Wednesday, Oct 07, 2009

Why are the bears being refuted?

London Evening Standard: House prices surge in the face of gloomy forecasts

"House prices look certain to defy all expert opinion by ending the year up after another surge ... The extraordinary recovery since the spring confounds almost every prediction made earlier in the year by economists and property experts. In a Reuters poll of 36 City analysts in March — around the time the market was touching bottom — the average prediction was a fall of 14 per cent this year, with 23 analysts saying it would be at least 12 months before the market stabilised." It appears that HPCers are not alone in being wrong footed by this market.

Posted by quiet guy @ 12:42 AM (1943 views)
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1. sneaker said...

I don't know anyone buying and I know lots of people.

Estate agents I have spoken to say that the buying is from overseas.

So what does that mean? Weak sterling is allowing rich foreigners to move here and the Brits are still selling.

Wednesday, October 7, 2009 01:01AM Report Comment

2. gone-to-colombia said...

Nah, what ever this present rise is it wont last.

Wednesday, October 7, 2009 01:08AM Report Comment

3. greenshootsandleaves said...

I'm sure that, after examining the evidence (such as it is), Hercule Poirot could come up with an explanation. 'Zere was no foreign buyer! Zere was no surge! Why, zose sales figures had your fingerprints all over zem! Ees zat not so, Monsieur Vestedinterest?'
If Poirot is right (and the fact that properties remain on RM, etc. for ages, their prices slowly drifting down, suggests that he is), will the warped measuring sticks used by the industry ever be taken seriously again?

Wednesday, October 7, 2009 02:08AM Report Comment

4. happy mondays said...

@ greenshootsandleaves, love the ancient & acting skills, can you do a good Columbo though? As he would would get to the bottom of this riddle, he would definitely find some foul play at work, with some planted false evidence ! "And just one more thing sir " he would know from the start that something suspicious was going on & that it is a Crime ..

Wednesday, October 7, 2009 05:36AM Report Comment

5. mark wadsworth said...

It wasn't the market that wrong footed us, the market was headed in one direction only.

Where we got it wrong was underestimating the willingness and the ability of the government to reflate the bubble.

Wednesday, October 7, 2009 07:50AM Report Comment

6. smugdog said...

Birds Flyin High
You know how I feel
Sun in the sky
You know how I feel
Breeze driftin' on by
You know how I feel
It's a new dawn
It's a new day
It's a new life
For me
And I'm feeling good

Wednesday, October 7, 2009 08:16AM Report Comment

7. hpwatcher said...

(Where we got it wrong was underestimating the willingness and the ability of the government to reflate the bubble).i

Partly true, but volumes are still very low; cash buyers are stupidly allowing themselves to be stripped of their money on the basis of marginal price falls.

In the areas where I am looking (west london, north london), I am seeing house price falls, not rises. Expect more falls soon, as the depression continues.

Wednesday, October 7, 2009 08:24AM Report Comment

8. tenant super said...

I can't see prices falling in the short term because banks still lend 4x joint salary (instead of 3 x 1st + 1x 2nd) and will continue to do so if they can, as a severe crash is absolutely not in their interests. How people manage when they start a family, I don't know. Well, I think many people don't have a family for that reason. That's why at 33 years old, only one of my girl friends from school has a baby (we'll come to be known as the IVF generation).

Even if lenders are cherry picking customers, those few customers are borrowing 4 x joint income and so can pay an average of £165 k. With low supply, the prices are being kept up because there are few distressed sellers, due to low interest rates. There is also the 'arm-twisting' of state owned banks to be lenient with those defaulting on mortgages. Nadeen Walayat changed predictions and his crash graph to show a reduction in the rate of decline and the bottom taking much longer to reach due to interest rates and arm-twisting. But I am beginning to wonder how criminally far this government will go. The Scottish government are passing new laws to make it harder for banks to reposses ( ) . If wouldn't surprise me if eventually they almost totally halt repossession by setting up an equivalent of the Irish NAMA (bad bank) and taking bad mortgages into the scheme and organising a state sponsored rescue and rent-back scheme. Then there will be no crash even with raised interest rates and rising unemployment.

I hope I am wrong but I am already planning my exit strategy!

Wednesday, October 7, 2009 08:28AM Report Comment

9. Neil B said...

I wish the words 'recovery' and 'rising house prices' would stop being connected. The market is NOT in recovery.

Wednesday, October 7, 2009 08:58AM Report Comment

10. P. Doff said...

5. mark wadsworth said...
'Where we got it wrong was underestimating the willingness and the ability of the government to reflate the bubble'

Perhaps Greenbay was right. The housing market is too big to be allowed to fail.

PS. At the risk of upsetting Sarah may I make a political comment? I take exception to Osborne's latest catchphrase - 'we are all in this together'. It might be true but we didn't all contribute to the problem. As a risk averse person I don't see why I should suffer by bailing out the reckless gamblers and speculators, be they banks, companies or individuals. Osborne might get more votes from the 'silver savers' if he penalised the greedy and not them. I too demand my state pension at 65 - I've paid for it.

Wednesday, October 7, 2009 09:24AM Report Comment

11. will said...

I am obviously disappointed that house prices are being manipulated in a way that none of us probably can imagine, I will continue to sit out from the treadmill of home ownership for a while longer. Renting is cheaper than buying at the moment until a proper correction takes place.

The rich rule the poor and borrowers are slaves to lenders.

Wednesday, October 7, 2009 09:25AM Report Comment

12. tyrellcorporation said...

TS if the state are effectively going to honour any defaulting mortgages then surely buying a house is a one way bet and the ensuiing bubble would make this one look like a storm in a teacup. There has to be some element of risk otherwise we really are all doomed and are indeed having a 'paradigm shift'.

Wednesday, October 7, 2009 09:29AM Report Comment

13. Crash N Burn said...

Nice remarks Tenant Super.

You are damn right with what you say. I've just started a family and have been slapped with wage deflation - meeting living expenses now is becoming ever more difficult. As we are living in a global market place, I've started selling my Sterling housing
deposit so I can buy somewhere else. It is hard to see where we are heading as the Government can't seem to leave its dirty paws from market manipulation. I've lost patience with this place and will leave. The pound has dropped dramatically against
just about all world currencies. Colombian Peso and Brazilian Real have surged against our basket case banana republic. I'll be damned to hang around paying for others mistakes. Off to the sunshine for me!

Wednesday, October 7, 2009 09:30AM Report Comment

14. uncle tom said...

70% of UK households are owner occupiers.

Can 70% of newly formed households afford to buy a home? - Absolutely not.

Is renting an economic alternative for those priced out? - No.

Can the methodology used by the home price indices give misleading data in a thin market? - Yes.

Will the next three months' data show rising or falling prices? That is the question - but my money is on firmly on falls.

Wednesday, October 7, 2009 09:34AM Report Comment

15. britishblue said...

Agree with uncle Tom@ 11.

I also have a sneaky feeling that many with vested interests, The halifax and Nationwide to name a couple are not happy at the recent surge in the indicies. it would have been much better for them if there were a little drip fed growth of say 0.2% a month or even better if another 10-15% drop had happened in a short period of time and then there was the drip fed growth. They know, and their comment also infer that the current price rises are based on low transactions and that not too much should be read into them. But what this means is that when the market has more transactions as well as prices dropping because of fundementals, this little 4 month bubble has to be deflated and added into the calculation as well. This could easily mean that the second housing drop could be much more severe than the first and lead to disbelief and capitulation. Then people will start having a long term distrust of the housing market as happened in the early ninetees.

Wednesday, October 7, 2009 09:44AM Report Comment

16. smugdog said...

It's very much a twilight scenario in Great Britain at this moment in time.

Whilst I finalised a repo purchase yesterday at a terrific price, I sincerely feel for the family whose existence has been knocked sideways because of matters out of my control.

The flip side of the coin means that after my boys have turned it around in probably 4 weeks, I will have many eager couples looking to live the illusion that I have created.

It's on a knife edge. Make hay, but factor in that all important exit strategy as TS so rightly points out.

Wednesday, October 7, 2009 09:45AM Report Comment

17. letthemfall said...

This article is just a rehash of the stuff we've read in the papers lately. The question is how much of a boost is the market really getting (lots of house for sale 3 months and longer where I live). Whatever engineering the govt and banks are doing to hold things aloft, there must be a limit. But of course, the steady transfer of wealth to a small part of the population has been proceeding now for at least 10 years and they will do their damnedest to see it continue. How much this may continue to support overblown prices I don't know, but it would be some feat to hold them up for any length of time.

Wednesday, October 7, 2009 09:47AM Report Comment

18. techieman said...

" 36 City analysts in March — around the time the market was touching bottom — the average prediction was a fall of 14 per cent this year". Yes which makes perfect sense to me. As for UTs logic, historically we have only recently had owner occupancy reach 65-70%. If there is no wherewithal or desire to get on the bottom rung of the ladder than how can we have a continued price rises?

The question is has the recent rises hoodwinked people to have the desire. As for the wherewithal.....

Wednesday, October 7, 2009 09:49AM Report Comment

19. jack c said...

Picking up on mark wadsworth's point (Wednesday, October 7, 2009 07:50AM) "underestimating the willingness and the ability of the government to reflate the bubble"

Greenbay (remember him) made this point on several occasions and I have to admit he pretty much got it right. In the log term however I just dont think you can prop up the market.

Wednesday, October 7, 2009 09:54AM Report Comment

20. luckyjim said...

I think the mistake was dismissing each of the governments actions as futile. Too many here chose to put their fingers in their ears and deny that the odds were stacking up againt them.

Wednesday, October 7, 2009 10:10AM Report Comment

21. will said...

Without a correction here in the UK we are now looking seriously overvalued compared to most other countries in the World who have gone through genuine adjustments. This must surely put a stop to foreign investors buying here and to those looking to come to work here/live here.

The bad news regarding mortgage losses/defaults has been buried by the banks and propped up by the tax payer.

How dare the Tories suggest that 'we will work it out together'. I haven't contributed to this mess and shouldn't have to bail anyone out.

Wednesday, October 7, 2009 10:31AM Report Comment

22. icarus said...

Why is employment a lagging indicator in the 'recovery'? Because it's the most difficult to manipulate (except by statistical massage, which can't be both immediate and credible).

Wednesday, October 7, 2009 10:39AM Report Comment

23. wiltshire said...

It's funny how many times people on here (myself included) have written "but this time it's different", meaning it's not different at all. It was just another crash, like the previous ones.

However, it actually is different this time. I suppose it's different every time, it's just looking back through history you can perceive patterns.

The difference this time? Well for a start, who would have guessed that the bankers and their government poodles were so blinded by greed and belief in their own ability to re-write economic rules that they almost destroyed the capitalist system. Apparently we were a few hours away from the cash points being switched off. Masters Of The Universe indeed!

How do the same bankers and poodles think they can solve the problem. Well obviously spend even more money that we haven't got.

I admit that I've been wrong footed by the way this housing downturn has been developed. I had no idea how reckless Labour were prepared to be with fiscal policy and I underestimated the British public's desire for property and gadgets AT ANY PRICE. I'm pleased I'm an s.t.r. because I really wouldn't like to be subject to the will of any mortgage company right now, even with interest rates the way they are.

Does Gordon Brown believe he's re-written the laws of economics? Yep! Has he? Has he ****!

The smug amongst us should enjoy their moment in the sun. I have no idea when this mess will unravel but there won't be too many left grinning like a Cheshire Cat when it does.

All we can

Wednesday, October 7, 2009 10:39AM Report Comment

24. tyrellcorporation said...

I once watched a fly-on-the-wall documentary about life with some Foxtons agents. Every Monday (I think) they'd have a super session on the phones, battering down vendors on their asking prices so they could secure a sale/commission. My bet is that this practice is now rife as EAs fight for their very survival.

Using Globrix I have found that on average there is one property between £250k and £350k coming onto the market every 2 days.There are about 15 EAs in Exeter all clamouring for the scraps thrown to them and with the incentive to secure the vendor on their books they will no doubt over-inflate the asking price to tempt the greed gene. This will mean the property is on their books for far longer than normal and marketing that property will be that much more time consuming and expensive. The upshot is that any asking-price based index will show continued rises but the spread between asking price and sale price will widen and actual selling prices will continue to decline.

I expect there to be about 10 EAs left in Exeter by summer 2010.

Wednesday, October 7, 2009 10:40AM Report Comment

25. icarus said...

wiltshire - 'a few hours away from the cashpoints being switched off'. Don't you know they SAVED us from that fate, you ingrate.

Wednesday, October 7, 2009 10:48AM Report Comment

26. mark wadsworth said...

@ Tenant Super.

"That's why at 33 years old, only one of my girl friends from school has a baby"

There is a savage cut-off at about age 35, isn't there? I was lucky enough to be just old enough to buy a house in the nineties when they cost b-gger all, and Mrs W (in her mid 30s) & I have had our two kids, no financial problems, sorted. If I had been five years younger (or dallied for another five years before buying) then we would not be in this happy position. (OK, we've sold to rent since then, but hey).

Wednesday, October 7, 2009 10:50AM Report Comment

27. tenant super said...

Tyrell @ 10,

I do not think the government wiould ever honour all defaults - BTL would never be covered. Mortgages where people borrowed 6 x salary and 125% are already excluded from the Government mortgage rescue scheme. Though this scheme has saved very few homes, and is only available to up to 6,000 vulnerable households, my fear is that it is expanded on a massive scale.

Also, I am not convinced that the fact that so many people are priced out will lead to falls. I remember landing in Mumbai at dusk and though I was expecting to see street dwellers, it was the sheer scale that blew me away, mile after mile of thousands of people bedding down on the streets. When a vast percentage of the population can't afford a basic necessity, it doesn't automatically become affordable to them. I am not saying we're heading for third world mass homelessness but maybe we're heading back to a bygone era of families living in two roomed tenements. I know in my borough there are many families of five or more people in 2 bedroom box flats. First time buyers are needed to prop up the pyramid but perhaps young families will pay a small fortune for ever decreasing proportions of shared ownership properties. If they've never known anything different than spending 80% of their income on putting a roof over their heads, they won't complain. Perhaps it is only when the people priced out significantly outnumber the deluded home-owner that political unrest can force a shift.

As I said, I hope I am wrong and these extreme scenarios are paranoid and unfounded fears! I think what is more likely to happen is that the arm-twisting and market manipulation, halts further falls and there is a stagnation in prices whilst wages catch up.

Wednesday, October 7, 2009 10:55AM Report Comment

28. tenant super said...

@ mark wadsworth

Fertility starts to decrease sharply at 35 although 85% + of 35-40 year olds will have no trouble conceiving. I must confess, I also STR my 1 bedroom box at the peak. The bullish Mr Tenant Super still owns his 2-bed but we both bought in 2000 before prices went totally insane. It is mainly the state of London state schools that put me off having kids. And I have to finish my part-time PhD before I can leave London which will be a few more years (I'll be 36 then so not entirely over the hill and barren I hope!)

Wednesday, October 7, 2009 11:08AM Report Comment

29. rumble said...

If you average many eager and few stubborn sellers, prices would've fallen during panic selling time. Start removing the eager sellers from the set due to renewed , if false, confidence, stubborn sellers' prices remain unchanged, and the average starts to rise. What was my point, where is my coffee? The rise is not due to increasing prices, but removal of the panicked weak from the market? Any bad news could bring them back, although I'm not sure they pay attention to any news other than house prices. Also, sooner or later various events will turn stubborn sellers into eager seller, again bringing prices down.

Wednesday, October 7, 2009 11:56AM Report Comment

30. letthemfall said...

It will be a fine balancing act that maintains house prices at their current levels. Large enough loans have to be made to fund their purchase; interest rates have to stay very low (surely impossible except in the case of a deflationary slump lasting years); or the rich have to buy up pretty much all the houses there are, but I doubt there are enough of them or that they believe in property enough to sink most of their money into them. No, I don't think things are essentially different this time: prices have recovered a little, just as they did last time. If there is a difference it is that we have just survived a monumental financial crisis. Can an asset bubble really survive through this and on into the future? That would require some economic nightmare.

Wednesday, October 7, 2009 01:51PM Report Comment

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