Thursday, December 27, 2007

Don’t worry

Outlook bleak but not critical

Mortgage approvals are considered an early indicator of what is likely to happen to property prices in the months ahead, so the 44% slump in approvals in November is worrying. But the signs point to a gentle correction rather than major crash. House prices are notoriously sticky on the way down because vendors are reluctant to accept less than they perceive their homes to be worth. As long as the economy holds up and unemployment doesn’t rise significantly there is unlikely to be enough forced sellers to trigger a full-scale slump. The number of home repossessions is set to rise 50% next year, but this is still low historically. In most areas there is also a shortage of housing supply.

Posted by little professor @ 02:20 PM (4474 views)
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20 thoughts on “Don’t worry

  • “So far, the balance of probabilities still points to a gentle correction rather than major crash”

    Well obviously over optimism is going to be with us right to the end in 2007 – lets hope 2008 brings in a huge dose of realism.

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  • “So far, the balance of probabilities still points to a gentle correction rather than major crash.”

    Ah yes the “elusive” soft landing which is still highly “probable”. Total boll*cks

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  • backseatcrasher says:

    of course this is the way it goes TO START WITH! When consumer spending slows due to the lack of MEW (from the “soft landing” at the top of the curve) problems start to appear. Unemployment will rise and people will then be forced to sell. But to give the press their due, they can hardly write what we know they’ll just bring it on faster and be accused of that, so it’s normal for the press to be dovish – until nearly everybody knows it to be the case.

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  • Just how “bad” has it got to get, before Andrew Ellson says things are bad ? “In most areas, the housing market is also underpinned by a shortage of supply.” Hey Andy ! Shut da fcku up,okay ? “With only 44,811 approvals in November, the second lowest on record, (the previous lowest was the October) we can confidently predict that demand for property is slumping. The real question is the extent to which this will lead to lower prices.” No Andy,the real question is how much pressure must a journalist be put under to write this sh*te ?

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  • dont forget those polish workers on 6quid an hour… they are still buying 400k houses like it is a monopoly game they must count for the shortage..

    After all the empty houses in the UK amount to nearly half of the empty houses in the USA and they are in panic…lol

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  • “Nonetheless, there is now a higher chance that prices will slump than any time in the last 10 years”.

    This newspaper is acutely aware of the prognosis for 2008. They are very gentle with their assertions, they want to be able to say “we told you so” in 10 weeks time, but not upset the sales advertisers during the festive season.

    It’s a good job we left Lakeside early, the queues trying to get in to spend the last of their money were pretty big.

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  • The key word here is mortgage “approvals” – there might have been the usual volume of mortgage applications but because lending criteria has tightened and the underwriters are becoming much more cautious this might have led to the reported drop.

    It’s about time journalists woke up to the fact that the demand for property is directly affected by the ability to acquire the necessary finance which is no where near as freely available or as cheap as it once was.

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  • Actually, what happened to the thousands of people coming off their fixed rates? Wouldn’t a proportion of the mortgage approvals be for people who are re-mortgaging?

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  • The message of this article is that if things are good house prices won’t fall much but if things are bad they could fall quite a lot. I just explained this to a four-year-old and she had no problem understanding this.

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  • The big flaw here is “As long as the economy holds up and unemployment doesn’t rise significantly”. That might well be the case before the age of highly questionable lending. Now with formerly available mortgages not available anymore, we have 1.4m people with “significantly” more to pay unless they can refinance elsewhere or get a useful wage increase. This “back-to-SVR-with-no-way-out” aspect is new, and the potential damage is incalcuable at the present time.

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  • @growler – spon on, ‘back to SVR or bust’ is the invisible sledgehammer in the room, followed by leveraging the equity in the home to get on the golden BTL trail, and finding that the lever works in the other direction as well. Many second home owners could find their first home at risk

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  • The problem is that articles that keep the gentle correction theory alive are welcomed by the general public, who then do what is expected – keep spending and buying houses. The article writers will never be held accountable. The only people who will be held accountable are those in the clutches of negative equity, in debt and redundant, etc.

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  • planning4acrash says:

    Renting2, people keep spending unsustainably so long as they are granted credit. People don’tz kill da economy Bankerz do, innit! They are like sponges, and the only reason for trift in times gone bye was because bankers didn’t create so much credit, (they had less confidence). We are in deep doo, because we privatised the banks and interest rate setting and regulations have shifted too far towards short term profit.

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  • Planning4acrash says:

    This is a problem with all western banks. Gordon Brown just followed the trend.

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  • @p4c – could not agree more. There are many that are thinking better be safe: like agricultural land kind of safe. I don’t think we’re in for a slump, but anyone who believes the UK housing market can stay neutral whilst everyones elses collapses seriously really has decided life on Mars is the way to go and Elvis is still alive.

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  • If No of mortgages are same but the value is same. this means only one thing.
    the value of the house per mortgage is falling.

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  • Journalists are always trying to talk their way back to good times. The market is a strange thing, prices bouncing around, absorbing some shocks, while others build up and cause a critical rebalancing of the forces and market expectations. While the market was in happy-clappy ever rising prices mode, the doomsayers could point to the reality of boom and bust, but the good news was enough to paper over the cracks. But pressure built up, US subprime finally broke the consensus and market sentiment fundamentally changed. Singing the happy tune no longer convinces anyone, journalists are just destroying their own credibility. Until there is a powerfully positive shock to the upside, the market has only one direction to run. Central banks pumping out easy money and lowering rates may work like last time, but then again they’re inflationary and if they don’t work, stagflationary.

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  • dohousescrashinthewoods says:

    I believe the housing market will stabilise.

    And I also believe that the Trilaterals are causing America to burn the last of the oil so they can go to Mars and leave us aliens behind.

    Goo goo gaa gaa prices only ever go up gurgle dribble golden rule snif (rolls eyeballs) aaand the BoE only target inflation because they are given the freedom to be independent flubber flubber where’s my plasma?

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  • I think the author of this article, Ellson sups on the same kind of sauce as his colleague Smith.
    One of the reasons that keeps me believing in an HPC (albeit a small one) is that Smith believes there won’t be one.

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  • Just wondering if all those banks, that could potentailly be insolvent, employee 30,000 people world wide, all with equiv (on avg, but prolly conservative) $200,000 mortgages…. Then what would the total figure be in outstanding depts of people with no job?

    Because everyday its looking like a big scary number with lots and lots of 0’s to me.

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