Tuesday, June 30, 2009

Here are the full gory details

June House Price Index

This whole 'Spring Bounce' is dragging on far longer than I expected ...

Posted by mark wadsworth @ 07:36 AM (2754 views)
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53 thoughts on “Here are the full gory details

  • So… If prices are running away with themselves again, why doesn’t the Govner put up feckin interest rates…. we are being stuffed from both sides by those meddling Labour [email protected]

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  • Brown doesnt care,labour wont be in power after the next general election,he’s trying to screw everything up as much as he can for the next party to come in and try and clear the labour crap up!

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  • happy mondays says:

    May be it’s not a bounce, but a continuum of the Norm ? May be the biggest financial crisis the world has experienced has been fixed by the clever people ? May be i should get a better job that pays me £60,000 + to afford me a house (foot on the ladder) May be the British public are stupid enough to let it all happen again ? Who really knows, but what we do know is that father time shall reveal the truth !

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  • george monsoon says:

    I have a real problem seeing how the market could recover from disaster so quickly.

    I must have blinked for a second when the banks started to lend again, and everyione got a 100k a year jobs.

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  • little professor says:

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  • bluebeach, Merve the swerve works for the BoE, not the government (latest puppets). Do a bit of research around who is
    behind the BoE and enlighten yourself as to who the real meddlers are playing this sick joke on the masses.

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  • Fallingbuzzard says:

    Noise. The big problem with Nationwide is that its a sample of about 7% of the market. Nationwide no longer release their monthly sample size because the sample has become so small that its statistically insignificant.

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  • without wanting to be a killjoy at all this grate(sic) news that house prices are soaring again…

    here in happy Hampshire (affluent London commuter cathedral city) rental property availability is growing, and times are so good that even Savills are dropping rental asking prices by 20% across 80+% of their stock and *still* not able to let after 2-3 months, hello?

    the fundamentals are not affected by labour spin, VI wishful thinking or lowest bank rates on record – we are bust, out of money and no amount of ‘magic’ by even Lord Voldemort of Hartlepool will change things in a hurry (ie less than a decade or 2)

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  • @ 5… Obviously you know the answers DM, so enlighten me why don’t you?

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  • @3-GM
    That’s exactly what’s going to happen. It is call inflation.I have done economics and the current news beats all logic. But then that’s what it appears to be illogical. Perhaps this is the making of new economics, no bust but boom only with QE or whatever other methods. The poor old Economics graduates must be pulling their hair out.Perhaps this is new communism. Look at China.
    Perhaps all responsible people must be feeling rather sick. I know of retired people who are rather upset with our current leader for reducing the interest rates on their savings. They will not be voting Nu Labour I suppose !!.
    Your comments would be appreciated.

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  • bluebeach. Never claimed to have answers, just pointed out that your statement was incorrect, and a pointer to how you could
    look into the actual facts. That’s up to you to carry out, not me.

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  • Ah, I see…. Gordon Brown is free from all blame, has had little to do with the destruction of this country and not behind the constant lies that we are being fed……it’s all the fault of Merv and the BoE… I get it now. God bless Gordon…

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  • house – i have tried to decipher your comments (with little success). The EMH has been proved not to have worked in the stock markets, although this was all the rage on the economic syllabus. (takes the dismal science a bit of time to catch up). I believe it doesnt work in any market. OK so much for that.

    What surprises me is that anyone is surprised by what is happening. If you accept that there is a bear rally (and you can spend all the time you want trying to invalidate the indices themselves) then whats caused it?

    3 things:

    1. The fact that prices have fallen so precipitously brings in the buyers for some bottom fishing. Normal.

    2. The government has tried to reflate (as you i think allude to). Ultimately i believe this will fail. Could i be wrong – of course.

    3. A rally becomes the justification for more rally. Whether thats people on the sidelines getting bored / sitting on cash that makes them little interest.

    So how long wil this last? And how much will they go up by? Probably for as long as a few more bears get sucked in, and as long as some people are achieveing asking prices then we may be bouncing around a bit or having a counter trend rally.

    NO MARKET GOES UP OR DOWN IN A STRIAGHT LINE.

    AND we are having low volumes…. http://blog.afraidtotrade.com/inside-a-volume-divergence/

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  • Techieman @ 10, a very good analysis… now that helps me work things out.. Thanks

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  • @techieman

    Thanks
    Your 3 points certainly offer some justification for the continued gravity defying house price rises.

    I do not imagine that this situation (rising house prices against a backdrop of job losses) can continue for much longer. I can only imagine that whatever private savings are left in this country are being sucked in to this house market vortex

    How long will it last

    This rally will last until every bull has invested their last bean in to this unstable rally

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  • house: I have ‘done’ economics but I can’t decipher your comments either. Perhaps you should have ‘done’ English

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  • To add to what Techieman says volumes are tiny and this is causing prices to hold up even increase to an extent.

    There is remember an embedded popular belief in the UK that house prices only go up, encapsulated in various myths/half truths eg house prices always double every ten years which is in turn fed by the media, the government, the VI’s even the BBC.

    Then people are thinking maybe all the problems with banks are sorted now, and as the problems were caused by “international turbulence” and “us subprime” we can go back to normal and we might even vote back in that Iron Chanchellor fellow who sorted out the global problems.

    But then none of this matters, in the US they have been unable to save house prices over the longer term and the US are as deft, if not more deft, at manipulation than we in the UK.

    Incomes don’t support prices, and to inflate the bubble again using credit would either rebreak the banking system or the currency or both.

    It really is over.

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  • Flash – dont be too harsh most of the younger (than baby boomers) population have been “done” by the housing bubble!

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  • matt_the_hat says:

    There is no new economics or failure of economics – its just like the Weimar Republic at the start (In 1923–1929 there was a short period of economic recovery) – we print money so the supply of money goes up, i.e. more lending – asset prices & wages start to go up so we feel better thinking we have low official inflation – everything goes well for a few years – then get your wheel barrows out!! History does repeat itself.

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  • Won’t it be horrible if the precipitous fall turns out to be just a retracement in a bull market. 38.2% coming up next?

    I’ll eat my hat, but anything’s possible

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  • What would you expect when the BOE is printing money and flooding the housing market with worthless money. No wonder house price is rising because of the goverment intervention. My question is why is unemployment rising despite the interest rate cuts??? The truth of the matter is the crisis is the result of poor judgements by the authorities. Unfortunately the man on the street will have to pay heavy price.

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  • In addition to techie’s 3 points @10 – Low transaction volumes = great difficulty making a mix-adjusted (the only worthwhile) comparison over time, especially when average price movement is very small. (Unless you base the comparison on asking prices, lol).

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  • …..and in a market with unusually low transactions you’d think the mix could be unusual.

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  • Flash I’d actually argue not possible other than in the event of something approaching hyper inflation or alt huge growth in UK GDP based on something other than consumer spending.

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  • MTH – when things start to tell us there is inflation … then there is inflation. I cant see anything that tells me that prices are increasing (i take the point that i am not including ROE in those equations). I suppose you could say that Oil up from $35 to $70 is inflation (but i would call that a rally against a down move from $147). I fear that this thread will now revert to the “is it inflation” / “is it deflation” argument thats been going on for a while. I posted two video over the weekend re Shilling (“penny for your thoughts”). Might be worth the inflationists taking a look.

    BTW i dont want to (and i havent) comment(ed) for a while on this argument, i know the inflationists believe this will kick off into hyper inflation – and maybe it will … eventually!

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  • Techieman and Flash

    Techieman, thank you for your comments. You are right, it was pure frustration that made me write what I wrote. I know you are right but I really wanted some kind of re-assurance that the normal economic condition should work in the long term. Supply and Demand will prevail eventually.

    Flash, I am not sure what you mean by that I should have done English. I was only commenting on GM’s comments. Surely if you keep on printing money then inflation is going to be a problem. Do you really think there will be control of money supply ? If every country increases the money supply in a similar proportion then the currency markets cannot change ie,the exchange rate would stay similar to what they were or am I missing a point.

    Also if anyone out there can say what a fair price for the first time buyers home should cost outside of the London and Home Counties.

    Your comments would be appreciated.

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  • Flash fundamentally do Fib numbers hold any sway. I thought you left the TA quackery behind? :-).

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  • happy mondays says:

    @ house, i think flash was getting at the use of the word “Done” economics…

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  • How fast can you run?

    Depends on the distance.

    I can run very fast, for a short time.

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  • house:
    “Also if anyone out there can say what a fair price for the first time buyers home should cost outside of the London and Home Counties”

    It’s a tough question but a typical FTB’ers property should cost about 3 times the average earnings of a typical first time buyer, living in the catchment area of the property he/she wishes to buy. If interest rates are high then you could reasonably adjust the ratio down to 2.5 X earnings.

    The ratio should never really go above 3 X earnings because there has to be a safety cushion in times of stress, for both the borrower and lender

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  • techie: just kidding. Sun’s out

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  • In any market;

    Demand greater than supply = Rising prices
    Supply greater than demand = Falling prices

    Demand is currently constrained by the lending criteria of the banks and that is not going to change in the short – medium term.

    Supply is constrained mainly by people being unwilling to sell at reduced prices (-15% to -25% from peak, depending on location)

    So if demand is pretty much fixed we will have to wait until supply increases for prices to fall.

    This will only happen when people either lose their jobs, which is a slow though painful process or interest rates rise so that people cannot afford their mortgages.

    So I believe the market will show no marked price reduction until interest rates move up, when that will happen is the key question.

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  • @24 Happy Mondays
    Thank you for your comments. Perhaps it should have read I studied “A” Level economics some 35 years ago. I am not an economics graduate.
    Does it really matter how the information is conveyed as long as there is support out there. Talking provides reassurance of any doubts you may have.

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  • house: quite right

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  • Actually techie, it’s probably worth expanding my view on technical analysis. I don’t and have never used it as a predictive tool. However, it often saves a bit of time when trying to get a perspective on how far the market has really gone. Most people see things quicker with pictures. I think it’s best use if for describing what happened in the past. i.e. “ as you can see it looked like a bull market at the time, but when you expand the time frame, you can see that it was, in fact, just a small counter rally, before house prices resumed their catastrophic fall”.

    This may sound a bit daft but many of our problems could be avoided if people could see a bunch of historical charts overlaid with indicators showing that things are not always what they seemed at the time

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  • Flashman
    Thank you for your comments.
    The earnings multiple you mention is correct but in practice it appears that it is not working. In the South West a FTB property appears to cost from £125k onwards ie. 5 times £25000. Do you think this could change ? My experience in the 1990’s was that it took 3 years to bottom out but it seemed a lot quicker. Also I do not remember the media going on about it as much as they do now. Perhaps I was spending my time trying to make ends meet and bring my family up.
    To be fair I did not watch much TV then.

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  • george monsoon says:

    Flashman, I agree with the 3 x earnings ceiling, but is that on 1 wage or 2?
    times have changed.. because in most households, the women also work and this has allowed the lenders to factor in their earnings as joint income.

    I believe it should be 3 x single income, especially in these strange times of low credit and high debt.

    That would equate to about 75k for me.

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  • happy mondays says:

    @ house, my use of the English language is pants, from an academic point, but that is partly the blame of the factory education i was given…But as you say as long as you can convey your thoughts, through the vehicle of tongue, or in our case Internet blogging and get your view’s / support across, that’s all we need, not concerning ourselves to much with dotting the i’s & crossing the t’s…

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  • house: “Also I do not remember the media going on about it as much as they do now”.

    For better or worse, there is a lot more media now, which as str1 would say, is exponentially speeding up the flow of information.

    “In the South West a FTB property appears to cost from £125k onwards i.e. 5 times £25000. Do you think this could change ?”

    Things always work their way back to a state of equilibrium but the trouble is you can get old and bored waiting and things can always get worse, rather than better. All you can do is make your best judgement and act accordingly. For what it’s worth, I don’t think houses will become more affordable because average income will sink just as much as property prices. I hope that’s not too depressing.

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  • House: I agree, the constant yo-yoing of downward spiral v’s upward trends seems to be ingrained in our press and news these days. I can’t remember it being this way during the last downturn. Who does all this benefit in the end? Doomwatch sums it up @5 “who are the real meddlers that are playing this sick joke on the masses?” Who?

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  • george: I think it is reasonable to allow combined incomes but only if they take 0.5 off the ceiling (2.5 x joint). There is a time proven actuarial reason for this

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  • Flash and Blue Beach
    Flash thanks. It is not depressing at all. Housing in my opinion was never affordable. You had to make sacrifices to make it affordable. But then the younger generation do not understand the meaning of sacrifices.

    Bluebaech, yes it is not helping anybody and giving false hope to people rather than allowing to them face reality, The whole thing is rather sick. It would be better if the media did a real job of concentrating on real issues in the world. Perhaps this would mean that the BBC would have to make many reporters redundant. This would make BBC leaner and the licence fee would not have to go up as much. lol.

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  • Flash @ 31 – Thanks for that as i have always said re TA – everything works until it doesnt. I am sure you know what i mean!

    Personally i think that most folks would do well to use TA but as a timing tool. For example if the RSI screams overbought and you think the market goes down that RSI being overbought (or a derivative [Whoops!] of it) might give you confidence to back your fundamental position. (as you will know though no TA indicator is the holy grail – similar to our discussion re pivots – if it did become the holy grail , it soon would revert to not being it). Re that RSI – the market could continue against you even though the RSI is overbought.

    Im not going to preach that fundamentals should be ousted in favour of TAs – even though i might think that. Each to their own – shouldnt you be at Wimbledon flash?

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  • @37 Flashman
    If there is an actuarial reason then why are the lenders lending more than they should. I do understand about liar loans but surely not everybody out there is lying.

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  • techie: I’ve got tickets for the semis. Looking forward to it, as long as they stop Cliff Richards from getting in

    house: I think they’ve tightened up a lot now. They still give you a bit more if you’ve got more than 50% equity and other assets because then they can’t lose

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  • Another indicator is a Sentiment index. I am a bit concerned that we have not had many Bulls on this site. I would like to see some join the fray, then my confidence would return that the falls continue. Maybe THEY are all at Wimbledon!!!

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  • @42 techieman
    The general sentiment out there is that the recession is not going last long and the Government this time will not allow it to hapen and all should be fine. It is this that worries me. People are not able to use their common sense to realise that things are not going to get better for a long while.

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  • mark wadsworth says:

    I’ll go with what Techieman says at 10.

    Or maybe wdbeast at 28 is more to the mark, let’s assume that prices are only being propped up by potential vendors becoming involuntary landlords and landladies, in which case the price fall will drag out for the usual three-to-five year period, surely there are only a limited number of FTB’s with the required 40% deposit to be able to borrow at low interest rates, even if they are sure that they will stay low, which also seems unlikely – something that can’t go on for ever won’t go on for ever.

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  • MW – “surely there are only a limited number of FTB’s with the required 40% deposit”, yes please tell that to my better half, her nesting instinct is pushing me towards becoming one of the suckered bears 🙁

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  • 51ck: I hear you brother. My wife couldn’t give a stuff about value. She wants a herb garden and she wants to decorate the kids’ rooms. She thinks I’m a stubborn tight wad and says that I don’t care about the money and that I just want to be proved right. I have to say that it’s probably true. I am about to start house hunting (boo hiss). If only a few more % came off the market first. Then I could say I told you so for the next 30 years

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  • mark wadsworth says:

    51ck and Flashman, I hear you brothers!

    Mrs W has her heart set on a 100′ garden with a vegetable patch. A bloody vegetable patch, that might add £100,000 to the cost of the house. I keep telling her we can get one with a small garden, stick the difference in the bank and the interest will pay for all our vegetables for the rest of our lives, but she’s not having it.

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  • I’ve started house hunting this week.

    Registered with four agents and have a pack of 10 property details to look at. The Wife is sick to death of renting a small, cardboard-walled, 1-bed flat with window-less bathroom, 8×5 foot kitchen and noisy neighbours: we’ve started trying for a baby and she wants a garden, three beds and a big kitchen. I’ve waited since late 2007 for the oft-promised 40-50% fall and we’ve got about 15% in our area, after nearly two years of correction, so I’ll take that thank you very much. Had enough of waiting and waiting and waiting and now have a deposit of about 40% of the value of a 3-bed semi in our area.

    Will any house we get be worth 20, 30 or 40% less in two or three years time? Couldn’t give a toss. Eight years of hard work and scrimping and saving, and two years of desperately hoping for big falls that don’t materialise, is long enough. Too long. BUY WHEN YOU CAN AFFORD TO AND NOT A DAY LATER: after all, who cares what your house is worth if you can afford the monthly payments? It’s for living in, not profiting from, right?

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  • MW – Suggest an allotment.

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