Sunday, December 23, 2007

David Smith reassures us all

Cheer up, things aren't that bad

How much more gloom can you take? HBad news sells, so perhaps I should be laying it on with a trowel. We have the credit crisis, the budget deficit is overshooting and the pound has fallen. But there is reason to be optimistic. If you believe that a big, 10% fall in house prices (which I don’t expect) would take us back to the negative equity of the early 1990s, and leave banks with dodgy mortgage books, then fine, but it is not true. Loan-to-value ratios have been kept under control, so mortgage books are insulated from quite a big fall in prices.

Posted by little professor @ 10:24 AM (1597 views)
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12 thoughts on “David Smith reassures us all

  • David Smith is going to be ‘shocked’ (and probably sacked too) over the coming years.

    The fact that he is always so consistently wrong about everything, seems so far to have had little effect upon his confidence for making further predictions.

    I suggest we use David as a marker. When he calls it a time to sell property, it will probably be the right time to buy.

    If you do the opposite of everything he suggests you may do quite well. He is a great ‘dumb money’ indicator, and should be read as such.

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  • “Gordon Brown and Alistair Darling are as confident in private as they are in public that Britain’s economy is strong enough to pull through this”

    So you see, David Sith has been meeting Laurel and Hardy in private, no wonder his views are so pro Labour!

    What a load of Cr4p!

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  • Quote

    “If you believe that a big, 10% fall in house prices (which I don’t expect)”

    Very nearly had that already in most places, dream on David

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  • does this guy live in dreamland?

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  • “Dodgy mortgage books”? It’s a bit more serious than that. Trillions of dollars ‘worth’ of over-leveraged junk is unwinding. Banks are capital-strapped and hoarding in order to stay solvent. And this guy thinks it’s just another hiccup.

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  • He’s on our side. Whilst he doesn’t expect house prices to drop significantly (I presume he means on average) he says if they do fall, it’s not a bad thing. So it seems he *can* be right.

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  • Surely it is the fact that house prices have rocketed that has made the majority of LTVs very low???

    Only a small margin of properties are bought and sold each year. The majority of owners stay in their properties for a number of years. i.e. the majority bought more than a few years ago, and as prices have rocketed their mortgage has stayed the same and their LTV has subsequently fallen, making the average LTV still look very healthy.

    This doesn’t mean that houses are affordable or that house prices are sustainable. What it does mean is that as soon as house prices start falling, so LTVs look worse, thus shooting to pieces Mr Smiths theory. On the basis that house prices go up and down, the LTVs change accordingly – In which case low LTVs imply that prices have gone up and could almost be an indicator that prices are about to come down again. So basically I think Mr Smith has interpreted this measure in completely the opposite way.

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  • The Loan to values might not look so good when prices begin to fall significantly particularly for those who have released equity from their homes on more than one occasion to fund holidays, cars and furnishings etc… Negative equity will become a reality for many and a major problem if they are forced to sell.

    I love his comments on the prospect of a “BIG” 10-15% fall in house prices – lets be honest if you go shopping in the January sales and you can buy a shirt in Next with 10% off you would hardly call that a big discount – half price is a big discount and most posts on here suggest UK house prices are headed for a genuinely big discount in 2008/2009.

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  • I am beginning to think that the coming recession has been deliberately engineered, it was quite obvious that consistently falling interest rates over an extended period as witnessed over the last 10 years or so would result in the position we have ended up in. This has all been a calculated move by NewLabour (Blair/Brown) with the ultimate aim of driving an economically broken nation into the warm embrace of the euro. With most decisions now being made by Brussels our politicians have little to do in parliament other than produce and endless stream of petty bureaucracy, laws and legislation that were once covered by local council bylaws to justify their existence, gold plated MP’s pensions and looming 10% payrise.

    We will shortly be both a broke and broken nation, a mere island province in a greater european grey mush of undemocratically neutered states.

    I have often marvelled over the rise of Blair & Brown to power in this country as they came from nowhere, who had even heard of them before they hijacked the labour party, its almost as though we as a nation had no choice in the matter and I am beginning to think the same about Cameron (another politician coming from nowhere to lead a party).

    Does the whole thing smell badly or am I thinking too much about it?

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  • who stole my pension? says:

    enuii,

    I partly agree with you. However, Brown does not want to force us in to the hands of Brussels, instead he wants us all to depend on Westiminster and him.. This is why he has destroyed personnel pensions with such vigour. Brown wants us all to be dependant on the state – his aim is to destroy all private sector wealth thus making us dependant on benefits and thus afraid to vote for any party that might cut benefits. This is how he intends to stay in power. The only problem is the state is now broke!!!!

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  • Cheekie Charlie says:

    The last time the economy was in trouble we joined the ERM! This time we might join the euro 1 for 1 exchange rate of course and that ‘ll be doing us a favour.

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  • it_is_going_with_a_bang says:

    “Gordon Brown and Alistair Darling” – oh please. What a load of cr4p.
    “Cheer up, things aren’t that bad” – LOL.
    ““technical recession” LOL
    “Bad news sells, so perhaps I should be laying it on with a trowel, frightening you into submission well before you get to the end of this piece.” – I DOUBT IT SOMEHOW.

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