Prices to fall as "irrational" rally ends

PasturesNew

Generali wrote: »

You can't have a dead cat bounce where you can't go short.

As an exam paper would say: Explain.

Heyman_2

Generali wrote: »

At present, the banks either can't or won't lend enough money to people to support higher levels of transactions at current prices as we can see through the roughly static M4 money supply numbers (that is the money supply including credit creation by banks). If the housing market is going to start functioning again, either lending is going to have to be loosened or prices fall. As the total amount of lending available at present isn't enough to support transactions at current prices if volumes rise.

IIRC, near the end of 2008 all the predictions for 2009 were that the money supply was due to get worse, not better, and that the housing market was facing some big drops.

I'm not sure that there is a defined catalyst in place for prolonged falls in house prices.

Unemployment? Interest rate rises? Mortgage availability? Supply issues?

They are all factors but how much change would we have to see in each area before it starts impacting on the market?

Generali

PasturesNew wrote: »

As an exam paper would say: Explain.

AIUI, a dead cat bounce is caused thusly:

- Market participants 'short sell' an asset.
- Price of asset falls as shorters hope.
- Shorters want to take their profits so have to buy to cover their short positions.
- This profit taking causes a short lived rally in the price (this is the dead cat bounce).
- Price then resumes falling once profit taking no longer dominates.

You can't short sell housing in any meaningful way. Thus you can't have a dead cat bounce.

mortgage_adviser_2

A dead cat bounce is a figurative term used by traders in the finance industry to describe a pattern wherein a spectacular decline in the price of a stock is immediately followed by a moderate and temporary rise before resuming its downward movement, with the connotation that the rise was not an indication of improving circumstances in the fundamentals of the stock. It is derived from the notion that "even a dead cat will bounce if it falls from a great height".

Mistymaid

Not that I've got the time, but ... you've completely lost me on this.

Are you saying this is a dead cat bounce or not?

Dead cat bounce - people (investors/buyers) think the market has bottomed out, they buy into it maintaining or raising the price, (not necessarily for profit but in fear it may rise and they won't be able to afford it in the near future) but the market hasn't bottomed out, (Proven by market forces) hence price then falls again.

Dead Cat bounce.

Where does selling short come into it on this particular occasion?

System

It's a dead cat on a trampoline attached to a moonrocket.

Anyway, the article. Yep, that's what we've all been saying, finally people are starting to catch up

IveSeenTheLight

Joeskeppi wrote: »

It's a dead cat on a trampoline attached to a moonrocket.

Anyway, the article. Yep, that's what we've all been saying, finally people are starting to catch up

Yep,
Prices have risen 8.4% since Feb and is predicted to drop by 7%, so presumably will be positive on YoY

Hardly a dead cat bounce or bull trap scenario is it?

kennyboy66_2

Generali wrote: »

AIUI, a dead cat bounce is caused thusly:

- Market participants 'short sell' an asset.
- Price of asset falls as shorters hope.
- Shorters want to take their profits so have to buy to cover their short positions.
- This profit taking causes a short lived rally in the price (this is the dead cat bounce).
- Price then resumes falling once profit taking no longer dominates.

You can't short sell housing in any meaningful way. Thus you can't have a dead cat bounce.

http://www.tfsbrokers.com/pdf/RISK&MANAGE/2009/Sep-09.pdf

I've no idea what kind of volumes this compamy sees in their property derivatives, but someone must be able to trade.

I'd really fancy selling the 3 year and 5 year futures. Just can't see much downside.

kennyboy66_2

Heyman wrote: »

IIRC, near the end of 2008 all the predictions for 2009 were that the money supply was due to get worse, not better, and that the housing market was facing some big drops.

I'm not sure that there is a defined catalyst in place for prolonged falls in house prices.

Unemployment? Interest rate rises? Mortgage availability? Supply issues?

They are all factors but how much change would we have to see in each area before it starts impacting on the market?

The lack of new supply, particularly new building of family homes in the right part of the UK is perhaps the only thing that supports daft prices. Everything else points in the other direction.

I still thing years of stagnation are ahead for house prices, with the risk now on the downside.

Really2

What so falls over winter then stagnation.

Are the "bears:rolleyes:" now saying the same as the "bulls:rolleyes:" because it as been written in an article?

I would be interested to what the bears think about how far prices will fall now, and if they will fall below the 2008 low?

I don't find this article bearish at all in the scheme of things.

If a "bull" posted it last year the "bears" would have been slamming it for sure!