Support grows for 70% crash

macaque_2

The 70% prediction has attracted anger, criticism and even mockery on this forum. The reality is however that the 70% question (or something near to it) is not an if but a when. The government have used half % interest rates and QE like sandbags in a flood. The problem is that the UK is rapidly running out of sandbads whilst the flood waters of falling incomes and rising unemployment show no signs of abating.

This leaves us with the more pessimistic scenario 2 or scenario 3 as the most likely outcomes.

Scenario 2
(a) - the bar chart - assume a return to normal credit conditions by 2011; here we see average house prices stabilise at around £130,000 before beginning to rise again as income grow from 2012 onwards. Scenario 2(b) – the line graph - in contrast, assumes that credit conditions do not return to ‘normal’ conditions, but that access to credit remains constrained, leading to a fall in house prices to around £110.

Scenario 3
The most worrying parallel for the UK here is Japan, which experienced persistent deflation for more than a decade following the bursting of an asset bubble in 1989. Just as the UK government has done, the Japanese government attempted to break the negative feedback loop between the financial sector and the real economy by bailing out bankrupt banks, slashing nominal interest rates to zero and then embarking on ‘quantitative easing’ – these policies all failed to arrest house price declines which fell between 50-90 per cent (depending on the region) over a 15-year period.

http://www.bshf.org/published-information/publication.cfm?lang=00&thePubID=BFC02D63-15C5-F4C0-9975ED901869CECD

Jonbvn

But you said 70% falls by Xmas???

Seems like the membership of the 70% club is dropping.

Californication

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I still feel that house prices are overvalued and all the risk is to the downside, but these guys aren't likely to be particularly impartial.




--C

macaque_2

Jonbvn wrote: »

But you said 70% falls by Xmas???

I have not said that at any time. The 70% club's official position is that there will 70% falls over the next 10-20 years.

ses6jwg

The rate of unemployment slowed by more than expected at the last update?

drc

I think it is possible that 70% falls could happen although the government will do everything in its power to stop that. A few years ago nobody would have believed that banks could fail to the extent that they did. What I have learned from the ecomonic crisis is that new paradigms are constantly being created in the world economy, so never say never.

Rob_Marx

macaque wrote: »

I have not said that at any time. The 70% club's official position is that there will 70% falls over the next 10-20 years.

long enough so that if you are wrong nobody is still around to point and laugh :rotfl:

not that i'm saying you're wrong, you could well be right

HAMISH_MCTAVISH

macaque wrote: »

Some tin foil hat wearing nonsense....

Putting aside for just one moment your misleading interpretation and selective quotes, lets examine the facts behind the paper.

1. The paper was written as background information for a presentation in June 2009. So facts would have been compiled in the months before June, when the UK was just 2 months into what has since proved to be a 10 month recovery.

2. This is confirmed by the paper referring to housing data at Q1 2009 as the most recent data used. So the paper has used data that is now 9 months out of date as it's most recent, and this has subsequently proved to be the trough of this correction, with prices rising 10% since then..

3. The paper identifies three possible paths for UK housing, as of it's data 9 months ago. It also assigns a probability of each event happening. In the opinion of the authors, the events in option 1, ie, a strong bounceback, were the least likely to happen. Unfortunately for the authors, they have already been proved wrong as housing has in fact recovered strongly since Q1 2009. In fact, it has recovered more strongly than even the scenario outlined in option one.

So what can we learn from all this......

1. Those guys got it badly wrong.

2. Macaque is getting desperate, resorting to posting articles that are 9 months out of date, where the scenarios listed have already been proved wrong by the reality of events that have occurred since.

3. The 4 people that thanked Macaque obviously did not bother reading the paper referenced, as surely nobody is stupid enough to have read it but still not caught the fact that it was 9 months out of date, and it's projections have already been proven wrong.

Other than that, good job Monkeyboy, at least you referenced a paper this time. Shame it was so badly out of date and already proved wrong.

Graham_Devon

drc wrote: »

I think it is possible that 70% falls could happen although the government will do everything in its power to stop that. A few years ago nobody would have believed that banks could fail to the extent that they did. What I have learned from the ecomonic crisis is that new paradigms are constantly being created in the world economy, so never say never.

I don't think people would have ever seen rates at 0.5% either. Certainly no one in 2008 was actually predicting such a thing....and in 2007?

It's why I have stopped saying where I think things may end up. No one has a clue and everyone is simply guessing.

I just think it will be a lot worse in the near future than it is now.

carolt

Rob_Marx wrote: »

long enough so that if you are wrong nobody is still around to point and laugh :rotfl:

not that i'm saying you're wrong, you could well be right

Hamish will still be around, never fear.

macaque_2

Hamish

Quotations in the OP came from a serious article by a respectable organisation and references to 50-90% price falls applied to real events in recent history. Damning this as 'tin foil hat wearing nonsense' perhaps says more about the fragility of your own position than the thoughtful analysis of rational bears.

You were unhappy with the age of the data in the BSHF report. This stated:

Our second scenario is based on forecasts from the IMF32. The Fund takes a more pessimistic view of the UK’s economic prospects than does HMT, forecasting a contraction of 4.0 per cent in 2009, and a further contraction of 0.4 per cent in 2010.

We now know that economic data for Q2/Q3 is actually worse than the “9 month old” data used for the study.

August's forecasts showed the BoE would meet its inflation target over the medium term, but this was based on an annual economic decline of only 4.6 percent in Q3. Friday's figures show a 5.2 percent fall, only marginally better than the record 5.5 percent annual fall registered in the second quarter.

http://www.reuters.com/article/idUSTRE59M1IX20091023
By picking up on the age of the data, you badly undermine your own position.

Scenario 3 is based on the deflationary spiral experience by Japan and not '9 month old data'. The UK is already seeing deflation in the private (non banking) sector. Public sector deflation will start to bite hard after the next election. As to what will happen when QE stops and interest rates rise is anyone's guess (but it won’t be good).

1. Those guys got it badly wrong.
2. Macaque is getting desperate, resorting to posting articles that are 9 months out of date, where the scenarios listed have already been proved wrong by the reality of events that have occurred since.
3. The 4 people that thanked Macaque obviously did not bother reading the paper referenced, as surely nobody is stupid enough to have read it but still not caught the fact that it was 9 months out of date, and it's projections have already been proven wrong.

This cocktail of defences sounds a bit like:

1. Your honour, I am not guilty of hitting the bicycle because I was at home asleep at the time of the accident.
2. And if you don't accept 1, I am also not guilty of hitting the bicycle because he had no lights on his bike and he swerved right in front of me.