Friday, October 23, 2009

Do as you’re told

Be bullish about house prices, for now

Here's a contrarian thought: What if the house price boom of 1997-2007 was not a bubble at all, but a perfectly rational response to the low interest rate environment, which is set to continue for quite a while? It's not the boom in house prices that was the aberration, but rather the present, somewhat mild, correction.

Posted by little professor @ 10:37 PM (3272 views)
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10 thoughts on “Do as you’re told

  • gone-to-colombia says:

    Bull$hit

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  • fallingbuzzard says:

    Its not an either or, its both.

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  • A rather mixed up article which argues too many ways to make a useful prediction.

    “What if the house price boom of 1997-2007 was not a bubble at all, but a perfectly rational response to the low interest rate environment, which to judge by the latest, dreadful figures on the economy, is set to continue for quite a while? It’s not the boom in house prices that was the aberration, but rather, the present, and as it is turning out, somewhat mild correction.”

    So the property slumps in America, Spain, Ireland, Eastern Europe and Japan in the 90s were also just anomolies in low interest rate environments?

    “So why are house prices recovering? Perversely, the more the economy plunges into the abyss, thereby obliging the Bank of England to keep monetary conditions exceptionally loose, the more affordable house prices become.”

    So when the real economy recovers, house prices will fall?

    @amjidk

    The article does not suggest that prices will rise forever. The last sentence sums it up: “On housing, it is possible to be a short-term bull, but a long-term bear.”

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  • “Yet perhaps the most reliable bet on the future you can make is that interest rates will remain low for a very long time.”

    I think the Bank of England are about to have a very rude awakening on how they’ve handled interest rates. Either inflation will let rip or bond sales will fail and the IMF will not take no for an answer to the question of whether to raise interest rates.

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  • What an utterly reckless article, treating a house as if it is a short-term trading instrument. The headline says it all – “Be Bullish about house prices- FOR NOW” then to say “Money is cheap-but affordable mortgages won’t last for ever”

    Jeremy Warner you are an imbecile of the highest order! “Bullish for Now”??? Jeremy Warner would you take out a 25 year mortgage knowing that this rally is only short term or that affordable mortgages won’t last for ever? You are an utter moron. Take a look at what got us all into this mess in the first place. You ought to be banned from writing articles. Low interest rates are KEEPING people in the houses they can’t afford, they are not meant to get people to go out and buy houses they can’t afford. If so, low interest rates will be around forever and ever and house prices will just rise to soak up the affordability. Jeremy Warner, you are clueless.

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  • mark wadsworth says:

    What Estrader says.

    People should base their assumptions on what interest rates will do over the next twenty years, not the next two years.

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  • To be fair to the author, he is saying that cheap money will keep prices up in the near term, which several of us here have feared. And that indeed looks like what is happening – to some extent. It does seem to be the case that the day of reckoning has been postponed by central bank intervention. I just hope it’s not for too long. The events of the last two years illustrates how the distortions to the economy are having a profoundly destructive effect on our society.

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  • Prices could be heading for a nasty looking ‘head and shoulders’. imho.

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  • Look into my eyes, look into my eyes, the eyes, the eyes, not around the eyes, don’t look around my eyes, look into my eyes, you’re under.

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