Saturday, January 12, 2013

Central banks will inflate their way to, inflation.

U.S. Housing Real Estate Market House Prices Trend Forecast 2013 to 2016

US House Prices Forecast Conclusion - As your read this, the embryonic nominal bull market of 2012 is morphing into a real terms bull market of 2013, with each subsequent year expected to result in an accelerating multi-year trend that will likely see average prices rise by over 30% by early 2016, which translates into a precise house prices forecast based on the most recent Case-Shiller House Price Index (CSXR) of 158.8 (Oct 2012 - released 26th Dec 2012) targeting a rise to 207 by early 2016 (+30.4%).

Posted by libertas @ 09:36 PM (2828 views)
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12 thoughts on “Central banks will inflate their way to, inflation.

  • So what date is the next crash penciled in for then? 2020 sounds like a good year, it has a ring to it.

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  • this is total crap, prices are still dropping in the USA, there is another wave of foreclosures waiting.

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  • The US housing market is manipulated in more ways than just QE/inflation. There was a rebound in 2009 but that was due to the First-time Home-buyer Program – but that soon petered out.

    Currently IRs, down-payments and the ‘for sale’ inventory are kept artificially low to support prices (banks control the supply of foreclosed properties so as to put a floor under prices in order to encourage house buying to prop up the market/bank assets), government-backed mortgage modifications provide generous refinancing to high-risk “underwater” applicants and the Fed is buying all the MBSs that banks produce. Despite all this any increase in the demand for housing comes not from owner-occupiers (number is falling) but from ‘investors’ or BTLs – (s)peculators who get easy financing to bulk-buy ‘distressed’ properties so they don’t have to be sold on the open market, a measure which would bring down average prices (bulk-buys not included in those average figures).

    These bulk-buys are taking the good deals away from FTBs, whose numbers are decreasing – young people are moving from their parents’ house to rented apartments owned by private equity bandits from Wall Street. Added to the decline in FTBs is a big decline in the number of repeat buyers – those with mortgaged properties seeking to move up the ‘ladder’ but can’t because of nequity. Since these are/were the meat and potatoes of the housing market there’s a big question as to what happens once the (s)peculators move on to something else (e.g. if house prices rise relative to rents and the margins are reduced). So there is a minus amount of ‘organic’ growth in the market.

    Bernanke’s recent pronouncements suggest he’s about to (a) loosen credit availability to make it easier to get a mortgage and (b) facilitate the dumping of bad loans onto Fannie/Freddie/Taxpayer – deperate measures for someone who’s supposed to be looking at an incipient bull market.

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  • Relax people, US house prices will still fall vs Gold even if the US Dollar is worth less than toilet paper!

    For most people, income and savings will not get them on the housing ladder. They will need the gains gold will make from all this inflation to get a leg up.

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  • What Icarus says.

    Walayat may have called this one a bit early although I wouldn’t like to argue against the long-term inflationary trend.

    It would be interesting to see how the US house price graph would have looked if the BTL bulk buys that are not counted in the official numbers had not happened. I have commented about the role of the GSEs on the American property market before.

    Also, the negative correlation between unemployment and house prices should look familiar to long-term readers of this blog.

    Image and video hosting by TinyPic

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  • The timing depends on how long the FED can keep interest rates low.

    Once market forces take hold again the interest will rip the housing market a new one, both in the US and here. It may not register in nominal terms, but in real term, say against gold as libertas points out, the housing market is going to hammered again.

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  • What happens when Federal Rates rise? How long can they be held down?

    Surely the longer they are held down the higher the spike when they do move upwards? Just back to the normal 5% would cane the housing market. How can that be avoided? But then, the economic alchemy going on right now is boggling everybody’s imagination.

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  • Quite frankly, I have to say that the bailouts mean that this plateau is probably actually a bubble. The amount of QE used to just keep houses on an even keel really put Nadeem’s suggestions at question. If QE was so effective, why did it not cause prices to rise already?

    No, I suspect that yes there will be an inflationary boom, but not in houses. They will stay put until rates start to rise, and then they will tank.

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  • rates for USA will go up very soon, they won’t be able to control borrowing costs, the market will take their choices away soon, after all how long can their credit card go on for?

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  • Walayat can be very wrong sometimes…in 2010 he forecast that the exchange rate for USD/GBP would be £1 = $1.75 – it’s barely £1 = $1.60. There are several other examples too.

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  • Mark, I think you underestimate the strength of having a world reserve currency. Could drag on quite a bit longer.

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