25% Peak To Trough Now The Consensus Opinion

[HAMISH_MCTAVISH]

LONDON, June 25 (Reuters) - UK house prices have further to crumble but will bottom out inside a year as economists grow more optimistic about a faster upturn with interest rates remaining at record lows, a Reuters poll showed.

Average house prices are seen falling 8 percent this year, after already sinking 16 percent in 2008, but are likely to remain flat in 2010, the poll of 35 analysts at banks, investment firms and consultancies found.

Prices are seen rising just over 2 percent in 2011.

However, as gloomy as the forecasts are, they are somewhat rosier than predictions in a March poll for a 14 percent fall this year and a 4 percent fall in 2010. Since then, mortgage lenders have reported a few unexpected monthly price rises.

But not all forecasters were optimistic about next year, with Britain's largest building society, Nationwide, one of the most pessimistic on the outlook for next year.

Twenty-three of 33 said house prices would stabilise within the year, with 11 of those saying they would trough within six months. Only 2 said it would be more than two years.

"We will get a few more month-on-month negatives but it is pretty flat from here," said Alan Clarke at BNP Paribas.

Houses in the UK have long been the bedrock of consumer wealth but prices nose-dived last year, knocked by the global financial crisis. A bubble that saw average values triple over the prior 10 years burst as the key driver -- mortgage lending -- dried up.

By the end of the downturn, average UK house prices are expected to have sunk 25 percent from their peak in 2007 and still have another 7.5 percent to fall from now. The March poll saw prices falling by a third from their peak.

The survey will prove glum reading for anyone who bought a property during the boom years when UK banks were lending money at record low rates with few restrictions on how much one could borrow, sometimes as much as 125 percent of a home's value.

Banks have now tightened lending criteria considerably for new borrowers and mortgage approvals -- loans agreed but not yet made and a good early indicator of where house prices are headed -- rose slightly to 43,000 in April.

The poll found monthly mortgage approvals at around 55,000 in six months and about 65,000 in a year, much higher than the 36,000 and 53,000 predicted respectively in March's poll, but still a far cry from the average of 104,000 seen in 2007.

"Housing market activity is still very low by past norms and at a level consistent with falling house prices," said Howard Archer at IHS Global Insight, who thinks prices have a further 10 percent to fall from here.

A lack of new sellers had boosted property asking prices this year but there remains a big gap between sellers' aspirations and actual selling prices.

Property website Rightmove said on Monday asking prices in most of the UK fell 0.4 percent in June, after rising 2.4 percent in May, but the annual rate of decline moderated to an eight-month low.

The poll found economists still think properties are slightly overvalued, giving a median rating of 6, where 10 was extremely overvalued and one extremely undervalued compared to fundamentals. The median rating in March's poll was 7.

The house price to earnings ratio -- a key affordability measure -- fell to 4.36 in May, a level not seen since January 2003 according to the Halifax, but the Reuters poll showed it falling further to 4.0.

The BoE has slashed a whopping 450 basis points from interest rates since October, putting them at just 0.5 percent, and the bank has begun quantitative easing, effectively printing money, in an effort to encourage lending and jump-start the economy.

However, the only direction for interest rates to go now is up and economists predict they will begin to climb in the second half of next year. This will provide additional headwind for any housing market recovery as banks factor the rise into lending rates and increase borrowing costs. Britain's economy entered recession at the end of last year for the first time since the early 1990s and is seen shrinking 3.9 percent this year, with a return to growth pencilled in for end-2010.

http://www.guardian.co.uk/business/feedarticle/8576415

[Bruce Banner]

[HAMISH_MCTAVISH]

House prices in the UK will bottom out before the end of the year, according to a new report.

The credit rating agency Standard & Poor's predicts said that because more houses are up for sale, prices could fall to their lowest levels in the final quarter of the year.

Jean-Michael Six, Standard & Poor's chief economist, said: "UK house prices will stabilise in the final quarter of this year, about 7% lower than in December 2008, and remain roughly stable in 2010."

The bottoming out of UK house prices will come sooner than in other European countries.

Mr Six said that Spain will not see house price settling off until next year, while in others countries it will continue to fall this year and in 2010.

Andrew Sentance, a member of the UK's interest rate setting committee, said there were some indications showing that house prices had stabilised, "but signs that falls in house prices may have stopped is tentative," he said.

Kate Barker, another member of the committee, was less optimistic.

She said: "We're not necessarily out of the woods in terms of housing because of potential rise in unemployment that will weight."

She also added that despite there being signs of recovery in the housing market, she was cautious about prospects for the sector in the next 12-18 months.

http://news.sky.com/skynews/Home/Business/...200906415319534

[HAMISH_MCTAVISH]

Thanks for the bump.

[othello]

SImple answer: not it's not. Look up consensus in the dictionary!

[General Melchett]

+1

I'll say this only once, and I'll say it slowly and plainly:

House prices movements lag movements in the real economy. In the real economy, people are, on an aggregate measure, losing their jobs and their income. And the rate at which this is happening is getting worse.

Huge numbers of people are in negative equity (and so will have to pay more come remortgage time) and/or cant afford their mortgages, despite the lowest interest rates in (post-medieval) history. There is only one way interest rates are going from here.

Securitisation, which is the 'majic trick' which enabled house price inflation, through huge mortgages for anyone, and caused the credit crunch, is dead. It ended in August 2007.

House prices are made at the margins. That margin remains, and is set to remain for several years, forced sellers. Forced sellers are increasing.

Edited June 25, 2009 by General Melchett

[mirage]

Just remind us what the consensus opinions were at the start of 07? You know, when we were teetering on the top of the largest bubble in history?

[Flat Bear]

It is on course for my mid prediction of around 40% actual fall and within the time frame. (I know the real, inflation adjusted fall will be higher but I am not bothered)

It is quite easy to predict more accurately when you stand back and look at all the facts objectively.

So we are around half way through the crash but it's not been to bad so far has it? Many bulls are still bullish and life is still tickerty boo for most people. The truth is the second half will feel much much worse.

The bull trap is just about to finish and the house price crash will be following the economy down and quickly. It will not be nice, it will not be pretty. I will not tell you "I told you so" as we will all be too depressed to care.

Prolonged rising interest rates with a steady decline in credit, together with steady and unrelenting rises in unemployment will destroy even the most hardened bull eventually.

You aint seen nothing yet

[ʎqɐqɹǝʞɐɥs]

Just remind us what the consensus opinions were at the start of 07? You know, when we were teetering on the top of the largest bubble in history?

The consensus than was a short period of stabilisation before they would start to rise again. How right they were.

[athe]

http://news.sky.com/skynews/Home/Business/...200906415319534

I notice that you missed out this bit:

But the crisis was caused in part by excessive debt taken on by households and companies, and the correction of this factor would take time.

However, the level of household debt differed from country to country and was "much higher in Spain and in the UK than in France or Italy", suggesting that the housing downturn might last longest in highly leveraged countries.

Still 25% from peak and then static for a year whilst inflation kicks in. It's a start.

Edited June 25, 2009 by apr400

[Namaste]

Is this a 25% for now, whilst interest rates remain low and everyone with debt is being bailed out? If so, I'd agree. Of course any idiot would realise that when interest rates start to rise, and the debt has to be repaid, there is only one way for house prices to go.

[Rinoa]

[athe]

Edited June 25, 2009 by apr400

[Laura]

ZZZZZZZZZZZZZZZZZ

Hamish my boy, you are forked. The sooner you get used to it the better.

You will over the next twenty years be priviledged enough to experience the biggest bust since the one in the middle to late part of the 19th century

There is nothing you can do to stop it.

If you can't cope may I suggest a professional therapist? - Or would a good spanking help?

[HAMISH_MCTAVISH]

Or would a good spanking help?

Sure..........

Bend over.

[Minesapint]

The only consensus is that the people making predictions haven't a clue and it is more a consensus on what they would like to happen.

How accurate have the predictions been over the last 2 years. Wasnt it the fact the Halifax stopped predicting were they thought house prices were going to go due to "unpredictability".

Ask 100 Man U fans who they thought was going to win the Champions League final before it started and the consensus would be.....

There is no money, there is no demand what demand there is is a lot lower than supply - go and compare recent RICS reports for the proof of that statement!

[Meerkat]

"LONDON, June 25 (Reuters) - UK house prices have further to crumble but will bottom out inside a year as economists grow more optimistic about a faster upturn with interest rates remaining at record lows, a Reuters poll showed."

Hamish, even if "official" rates remain low, I have two questions:

1) Will banks lend money unemployed?;

2) What will be the credit spread (mark-up) over the interbank lending rate to the people who cannot throw in 50% deposit into their purchase?

You ought to realise that banks won't be throwing money to the right and left: they have lost a lot and will lose even more. Borrowing will come at a much bigger cost than during the days when Brown & Co could trick people and businesses into believing money or capital, the most deficit good out there, is cheap and in overabundance.

[bobthe~]

The only consensus is that the people making predictions haven't a clue and it is more a consensus on what they would like to happen.

How accurate have the predictions been over the last 2 years. Wasnt it the fact the Halifax stopped predicting were they thought house prices were going to go due to "unpredictability".

Ask 100 Man U fans who they thought was going to win the Champions League final before it started and the consensus would be.....

There is no money, there is no demand what demand there is is a lot lower than supply - go and compare recent RICS reports for the proof of that statement!

Add to that, investing on the basis of "consensus" is pretty much the guaranteed route to the poorhouse.

[ʎqɐqɹǝʞɐɥs]

ZZZZZZZZZZZZZZZZZ

Hamish my boy, you are forked. The sooner you get used to it the better.

You will over the next twenty years be priviledged enough to experience the biggest bust since the one in the middle to late part of the 19th century

There is nothing you can do to stop it.

If you can't cope may I suggest a professional therapist? - Or would a good spanking help?

Hasn't he been getting spanked since early 2007?

[Milton]

House Prices are 85% higher now than they were in Jan 2001.

[bTW They were overpriced in Jan 2001]

What a load of Horsesh!t you speak Hamish McTavish.

Edited June 25, 2009 by Dan1

[the flying pig]

yeah, i don't know, 25% peak to trough sounds sensible enough, but definitely a bit on the high side.

it's possible, but to my mind slightly doubtful, that as little 25% off could be sustained even with low interest rates if unemployment is high.

and totally impossible for as little as 25% off to be sustainable if both interest rates and unemployment are high.

[Willy Weasel]

I love a good consensus of 'experts'. It's the best contrarian indicator going. As long as the consensus disagrees with my own point of view, I'll continue to be confident that my assessment is correct. As soon as the consensus is that it's an awful time to buy that's the time I'll be putting my hand in my pocket

[Damik]

http://www.guardian.co.uk/business/feedarticle/8576415

Something like this, McTavish???

You are brainless and I claim my 5£ ...

[Moo]

and totally impossible for as little as 25% off to be sustainable if both interest rates and unemployment are high.

The interesting point here being the rates paid by new borrowers at the moment. They are, in recent (as in the last ten years or so) terms, high.

[No Teacher - No Guru]

ZZZZZZZZZZZZZZZZZ

Hamish my boy, you are forked. The sooner you get used to it the better.

You will over the next twenty years be priviledged enough to experience the biggest bust since the one in the middle to late part of the 19th century

There is nothing you can do to stop it.

If you can't cope may I suggest a professional therapist? - Or would a good spanking help?

The great depression in the nineteenth century ran from the 1870's on and was primarily an agricultural crisis in the UK affecting the great landowners, tenant farmers and agricultural labourers.

Expanded agricultural production in the Americas and cheaper transatlantic transport costs undermined European agriculture with deflationary effects.

The decline in agriculture boosted a ready supply of labour for industrial production, intensifying the trend to urbanisation underway since the late 18th Century. Unemployment fell during the period of the great depression and wages rose whilst asset prices fell.

There are lessons to draw from history - but the great depression is not a good fit to the current recession.