Wednesday, March 25, 2015

Could deflation wreak havoc in the housing market?

Could deflation wreak havoc in the housing market?

If deflation goes on for a fraction too long it could unravel UK house prices...

Posted by cornishman @ 12:38 PM (9317 views)
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19 thoughts on “Could deflation wreak havoc in the housing market?

  • And experts said this was nothing like Japan

    Credit bubble burst..money printing and near zero rates..=massive deflation for decades

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  • Some great comments here: this sounds like one of the resident HPC trolls:

    “No market *correction* will happen to fantasy distressed sellers ; the fundamentals do not support that , hence the housepricecrash numpties being wrong on Armageddon 2008-2015 , when will they be right ?”

    It’s happening right now. In real time. No amount of government boondoggles can prevent the inexorable decline.

    The gibbering fantasists continue to warble on about fundamentals, whilst ignoring the fact that the market has become completely detached from all reality.

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  • landofconfusion says:

    I’m afraid this is just more “The government needs to do something!” noise from a paper which represents the over-extended.

    As they say in the article we’re months away from the cusp of what might be called a ‘deflationary spiral’ and none of the current price drops are either in key areas or sustainable. Petrol prices for instance have already started climbing and I’ve seen food and general grocery prices plateau or even rise slightly recently.

    Also the idea that people will take out larger mortgages because the read and milk has got a bit cheaper is just ridiculous.

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  • landofconfusion says:

    ^^^ bread and milk

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  • zero or negative interests rates could push house prices either way. Martin Armstrong is predicting that the DOW will soar much higher. Not because the stocks aren’t already insanely overpriced, but because companies and people can borrow for nothing and still get a 3% return in the stock market. Therefore sentiment could play a much greater pivotal role in the housing market. If people think that everything else will go down but houses will stay the same or go up they may pile even more money into housing. Pensioners who would normally downsize and put money into the bank won’t sell, because they will see putting money into the bank as losing money. So despite all the logic that says house prices are insanely overpriced on all traditional metrics, we could still could see a rising market for a while yet before the mother of all crashes.

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  • I have been following Armstrong for years and he certainly saved me a lot of money in 2007/8. He has the most advanced AI computer on the planet and sucks up every crumb of information from the beginning of known records to date and his forecasts have been more than accurate. I will also be signing up for one of his packages when Socrates goes public. He has stated that every asset class will be subject to deflation. Yes, sentiment is a big driving force and when the housing sentiment turns, it will free fall in the UK. He has also stated that if you need to buy a house, get the longest fixed term you can. Cash buyers will be the winners if they can wait. The bond markets will collapse and the banks that are left will have no confidence to lend. So who will be buying the housing?

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  • Not so long ago they were talking of oil hitting $2-300….peak oil….finite resource etc etc

    Now the problem with oil is just where to store it all.

    Same will happen with property…there’s not much shortage as the bulls maintain…it’s in the wrong
    Hands…mass immigration does not equal huge house price rises…only 6% of land is built
    On etc etc

    It’s just a speculative bubble based on cheap credit and props..simple as that

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  • happy mondays says:

    Panem et Circenses more like..

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  • The cheap credit will last until the government no longer need to borrow more than they spend.

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  • landofconfusion says:

    “khards said…

    The cheap credit will last until the government no longer need to borrow more than they spend.”

    I don’t think that’s how it will work but that said I do think the government’s hand will have to be forced before IR’s rise. Really they need some inflation to erode the debt but trying to keep that level stable is going to be nigh on impossible and I can now see dark clouds on the horizon.

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  • @1 taffee draws a comparison with Japan – where house prices are still roughly the same as they were in 1975, when there was a massive spike in inflation (presumably due to oil prices). That was about the same time Britain gave up up on ‘traditional’ manufacturing and we became a nation of yuppies if anyone is old enough to remember that. So I guess my point is there are long term trends operating and one month’s figures do not signal the end of an era. Maybe things will change if red Ed gets in.

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  • As I understand it government borrowing interest is linked to 10 years bond.yield.

    We are in a bond bubble where some yield are going negative….many think the bubble.Will.be forced to burst

    Yields go up as people sell bonds or short them and they fall.in value..then there is.pressure for.central.banks to increase rates

    When this will happen is unknown..but it.is almost. Certain to happen at some point as markets have reached
    The point of no return.

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  • @Cyril 10

    Remember yuppies….almost unbelievable to think the service sector now is almost 80% of the economy..how can this
    Be healthy(if true)

    I guess the economy becomes a ponzi scheme.where you need population growth and consumer
    Spending and borrowing to keep the plates spinning

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  • landofconfusion says:

    “almost unbelievable to think the service sector now is almost 80% of the economy..how can this
    Be healthy(if true)”

    All money is ultimately for labour, whether that be to fix you house or dig up some gold and I guess that advanced economies can’t rely on burger flippers or component solderers to create the level of wealth need to maintain that level of advantage. And so they have to rise up and offer skills worth the extra money.

    @11 taffee

    I absolutely agree we’re in a bond bubble. But it’s worse: we’re in a central-bank induced bond bubble where the fundamentals have been distorted so far beyond the natural safeguards that it’s really very dangerous. When this eventually collapses we may well see a major crisis in it’s wake, perhaps in the same order of magnitude as the peak of the 1970’s crisis.

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  • “At its meeting on 24 March 2015, the Bank of England’s Financial Policy Committee (FPC) reviewed its assessment of risks to financial stability…..

    ….International and geopolitical risks to financial stability in the United Kingdom persist………

    ………Any of these risks could trigger abrupt shifts in global risk appetite that in turn might lead to a sudden reappraisal of underlying vulnerabilities in highly indebted economies, or sharp adjustments in financial markets…..

    …..The Committee remains concerned that investment allocations and pricing of some securities may presume that asset sales can be performed in an environment of continuous market liquidity…..”

    http://www.bankofengland.co.uk/publications/Pages/news/2015/021.aspx

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  • landofconfusion says:

    @14 cornishman

    +1

    So it would appear the captain is aware of the dangers of these waters and yet chooses to set course though them anyway.

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  • Allillanchoo says:

    5. britishblue said… “Martin Armstrong is predicting that the DOW will soar much higher. Not because the stocks aren’t already insanely overpriced, but because companies and people can borrow for nothing and still get a 3% return in the stock market”

    I thought he was saying that more for capital inflows for safety reason from the rest of the world to US post 2015.75

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  • So it would appear the captain is aware of the dangers of these waters and yet chooses to set course though them anyway.

    So long as he thinks he can remain captain of the ship, he’ll navigate off the end of the world.

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  • clockslinger says:

    NO, it couldn’t.

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