Friday, May 30, 2008

Edmund Conway accepts a bubble crash is under way

Housing crisis: Average home now worth what it was in 2006

Edmund Conway comes round to our way of thinking. He doesn't mention factors that mean this crash could be worse than previous ones. House prices as a proportion of earnings or rents are far higher this time, and the turnaround in the availability of mortgages has been much quicker and more vicious than I remember it being in 1989-90.

Posted by monty032 @ 09:12 AM (1735 views)
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8 thoughts on “Edmund Conway accepts a bubble crash is under way

  • it_is_going_with_a_bang says:

    CRISIS? for who?

    “For rather too long, most City economists and property experts have been blithely predicting that Britain will escape relatively unscathed from this housing slump — that prices will rise at a much slower rate in the coming years, allowing wages to catch up with them. This goes against the experience of the past half century.”

    WELL IT’S A PITY ALL THE PRESS WERE MORE THAN WILLING TO PRINT IT THEN ISN’T IT.

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  • What commentators like this fail to take on board is the lack of foundations beneath the UK economy.

    We have had a boom built out of debt – consumer debt – government debt – and trade deficit. The manufacturing sector has been recklessly allowed to wither and die, as industrial estates become housing estates, and we now have a whole generation who lack basic industrial skills.

    As the pound steadily sinks against the currencies of the developing world, and imported manufactured goods become ever more expensive, the speed with which UK plc resumes manufacturing will be painfully slow, forcing the currency even lower and pushing the price of oil and other commodities into orbit.

    The USA, by comparison, is much better placed to revive its manufacturing base. Aside from a plentiful land supply, their education system has never lost sight of the need to make stuff. While we may laugh at their parochial attitudes to world affairs, the average American’s understanding of engineering, marketing, and the practical application of mathematics puts Britain utterly to shame.

    While the US will not escape the current depression, it looks set to recover from it far faster than the UK.

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  • 2. uncle tom said…

    “The USA, by comparison, is much better placed to revive its manufacturing base. Aside from a plentiful land supply, their education system has never lost sight of the need to make stuff. While we may laugh at their parochial attitudes to world affairs, the average American’s understanding of engineering, marketing, and the practical application of mathematics puts Britain utterly to shame.”

    I’ve always wondered what the average American would think of our DIY/propertydevelopment obsession. It’s got to the point in the UK where we are so shallow, skilless and image-obsessed that people who can turn a hand to carpentry, gardening, cooking or any other practical skills are looked upon as some sort of wizard, deserving of their own TV show.
    An American relative of mine wanted an extension on his house, so he built it. he wanted a garage, so he built it. His wife and entire family are skilled in crafts. 30 or so years ago, they hunted for their food. They are not unusual.

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  • There was a young single mum on Breakfast this morning who was in debt because of her fuel bill. Without wanting to sound unsympathizing this wold seem an unsustainable reliance on the state ?

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  • mark wadsworth says:

    The article mentions the 18-year house price cycle if you look closely (the 1979 peak was in fact in 1973/74, and the 1948 to 1973/74 trough was flattened and extended because we used to build lots more houses)

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  • monty032 is right – we should stop comparing this HPC with previous ones in this country and concentrate instead on the nature of the global crisis in both financial markets and, increasingly, in the ‘real’ economy. The biggest and most highly leveraged credit bubble ever (relative to GDP or anything else), massive amounts of long-term assets transformed into cash to keep it expanding, huge debts, no liquidity buffer in the US/UK (no savings or current account surpluses) and aggregate interest charges that are on the verge of becoming greater than the creation of the new credit/debt required to pay those charges and to avoid an avalanche of cross-defaults. No, this is more than just another HPC.

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  • bidin'matime says:

    Before too many people attack Edmund Conway, I have followed his column regularly over the past couple of years and he has always been a closet bear. Sadly, too naive to take his own advice, as (against his own better judgement, as he admitted at the time), he bought a place last year…

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  • indiablue19 says:

    Uncle T., yes I’ve said since the begining of contributing here that the USA has a much broader base of resources and skills – even backup supplies of food on shelves — to survive a real crisis than does the UK. Have lived both places for prolonged periods and know this to be true.

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