Since We've Been Gone: Boe Approvals 36k

[thedebtisreal]

http://news.bbc.co.uk/1/hi/business/7530432.stm Edited July 29, 2008 by thedebtisreal

[interestrateripoff]

Until next month.

[thedebtisreal]

Until next month.

Are we heading for 0 mortgage approvals?

[redgenieuk]

Are we heading for 0 mortgage approvals?

We'll not get there, but we are headed there. Even if they fell by 1 a month, we'd still be heading there.

An interesting question is if you are facing the other way can you be heading there?

I'd say yes. Brown is facing away from certain failure, but he is still moving towards it.

If not already there.

[Blue Peter]

The only lenders that will remain in this market beyond the medium term are very large players with diverse income streams. Players who can afford to lose large sums of money to maintain some sort of skill base (HBOS, Santander, RBS, Barclays, etc).

Did you mean HSBC rather than HBoS?

Peter.

[Prof]

How many properties are currently "For Sale" in the UK ? Is it 1million, or more (I really don`t know, but I bet it`s a lot).

Only 36,000 mortgages issued last month (and the figures seem to be getting worse). Vendors, are you listening ? If you want to sell anytime soon, you`re going to have to be very lucky. Any ideas what you can do to increase your chances ? I have a suggestion, but you ain`t gonna like it.

Reduce your asking price...... a lot.

[interestrateripoff]

A bit like a black hole?

[Kuma]

Anyone know what the seasonal adjustement is?

[Blue Peter]

Yes sorry, I was referring to HSBC. Who the hell are HBOS anyway?

Will we be saying "Who the hell were HBOS anyway?" in a couple of years time?

Peter.

[29929BlackTuesday]

http://www.houseprices.uk.net/articles/pro...y_transactions/

Look at the scatter graph in the above link entitled 'Correlation between HPC/HPI and mortgage approvals.

Print it off, extrapolate the x and y axes, add in a few curves to represent the mean of the scatters and THEN add in 36k to the x axis.

I get a HPC range of 40% (off) to 60% in 6 months from June 08.

So at least 40% off by December!

DON'T OFFER ANY MORE IF YOU'RE BUYING!!

Edit to replace less for more!

Edited July 29, 2008 by 29929BlackTuesday

[spline]

The house price predictions implied by these low levels of approvals are truly shocking - somewhere between 30% and 40% implied YoY falls are lurking in the pipleline if this carries on. It's made worse by the reduced feedthrough (higher neutral level after mid-2006) although this may return to pre-2006 levels as the collapse continues and offset the implied falls a bit.

Price Predictions are linked here, updated with today's BoE approvals:

http://www.houseprices.uk.net/articles/hou...rice_predictor/

Edited July 29, 2008 by spline

[Furby]

The house price predictions implied by these low levels of approvals are truly shocking - somewhere between 30% and 40% implied YoY falls are lurking in the pipleline if this carries on. It's made worse by the reduced feedthrough (higher neutral level after mid-2006) although this may return to pre-2006 levels as the collapse continues and offset the implied falls a bit.

Price Predictions are linked here, updated with today's BoE approvals:

http://www.houseprices.uk.net/articles/hou...rice_predictor/

Thanks Spline - and

F

[Smell the Fear]

The house price predictions implied by these low levels of approvals are truly shocking - somewhere between 30% and 40% implied YoY falls are lurking in the pipleline if this carries on. It's made worse by the reduced feedthrough (higher neutral level after mid-2006) although this may return to pre-2006 levels as the collapse continues and offset the implied falls a bit.

Price Predictions are linked here, updated with today's BoE approvals:

http://www.houseprices.uk.net/articles/hou...rice_predictor/

I wouldn't say 30-40% was "truly shocking". Slightly disappointing maybe - 50-60% would be better, with a final total nominal fall in the 70% region being satisfactory.

Providing that the UK still has an economy that is. If not then 90%+ would seem appropriate.

[Guest DissipatedYouthIsValuable]

I wouldn't say 30-40% was "truly shocking". Slightly disappointing maybe - 50-60% would be better, with a final total nominal fall in the 70% region being satisfactory.

Providing that the UK still has an economy that is. If not then 90%+ would seem appropriate.

I'm sure you pussied out back to being a bull sometime last year.

[?...!]

There is no justification for extrapolating that data.

Such poor approvals, so far below historical norms, mean we are witnessing a market that may well be functioning outside of historical mechanisms. It would be foolish to assume that the relationship between approvals and price changes remains linear at such an anomaly position of 36,000 approvals.

All I would say is what I have echoed for the past 36 months - that UK property equity is unsuitable for collateral against any loan with a term longer than 12-24 months. Granting mortgages in this market is fiscal suicide. The only lenders that will remain in this market beyond the medium term are very large players with diverse income streams. Players who can afford to lose large sums of money to maintain some sort of skill base (HBOS, Santander, RBS, Barclays, etc).

I expect all specialist UK mortgage lenders to disappear via either buyouts, bailouts or bankruptcy.

All you can say is that the UK property market looks to be in its worst ever condition.

[Smell the Fear]

I'm sure you pussied out back to being a bull sometime last year.

YAWWWWWWWWWWWWWWWWNNN.

Get back to to the antibiotic prescriptions......

[Smell the Fear]

There is no justification for extrapolating that data.

Such poor approvals, so far below historical norms, mean we are witnessing a market that may well be functioning outside of historical mechanisms. It would be foolish to assume that the relationship between approvals and price changes remains linear at such an anomaly position of 36,000 approvals.

All I would say is what I have echoed for the past 36 months - that UK property equity is unsuitable for collateral against any loan with a term longer than 12-24 months. Granting mortgages in this market is fiscal suicide. The only lenders that will remain in this market beyond the medium term are very large players with diverse income streams. Players who can afford to lose large sums of money to maintain some sort of skill base (HBOS, Santander, RBS, Barclays, etc).

I expect all specialist UK mortgage lenders to disappear via either buyouts, bailouts or bankruptcy.

All you can say is that the UK property market looks to be in its worst ever condition.

Would your gut feel be that reality will result in greater or lesser falls than 30-40% over the next 6 months?

[?...!]

Would your gut feel be that reality will result in greater or lesser falls than 30-40% over the next 6 months?

40% over the next six months is an extreme viewpoint. Do you know what kind of MoM figures that would require?

Rapid falls in the property market are falls of 10%+ pa.

Expect the episode to last several years rather than see such a drastic fall. Dramatic market dislocations often result in political attempts to socialise the losses, the BoE will want to avoid this and so liquidity will be swollen to ease the pace of the decline.

Although it can do nothing to stop the flow, the central banking system is there to permit a more orderly unravelling than we would otherwise see.

Emergency liquidity provisions only avoid collateral damage by helping to prevent the forced sale of other asset classes.

I expect we will see 10-20% from peak by December and probably the same if not worse the following year. The market will still fall as far as it would have without the BoE increasing liquidity, but it should take a lesser number of other markets with it as they are permitted time to adapt.

[?...!]

Did you mean HSBC rather than HBoS?

Peter.

Yes sorry, I was referring to HSBC. Who the hell are HBOS anyway?

[spline]

There is no justification for extrapolating that data.

Such poor approvals, so far below historical norms, mean we are witnessing a market that may well be functioning outside of historical mechanisms. It would be foolish to assume that the relationship between approvals and price changes remains linear at such an anomaly position of 36,000 approvals.

I would agree with the general caution on extrapolating figures, BUT in this case we have a strong prediction model and are also regressing out any structural changes in the market, i.e. pulling out the neutral level. The EKF state estimate is X = (price, hpi, neutral level) and the observations are Z = (price, approvals), and we have a strong collapse of prices with a simultaneous collapse in approvals. The ratios seem to be consistent with the current post- mid-2006 neutral level, elevated above the 80-90k level, and both are collapsing together without an implied change in this level – at least not yet – although I’d expect to see it drop back a bit. You can eyeball the undershoot/overshoot to see that an implied 30% YoY looks likely if the current low levels persist.

Backward comparison with published YoY with predictions going forward – red line is just the estimated annualised HPI pushed forward by six months, blue is HBOS YoY. Last data includes Jun/2008 approvals.

[Smell the Fear]

I would agree with the general caution on extrapolating figures, BUT in this case we have a strong prediction model and are also regressing out any structural changes in the market, i.e. pulling out the neutral level. The EKF state estimate is X = (price, hpi, neutral level) and the observations are Z = (price, approvals), and we have a strong collapse of prices with a simultaneous collapse in approvals. The ratios seem to be consistent with the current post- mid-2006 neutral level, elevated above the 80-90k level, and both are collapsing together without an implied change in this level – at least not yet – although I’d expect to see it drop back a bit. You can eyeball the undershoot/overshoot to see that an implied 30% YoY looks likely if the current low levels persist.

Backward comparison with published YoY with predictions going forward – red line is just the estimated annualised HPI pushed forward by six months, blue is HBOS YoY. Last data includes Jun/2008 approvals.

Perhaps the relationship will hold at low mortgage approval levels, or become even more extreme as the only transactions going through are forced/unavoidable transactions and the price is dictated by the new mortgage environment requiring higher deposits, lower salary multiples and proven income?

If that was the case then 50%+ is entirely possible.

Can anyone clarify what banks are typically lending at today in terms of deposit required and salary multiple available?

[?...!]

I would agree with the general caution on extrapolating figures, BUT in this case we have a strong prediction model and are also regressing out any structural changes in the market, i.e. pulling out the neutral level. The EKF state estimate is X = (price, hpi, neutral level) and the observations are Z = (price, approvals), and we have a strong collapse of prices with a simultaneous collapse in approvals. The ratios seem to be consistent with the current post- mid-2006 neutral level, elevated above the 80-90k level, and both are collapsing together without an implied change in this level – at least not yet – although I’d expect to see it drop back a bit. You can eyeball the undershoot/overshoot to see that an implied 30% YoY looks likely if the current low levels persist.

Backward comparison with published YoY with predictions going forward – red line is just the estimated annualised HPI pushed forward by six months, blue is HBOS YoY. Last data includes Jun/2008 approvals.

I have to agree that it's a very good model. I would however like to draw caution that fact that the current climate is very volatile, and many of the mechanisms that drove price and mortgage availability in the past are now all but gone.

I am also impressed with the power of this relationship for determining inflection points.

This model has forecast a huge move so it will be interesting to see what happens over this time period. However I expect market dynamics to change dramatically, (through monetary intervention, or otherwise) in order to slow such a catastrophic unwinding.

[mirage]

I would agree with the general caution on extrapolating figures, BUT in this case we have a strong prediction model and are also regressing out any structural changes in the market, i.e. pulling out the neutral level. The EKF state estimate is X = (price, hpi, neutral level) and the observations are Z = (price, approvals), and we have a strong collapse of prices with a simultaneous collapse in approvals. The ratios seem to be consistent with the current post- mid-2006 neutral level, elevated above the 80-90k level, and both are collapsing together without an implied change in this level – at least not yet – although I’d expect to see it drop back a bit. You can eyeball the undershoot/overshoot to see that an implied 30% YoY looks likely if the current low levels persist.

Backward comparison with published YoY with predictions going forward – red line is just the estimated annualised HPI pushed forward by six months, blue is HBOS YoY. Last data includes Jun/2008 approvals.

That's the best graph I ever did see.

[AteMoose]

I would agree with the general caution on extrapolating figures, BUT in this case we have a strong prediction model and are also regressing out any structural changes in the market, i.e. pulling out the neutral level. The EKF state estimate is X = (price, hpi, neutral level) and the observations are Z = (price, approvals), and we have a strong collapse of prices with a simultaneous collapse in approvals. The ratios seem to be consistent with the current post- mid-2006 neutral level, elevated above the 80-90k level, and both are collapsing together without an implied change in this level – at least not yet – although I’d expect to see it drop back a bit. You can eyeball the undershoot/overshoot to see that an implied 30% YoY looks likely if the current low levels persist.

Backward comparison with published YoY with predictions going forward – red line is just the estimated annualised HPI pushed forward by six months, blue is HBOS YoY. Last data includes Jun/2008 approvals.

Good analysis and its good to see the stats. I believe that the BOE approvals and MEW figures are leading indicators and splines graph worry me personally, did I get a big enough discount when I bought? Willl I need to start to eating hats. I do agree we now defiantly looking at between 20 to 40% falls this year.

The only form of rescue is a government money printing one, helping out ftbers, tax breaks etc etc...

Edited July 29, 2008 by moosetea

[thedebtisreal]

Good analysis and its good to see the stats. I believe that the BOE approvals and MEW figures are leading indicators and splines graph worry me personally, did I get a big enough discount when I bought? Willl I need to start to eating hats. I do agree we now defiantly looking at between 20 to 40% falls this year.

The only form of rescue is a government money printing one, helping out ftbers, tax breaks etc etc...

Come on moosy! Change that bull status.

Edited July 29, 2008 by thedebtisreal