Why House Prices Aren't Going to Rise - From The Fool

Generali

http://boards.fool.co.uk/Message.asp?mid=11581097

The writer works for (runs?) a hedge fund.

...there are many reasons why I don't believe that what looks like a slowdown in the rate of slowdown, and possibly even a pause in the fall of GDP, will lead to immediate rampant rises in house prices. One is that I don't believe the economy will return to trend growth for a while yet, another is that unemployment lags GDP by a couple of years and it is this that determines house prices, another is there is a huge stock of housing waiting to hit the market (as noted above). Yet another is that as I predicted well in advance the number of homes in negative equity has quickly reached much higher proportions. There are several other points I could make, many of them a repeate, but I will focus for the moment on a more immediate sign of problems ahead with any recovery in the market related to mortgage supply.....

adr0ck

"there is a huge stock of housing waiting to hit the market (as noted above)"

do you know what he's referring to here gen?

can't see it

edit: my 2000 post!

Generali

adr0ck wrote: »

"there is a huge stock of housing waiting to hit the market (as noted above)"

do you know what he's referring to here gen?

I think he's being humerous and refering to this line:

Indeed in the relatively small submarket I keep an eye on I have seen a rash of houses put on the market by sellers suddenly willing to chance their arms after months of waiting.

adr0ck

you will probably find people putting their houses on the market to chance it

but probably an equal number who won't because of the cost of putting their house on the market (which we didn't have before)

StevieJ

Generali wrote: »

http://boards.fool.co.uk/Message.asp?mid=11581097

The writer works for (runs?) a hedge fund.

Is that meant to impress us

...there are many reasons why I don't believe that what looks like a slowdown in the rate of slowdown, and possibly even a pause in the fall of GDP, will lead to immediate rampant rises in house prices

I don't think you will find many people who expect rampant HPI on the near future :rolleyes:


Also I posted, well before the crunch got into full swing, that with RMBS mortgage funding gone from the market there was probably only enough mortgage funding for approvals of 50k;

I have never quite understood this If Joe Blogs wishes to move his 50k mortgage from A to B lender does this count as a approval? If so where is the extra lending?

Generali

StevieJ wrote: »

Is that meant to impress us

...there are many reasons why I don't believe that what looks like a slowdown in the rate of slowdown, and possibly even a pause in the fall of GDP, will lead to immediate rampant rises in house prices

I don't think you will find many people who expect rampant HPI on the near future :rolleyes:


Also I posted, well before the crunch got into full swing, that with RMBS mortgage funding gone from the market there was probably only enough mortgage funding for approvals of 50k;

I have never quite understood this If Joe Blogs wishes to move his 50k mortgage from A to B lender does this count as a approval? If so where is the extra lending?

If Mr Bloggs wishes to move his mortgage from HSBC to Nationwide that counts as an approval. Historically about 70,000 approvals or so (the person I quote in my OP thinks the number is higher than that) is consistent with a housing market in which prices are rising.

In the example you quote there is no extra lending and I suppose it is possible that a situation could arise where a hungry new lender is so eager to buy new business that they offer deals so good that tens of thousands of people move their mortgages each month in which case the above rule of thumb wouldn't work.

I am not aware of any current move to grab a large portion of market share with very aggresive pricing but then I am removed from the market by dint of geography.

As regards the no rampant increases in house prices, well the rises of 1-2.5% in house prices in a single month reported and seized upon by some posters on here equates to rises of 12.6-34.5% pa which sounds pretty rampant to me! Unless you feel that house prices rising by a third each year is par for the course.

StevieJ

I don't think anyone thinks that the previous increase is any more than and up and down in at at best a bottoming market, you yourself said that we shouldn't take one month in isolation, so why are you doing now

sabretoothtigger

People shouldn't care what they think will happen this year, for a house while they still dont actually own one they should be concerned what happens this time next year

Any correct decision for next year or further even will probably seem not so bright right now.
In terms of decades long commitment that a house can be, this year is over pretty much, its yesterdays news already.
For correct judgement, more relevant then this weeks or months news is the election result next year and other events like budget changes, etc

No one would use a calendar to time or start a 100 metres sprint. So watching the clock like there'll be a massive sprint to buy housing is also the wrong thinking imo.

In this case Im backing the tortoise over the hare, hedgefunds included



Im not looking to buy a house, I doubt anyone would loan me the money tbh but if I was I think I'd have a 2010 & 2011 calendar marked up with all the major events I know will happen and that would be my housing news, tons more relevant then anything that is basically retrospective on the news at ten that night.

Its then more possible to speculate on what might happen and where housing, cash & related costs will go


I think beyond this year what might happen to cash and housing pricing next is that house prices will rise while the actual value or return on investment, takes longer to recover.
It will be a better investment to be in housing then cash


While the value of both might drop, housing will be less volatile ultimately and give a higher return then savings rates over inflation.
I do not believe cash will (continue?) increase in value faster then housing






The article I nicked the picture from completely disagrees with me and is related to Generalli's link in its view
http://tycoonreport.tycoonresearch.com/articles/986084133/looking-for-a-home-check-the-jobs-numbers-first
I disagree because its not just how good or bad housing will be but will you find any better investment, I think not

Generali

StevieJ wrote: »

I don't think anyone thinks that the previous increase is any more than and up and down in at at best a bottoming market, you yourself said that we shouldn't take one month in isolation, so why are you doing now

I'm not, I'm saying (pretty clearly I thought although obviously not) that the occasional up month has been seized upon and extrapolated by others.

My take on house price stats is pretty clear I hope: MoM is basically noise; YoY or 3month on 3 month will tell you a story. Given the confusion over earlier point perhaps I haven't made myself clear enough either way.

What number of mortgage approvals do you think is consistant with a functioning housing market, StevieJ? If you don't think that a link can be drawn then do you see any other leading indicator as being helpful as a way to predict what may happen to house prices in future?

StevieJ

Generali wrote: »

I am not aware of any current move to grab a large portion of market share with very aggresive pricing but then I am removed from the market by dint of geography.

.

What about people who move house with same lender, is that a mortgage approval? bearing in mind that the new house price is unlikely to be the same as the old. In addition funds are freed up by people paying down their mortgage ( esp at the current time) and mortgages coming to the end of their life.

StevieJ

Generali wrote: »

I'm not, I'm saying (pretty clearly I thought although obviously not) that the occasional up month has been seized upon and extrapolated by others.

Not noticed that myself.

My take on house price stats is pretty clear I hope: MoM is basically noise; YoY or 3month on 3 month will tell you a story. Given the confusion over earlier point perhaps I haven't made myself clear enough either way.

Fair enough

What number of mortgage approvals do you think is consistant with a functioning housing market, StevieJ? If you don't think that a link can be drawn then do you see any other leading indicator as being helpful as a way to predict what may happen to house prices in future?

I have no idea, my simple point was the requiremnt for extra funding just because we have extra approvals.