in...

[aliveandkicking]

The only thing I am certain of so far is that property prices are coming down to a lack of credit due to a lack of confidence in the secondary market for US mortgages

The problem in the credit markets might have become visible via unaffordable USA mortgages but the problem really does not lie there at all.

The problem is the securitization model is now seen to be a broken model. So the problem is far bigger than 'lack of confidence in the secondary market for US mortgages'

Countries and corporations are now chasing a smaller amount of money that they all need to borrow. Rates are being driven up while CB's are supplying cash at below market rates. Those with debt risk being crushed. Those with cash risk being devalued. Arguably there are no solutions to this now it has started. It will end when the crushable are crushed and the survivors begin to invest again.

[bobby9983]

Having scanned a few of your posts this am, I notice that you use the highlighted phrases quite often. This confirms to me that you are either an 80 year old retired golfer or a wind up merchant, and the lack of logic in all your arguments suggests.....well, either!

Troll alert, folks. Don't rise to the bait.

Troll I am not. I am offering a differing opinion. I am definately a wind up merchant, but this forum would be a bore frankly if everyone had the same view.

Edited July 18, 2008 by bobby9983

[bobby9983]

The problem is the securitization model is now seen to be a broken model. So the problem is far bigger than 'lack of confidence in the secondary market for US mortgages'

We are saying the same thing just using different words.

[Orbital]

I keep trying to say that the credit crunch

cheer up

http://business.timesonline.co.uk/tol/busi...icle4354339.ece

[Nicholas Cage]

Problem with BTL is covering the interest payments, which after subtracting teaser rates can be 1:1 .

They are very vulnerable to a slowing economy and a rise in the cost of borrowing, as seen recently.

Edit:

The Income multiple was below 2.3 during previous crashes and is now over 3.1 rising fast since 1998.

Edited July 18, 2008 by maxwell

[Mr Nice]

We are saying the same thing just using different words.

no you aren't.

He, if I am reading correctly, is saying that SECURITIZATION itself is the problem, which affects everyone.

you are saying that the problem lies in AMERICA'S securitization only, so it shouldnt be that bad in the uk.

if securitization itself is the problem, then the UK is stuffed because the loans were bigger, and more people (per capita) took them out.

really, all you have to do is measure how much the prices of homes in Britain rose vs. wages, vs how much prices rose in America vs their wages.

Britain rose much higher, for longer, and as the reversion to the mean takes place, will pay a much higher price.

[Mr Nice]

also, securitization and the CDO markets cover a lot more than just home mortgages.

when they talk about all of the toxic paper floating around out there, it isn't just sub-prime loans, regardless of the country.

Britain's biggest growth market has been the financial sector, and if anything is going to help out in a recession it would be that.

unfortunately, it is getting decimated, and it isn't likely to get better any time soon REGARDLESS of the housing market since there is so much sludge from other sources in the system.

Edited July 18, 2008 by Mr Nice

[Executive Sadman]

What do you people mean by banks can start lending normally again? 100% mortgages? 8 times salaries? >2% below base rates?

To my eyes given the risk and inflationary environment the mortgages on offer today still look very generous to me. If i was some sort of big lender i would want a lot more than 7-8% interest.

[Agentimmo]

I just don't get that. If it truly was the case then there would be stats on it. All the banks have investors and investors pay their custodians to produce independent data giving an opinion on the future worth of their assets based on macroeconimoic data available and surveys.

How do you think Credit Suisse got that chart I posted about America's mortgage armageddon.

There isn't anything like that on UK data because there really isn't that much of a story. Average BTL rates over the last 3 years have been 6%. Standard variable rates are 7.5%. That's a 20% increase in payments. Whoop de do.

In America as I have shown about 10 billion dollars a month is resetting from 1-3% interest with Negative Amortization (thats an increasing mortgage balance to you and me) to 7% plus. That's between a 250% to 700% increase. It makes BTL look like child's play.

Average BTL loan £100,000, annual interest jumps 1500, that's just over 125 quid a month. Average rent £200 per room per month. Average house has 3 bedrooms. Average rent £600 average mortgage payments at 7.5% £625. If you don't think that landlord, even the one in your example, who probably hasn't got a pension, won't be able service his mortgage payments and even pay more to reduce the capital, even on £25,000 a year, then you are barking mad.

The BTL you need to worry about is the new build flat problem. I would say though that will have 'washed out' of the system by next year. And young forget the enormous capacity of the market to bring about correcting changes. The BTL market now has built a mini industry from the gutter doing sale and rent backs and buying property off distressed sellers at 30% below RICS valuation.

I don't agree with the ethics but you have to admire the ingenuity. Ever heard of 'pound cost averaging'. Even uber bears like capital economics are saying 30% falls, which certainly tallies up with many commentators on here that the view is a return to around 3.5 times average earnings.

Fine Bobby. You just keep looking at the stats and I'll keep looking at real life examples "on the ground" as my reference.

The stats say inflation is about 4%. Most people I know, including the tradesman who has an 8x income loan, think it's higher

As for your calcs re. the mortgage? That's averages. At the outer edges, the rents are higher/lower. My "friend" has the 100K mortgage, but his 2bed semi rents for £450/mo. Then add in wear and tear etc. Don't ask why he bought at this yield. I guess he was banking on capital appreciation, like many BTL buyers in the last 2-3 years.

And if I'm barking mad, then fine. I can live with that.

[Neitherland]

Different? Or will just take longer to adjust? Take your pick.

Interesting link.

I'll go for somewhere between Different and longer to adjust.

I think a lot of posters think the house markets works and reacts like the stock exchange and don't realise just what a hugely diverse and illiquid market it is.

In fact the current liquidity is so bad that I've no idea how you value a property or indeed how you compile a statistically correct price index.

[bobby9983]

Just to add weight to my argument.

Try and find me a CDO backed by UK RMBS that gets written off at 10 pence in the pound because that what they are having to do with the toxins from over the pond.

If Wall Street take heed of this then we've just opened the book of revelations

http://www.businessspectator.com.au/bs.nsf...p;src=stf"

Edited July 25, 2008 by bobby9983

[InternationalRockSuperstar]

I keep trying to say that the credit crunch & subsequent house price crash was an imported problem and that the UK is an unfortunate victim of circumstance.

f*ckwit

On reflection I have to admit that I have been persuaded by some of the good folk at HPC that our market was indeed overvalued and our consumers overindebted.

no sh1t

I have also been forced to eat humble pie as our once great banking institutions have been found out to be greedy, lying ne-er do wells. Like their American counterparts.

really? and there was me thinking that banks benevolently dole out money for the public good with no regards for themselves.

You do realised that the American monetary system (Fed) is pretty much a copy cat of the BoE.

when the American problem subsides our banks will be able to start lending normally again and the crash could stop.

given that we are already drowning in debt, lending (ie creating more debt) is not going to help things.

It might just allow us to get our finance industry going again

The finance 'industry' is a parasite that leaches of the rest of society. I don't want 'our' finance 'industry' to get going again. I want them to f*ck off and die.

The financial elites have pilaged this country to a greater extent than the Vikings could have ever dreamed.

All I'm hearing from your post is "it's America's fault, it's America's fault, it's America's fault, it's America's fault, it's America's fault, it's America's fault, it's America's fault, it's America's fault, it's America's fault,".

You don't work for the British Gov't do you?

[kilroy]

Hmm, don't discount the power of change. I fully expect many of the builders, double glazing salesmen and even bankers that will lose their jobs jumping straight into the next bubble that's coming - renewable energy - expect to get a knock on the door soon from your friendly wind turbine salesman. It's inevitable.

Thanks for agreeing with me about the US mortgage market being far worse than ours.

You haven't looked at the stats to back your claims up have you. No one got 8 times income, 100% - 125% lending was small in comparison to that in the US were talking small number percentages.

Self cert is less than 10% of the market and not every self cert loans is fraudulent only the ones you see on the telly because lets face it the valid ones wouldn't make good TV would they?

6,7,8 times earnings? Who did that then? It's a myth that lending is done at these levels. Income multiples on mortgages are an average of 3.1 times income and the average loan to value is 78%.

Lending to uncreditworthy people, i.e. sub prime, less than 10% of market and bundled in with self cert. In the US it's 20% and that's before you take into consideration the ticking time bomb that is the Alt-A and Option Arm market, which we don't have.

Our main problem is that we've got roughly 25% of all mortgages on interest only but you would have to think that with 25 years to go and inflationary pay rises people will be able to convert to repayment at some point.

Oh and I did forget about our very own Mr Mortgage, Eric Pebble, although he's not quite as eloquent or knowledgeable as Mr Mortgage.

Although his fonts are much bigger and red! (so glad I don't know how to do that.

So it looks like I've just batted all your arguments out of the park. Any more?

I applied for 10x and got offered 12x then decided to rent as the market looked toppy

[kilroy]

Just to add weight to my argument.

Try and find me a CDO backed by UK RMBS that gets written off at 10 pence in the pound because that what they are having to do with the toxins from over the pond.

If Wall Street take heed of this then we've just opened the book of revelations

http://www.businessspectator.com.au/bs.nsf...p;src=stf"

give it 12 months

[InternationalRockSuperstar]

Try and find me a CDO backed by UK RMBS that gets written off at 10 pence in the pound

Try and find me a bank with honest accounting, especially regarding the valuation of their own assets.

Try and find me a credit market that isn't distorted by Central Bank 'injections'.

Edit: plus by the time the Central Banks are finished swaping sovereing debt for CDO garbage, the pound will only be worth 10 pence in today's money (if that).

Edited July 25, 2008 by InternationalRockSuperstar

[Elizabeth]

We're also spiralling into a recession. A compound factor if ever...

[ZeroSumGame]

6,7,8 times earnings? Who did that then?

Our main problem is that we've got roughly 25% of all mortgages on interest only but you would have to think that with 25 years to go and inflationary pay rises people will be able to convert to repayment at some point.

................................. Any more?

I know people on high incomes who have taken 8X joint income as a self-cert mortgage.

"25 years mortgages" - well it is start to end - but there are myriad changes that can happen in that long time : redundancies : no pay increases : job downgrades : paucity of available mortgages. etc, etc.

I/O mortgages are a disaster waiting to happen.

Further. As for taking 3.1 times salary as a mortgage ???? Not likely in most of the home counties I'm afraid. *Much* more than 3X average salaries. Prices falling or not.

Edited July 25, 2008 by RockingHorse

[bobby9983]

f*ckwit

All I'm hearing from your post is "it's America's fault, it's America's fault, it's America's fault, it's America's fault, it's America's fault, it's America's fault, it's America's fault, it's America's fault, it's America's fault,".

You don't work for the British Gov't do you?

well, that's because it is and call me a f*ckwit to my face and I'll break yours.

[bobby9983]

really? and there was me thinking that banks benevolently dole out money for the public good with no regards for themselves.

You do realised that the American monetary system (Fed) is pretty much a copy cat of the BoE.

agreed, but the Fed were the ones that f*cked it all up.

given that we are already drowning in debt, lending (ie creating more debt) is not going to help things.

agreed, but something must be done to help 'manage down' the mountain. Turning off the taps will just cause anarchy, unless that's what you want, therefore I will meet you at the terrordome.

The finance 'industry' is a parasite that leaches of the rest of society. I don't want 'our' finance 'industry' to get going again. I want them to f*ck off and die.

yes agreed and?

The financial elites have pilaged this country to a greater extent than the Vikings could have ever dreamed.

i doubt it. the vikings were a pretty hard bunch. i've never heard of a banker murdering anyone.

All I'm hearing from your post is "it's America's fault, it's America's fault, it's America's fault, it's America's fault, it's America's fault, it's America's fault, it's America's fault, it's America's fault, it's America's fault,".

well thats because it f*cking well is. take a look at what happened over there and then take a look at what has happened over here and i think that for all this 'liar loan' bu11sh1t there would have been a few more cases and statistics to back up the hearsay than one or two bbc videos. Our scandal is and will be contained to inside track and a few idiot southerners who got snared by foxtons.

You don't work for the British Gov't do you?

no lol