Tuesday, May 31, 2011

So this is why house prices have been propped up

Fall in house prices raises fears for US economy

US house prices have fallen back to levels last seen in 2002 and consumer confidence has also fallen sharply according to new figures, leading to fresh fears about the country's economic recovery.

Posted by box thinker @ 06:13 PM (1310 views)
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10 thoughts on “So this is why house prices have been propped up

  • mark wadsworth says:

    “About 28.4% of US homeowners owe more on the mortgage than their house is worth, real estate data firm Zillow said this month.”

    Re the title you chose, remember that high house prices (and especially the resulting high indebtedness of some individuals) are BAD for the economy. Falling house prices are also bad for the economy, but the speed at which they are falling seems to be irrelevant, so best get it over with (the Lib Cons have missed the ‘blame it all on Labour’ window of opportunity – so expect things to be drawn out and ugly).

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  • box thinker says:

    Mark Wadsworth we are damned if house prices rise and we are damned if they fall. Labour made our bed, now we sleep in it. Do not get me wrong, I want house prices to fall but are we ready for the consequences?

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  • 2002 was an excellent year… the best ever IMHO.

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  • @box
    I don’t want to be party political, quite the reverse, but… about 2/3 of our money supply was issued as mortgage debt even before labour came to power (1996), if you believe the Bank of England. This thing has quite deep roots… yes the last lot presided over and fuelled the fire like never before, but it was there before, nonetheless. When you have a hollowed out economy with a shrivelled manufacturing sector, it seems that finance and financial services take over as the great hope. A large part of which was an asset price bubble in housing.
    N

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  • box thinker says:

    Nick, there is no dispute the money was sloshing around prior to Labour getting into power. The financial services created and circulated a huge amount of money ridiculously lent out at the same time Labour went on a spending spree.Double whammy. Do I believe the Bank of England stats? no I do not, but neither do I believe the Halifax, Nationwide or and other body in authority with an interest in taking money off me.

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  • As we are referring to the US economy in the article, I would respectfully suggest another round of QE is on the way to keep interest rates low across the pond. This will inevitably impact these shores, ‘cos we are tied to the USA, like it or not. So we will keep rates low as well.

    As result, UK inflation will go up and up. Mervyn and his MPC mates will retire in a couple of years (on nice pensions) having kept rates low while inflation lets rip. This is called “financial repression” – get used to the phrase. It was used after the last war to keep rates low and get the economy moving (albeit in a different scenario). Not much chance with a “hollowed out” economy, but there you are. It will destroy savings for pensioners and any prudent people (so what, I hear you say).

    As inflation goes up so will the stock market (weee-hee), and people will be encouraged to buy houses again at silly prices.

    Hardly surprising that Gold and Silver have rocketed in the last 18 months. Expect this to continue. Pick any chart….. Link:
    http://www.kitco.com/

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  • I dont want to see a total crash but want to see house prices come more in line, I cant see anything like the 40-50% crash some are predicting but I can see a 10-15% adjustment, now if that adjustment will be flat house prices and high inflation or a fall in prices is yet to be seen.

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  • bellwether says:

    As we are referring to the US economy in the article, I would respectfully suggest another round of QE is on the way to keep interest rates low across the pond.

    QE DOES NEXT TO NOTHING TO INTEREST RATES CF CENTRAL BANKS ACTUALLY SETTING INTEREST RATES. NEITHER IS QE AN INCREASE IN THE MONEY SUPPLY. YOU MISAPPREND QE AND SO GOES YOUR ARTICLE.

    This will inevitably impact these shores, ‘cos we are tied to the USA, like it or not.

    TIED TO THE US IN WHAT WAY THAT IS RELEVANT TO THE PRESENT DISCUSSION.

    So we will keep rates low as well.

    WE MIGHT BUT THIS HAS NOTHING TO DO WITH QE. THERE ARE ALSO ARGUMENTS (YOU DON’T CONSIDER) AS TO WHY INTEREST RATES SHOULD BE LOW EG OVER INDEDTED HOUSEHOLDS.

    As result, UK inflation will go up and up.

    AT BEST THERE IS EXPORT INFLATION. CHINA SEEMS THE MOST PLAUSIBLE EXPLANATION FOR THAT ALTHOUGH I WOULD CONCEED THAT IF INTEREST RATES WERE AT 5% NOW OUR CURRENCY MIGHT BE STRONGER BUT SURELY ONLY FOR A BIT UNTIL HOUSEHOLDS BEGAN TO CRATER AND WITH THEM THE ECONOMY.
    Mervyn and his MPC mates will retire in a couple of years (on nice pensions) having kept rates low while inflation lets rip.

    IRRELEVANT AND EMOTIONAL.

    This is called “financial repression” – get used to the phrase.
    POLITICAL AND NOT OBJECTIVE.

    It was used after the last war to keep rates low and get the economy moving (albeit in a different scenario). Not much chance with a “hollowed out” economy, but there you are.

    A HOLLOWED OUT ECONOMY – YOUR PESSIMISM ABOUT THE UK IS FLIPANT. THERE ARE PROBLEMS SURE BUT YOU DON’T NEED TO REACH FOR EXTREMES OR THROW THE BABY OUT WITH THE BATHWATER. I CAN ONLY IMAGINE THAT FOR SOMEONE TO HOLD YOUR VIEWS THEY WOULD NEED TO BE PRETTY UNPRODUCTIVE IN THEIR OWN RIGHT. FROM YOUR COMMENTS I CAN PRETTY MUCH GUARANTEE THAT YOU DON’T OWN A BUSINESS, INNOVATE OR EMPLOY PEOPLE.

    It will destroy savings for pensioners and any prudent people (so what, I hear you say).

    KIND OF SO WHAT. PRUDENT PEOPLE DON’T INNOVATE AND DON’T MAKE THINGS HAPPEN. CURRENT ENVIRONMENT IS DEFLATIONARY FOR MOST BUSINESSES WHICH IS WHY STOCK MARKETS ARE DOING WELL.

    As inflation goes up so will the stock market (weee-hee), and people will be encouraged to buy houses again at silly prices.

    AS TO WHY THE STOCK MARKET IS GOING UP SEE ABOVE – ITS ABOUT PROFITS BECAUSE SALARIES RENTS AND COST OF COMMERCIAL PREMISES ARE COMPRESSED

    Hardly surprising that Gold and Silver have rocketed in the last 18 months. Expect this to continue. Pick any chart….. Link:
    http://www.kitco.com/

    SPECULATION BASED ON MISAPPREHENSION THAT YOU RATHER NEATLY LAY OUT HERE.

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  • mark wadsworth says:

    @ Box Thinker, we are only damned while house prices are falling, once they bottom out and a few bad debts are written off, we can start again, this is one important lesson we learn from John Major.

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  • @Bellweather,
    I have a question for you about MMT. Can take off list if you like; drop me an email at [email protected].
    N

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