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Debate House Prices
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Government repressing house prices.
HAMISH_MCTAVISH
Posts: 28,592 Forumite
As an alternative viewpoint to the "government propping up house prices" claim that we see so often around here....
I disagree.....
The state has done naff-all meaningful to prop up house prices.
In fact, just the opposite, they've missed opportunity after opportunity to restore a functioning housing market by continuing to desire a policy of maintaining nominal terms rises of less than inflation. Which can only be achieved by continuing to exclude millions of potential buyers from the market.
Now sure, you could safely say that if the state had just sat back and let the wider economy burn to a greater extent than it did, then house price falls would have been worse.
But that was never going to happen, other than in the minds of a few desperate bears on various internet boards.
And regardless, that's not the same thing at all as insisting that there is some great effort the state is engaged in to deliberately prop them up, when at best, you can only claim the results have been minor and incidental to saving the wider economy.
You could make at least as convincing a case that the state has implemented policies which have worsened lending availability and artificially repressed house prices, such as changing mortgage rules, failing to fix the dysfunctional credit markets, changing capital requirements for high LTV lending, etc, etc, etc.
Mortgage lending remains, in the words of the CML themselves, "completely dysfunctional".
We have millions of renters paying more in rent than they would for a mortgage, demonstrating their ability to service debt, yet forced into renting thanks to mortgage rationing.
If the state really wanted to prop up prices, they'd fix that problem (as the Americans have now done with unlimited QE into RMBS) and allow the natural supply/demand imbalance to ration housing through price and genuine affordability, rather than through heavily and artificially restricted mortgage lending.
There has been an extraordinary confluence of events conspiring to keep house prices artificially low over the last few years.
Yet in spite of endemic mortgage rationing, high unemployment, record high bank margins, crippling deposit requirements, record high rents preventing saving, doom and gloom all over the media, and an incompetent government that has missed opportunity after opportunity to fix a dysfunctional and broken market, prices remain just 10% below peak and are now are rising again.
Given the next few years are going to see the biggest wave of FTB age people in history, bigger even than the boomers, come crashing into a housing market with one of the worst shortages in history, where building has fallen to the lowest levels in a century, and all in the run-up to a general election..... time is very much running out for how much longer they can keep prices artificially restrained.
When some semblance of normality returns to the currently dysfunctional lending markets, as it eventually and inevitably will, the speed and scale of prices rises will be truly eye watering.
And 3, 2, 1......
Argue.
I disagree.....
The state has done naff-all meaningful to prop up house prices.
In fact, just the opposite, they've missed opportunity after opportunity to restore a functioning housing market by continuing to desire a policy of maintaining nominal terms rises of less than inflation. Which can only be achieved by continuing to exclude millions of potential buyers from the market.
Now sure, you could safely say that if the state had just sat back and let the wider economy burn to a greater extent than it did, then house price falls would have been worse.
But that was never going to happen, other than in the minds of a few desperate bears on various internet boards.
And regardless, that's not the same thing at all as insisting that there is some great effort the state is engaged in to deliberately prop them up, when at best, you can only claim the results have been minor and incidental to saving the wider economy.
You could make at least as convincing a case that the state has implemented policies which have worsened lending availability and artificially repressed house prices, such as changing mortgage rules, failing to fix the dysfunctional credit markets, changing capital requirements for high LTV lending, etc, etc, etc.
Mortgage lending remains, in the words of the CML themselves, "completely dysfunctional".
We have millions of renters paying more in rent than they would for a mortgage, demonstrating their ability to service debt, yet forced into renting thanks to mortgage rationing.
If the state really wanted to prop up prices, they'd fix that problem (as the Americans have now done with unlimited QE into RMBS) and allow the natural supply/demand imbalance to ration housing through price and genuine affordability, rather than through heavily and artificially restricted mortgage lending.
There has been an extraordinary confluence of events conspiring to keep house prices artificially low over the last few years.
Yet in spite of endemic mortgage rationing, high unemployment, record high bank margins, crippling deposit requirements, record high rents preventing saving, doom and gloom all over the media, and an incompetent government that has missed opportunity after opportunity to fix a dysfunctional and broken market, prices remain just 10% below peak and are now are rising again.
Given the next few years are going to see the biggest wave of FTB age people in history, bigger even than the boomers, come crashing into a housing market with one of the worst shortages in history, where building has fallen to the lowest levels in a century, and all in the run-up to a general election..... time is very much running out for how much longer they can keep prices artificially restrained.
When some semblance of normality returns to the currently dysfunctional lending markets, as it eventually and inevitably will, the speed and scale of prices rises will be truly eye watering.
And 3, 2, 1......
Argue.
“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”
0
Comments
-
No need to argue.
I give you funding for lending.... Your argument falls over.0 -
Graham_Devon wrote: »No need to argue.
I give you funding for lending.... Your argument falls over.
It would if it was meaningful in scale, like the Americans unlimited QE into RMBS.
But as I have often posted, FFL is just a very, very small step in the right direction, it's certainly nowhere near a cure for a still dysfunctional and broken mortgage market.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
HAMISH_MCTAVISH wrote: »It would if it was meaningful in scale, like the Americans unlimited QE into RMBS.
But as I have often posted, FFL is just a very, very small step in the right direction, it's certainly nowhere near a cure for a still dysfunctional and broken mortgage market.
It's still there, which voids your entire argument.
Your description of "meaningful" in this scenario is going to differ from other descriptions. You'd only really be happy with unlimited amounts of cash, but that doesn't mean it's not something directly helping the housing market.
I could go on about other help, such as SMI, incentives not to reposess, a policy of forebearance, NewBuy, but there is no need, FFL is all I need to make your argument null and void.0 -
They have spent Billions of pounds propping up house prices.
The banks were bailed out.
If they did not bail them out the banks would have had to bail themselves out by liquidating bonds, or in simple terms peoples mortgages Would have been sold on.
The buyers of these mortgage debts would have had free rain to raise interest rates to what they chose.
With 20%+ Interest rates charged house prices would have hit freefall.
Something benefit bashers would be well reminded of.
those in debt with mortgages got the biggest benefit of all.Be happy...;)0 -
spacey2012 wrote: »The buyers of these mortgage debts would have had free rain to raise interest rates to what they chose.
Not true.
Mortgage rates are governed by the terms and conditions of the document. The owner of a mortgage cannot raise rates outwith those terms.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
clearly we have a dysfunctional mortgage lending system
we seem to have a lot of demand i.e. lots of people want to buy properties
we seem to have loads of money available i.e. the price of money (interest rates) is very very low
but the two don't meet
why is that?
either we don't really have a lot of demand or we have regulators intervention which is stopping the market work
or maybe a bit of both0 -
Graham_Devon wrote: »It's still there, which voids your entire argument..
If society is going to freeze to death without a billion tonnes of firewood this winter....
Offering a toothpick is not a meaningful contribution towards averting that fate.
FFL is a toothpick, not a prop.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
HAMISH_MCTAVISH wrote: »If society is going to freeze to death without a billion tonnes of firewood this winter....
Offering a toothpick is not a meaningful contribution towards averting that fate.
FFL is a toothpick, not a prop.
A toothpick.
Come on Hamish. You are making yourself look silly.
CML figures show that £40bn was lent on mortgages in the quarter ending December in 2012. Extrapolate that across the year and thats £160bn.
Funding for lending is £80bn.
And you try, in your wisdom, to describe it as a toothpick.
Really can't be bothered saying anything further. If the only thing which you believe would be direct stimulus to the housing market is "unlimited cash" then you are always going to see anything else as irrelevant.
The CML themse;ves have suggested it's pushing prices up.0 -
Graham_Devon wrote: »CML figures show that £40bn was lent on mortgages in the quarter ending December in 2012. Extrapolate that across the year and thats £160bn.
Funding for lending is £80bn.
.
Of which just £4 billion has been drawn in the first 5 months of the scheme up until year end.
Like I said, a Toothpick.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
HAMISH_MCTAVISH wrote: »Of which just £4 billion has been drawn in the first 5 months of the scheme up until year end.
Like I said, a Toothpick.
Ahhh, well, see this is your problem Hamish. You appear to believe you can force people to borrow.
You can't.
Neither can you force banks to lend to high risks.0
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