The correction has been, gone, and is over

westernpromise

FWIW I was re-reading a couple of interesting pieces among my rarely-read saved pages recently.

One was this Ganudria article from December 2007 about the imminent housing crash: http://www.theguardian.com/money/2007/dec/05/houseprices.property1?gusrc=rss&feed=users

In there, note the quote from HPC’s Jonathan Davis that “over the next four to six years they [house prices] will fall 30%-40%”.

The other piece was this one from Andrew Lilico last year, debunking the idea that there’s a housing shortage: http://capx.co/there-is-no-uk-housing-crisis-and-there-never-was-one/

Mr. Lilico makes some interesting points, noting that renting is getting relatively cheaper (no doubt because of abundant supply thanks to BTL; we can expect that to start changing quite soon, I would think). I am not sure about his renting figures because they conflict with the BoE’s, which showed renting getting sharply costlier during 2008-2010. Most interestingly, though, he includes this chart from the Halifax that I hadn’t seen before. It shows that the real-terms price of mortgaged houses fell “33 per cent in real terms between July 2007 and October 2012”: http://centreps.wpengine.com/wp-content/uploads/2015/04/Lilico-6.png

So what that says is that in 2007, one prominent crash troll was actually right. Over the following 4 years prices did indeed fall 30 to 40% - 33% to be precise. I’m surprised this accurate prediction hasn’t been bigged up more by the bears. After all, it’s extraordinarily unusual for the bears to be right about anything.

Now it may be that none of the shouties takes people like Jonathan Davis seriously. He has been something of a stopped clock over the years, the price crash that he was “predicting” had in fact been already underway for 10 months at the time of the Nairduga article, and his other remarks in that article were - as usual - well over towards the completely potty end of the spectrum - “there will be an incredible flood of investment properties coming on to the market”, “if you own an investment property, sell it if you can” - all the usual appallingly bad advice in the usual style that you’d be ill-advised to have taken.

Yet it seems pretty clear that without many of the bears even noticing, the correction has been, gone, and is over. What would explain this? Is it just regional differences, or what?

Blacklight

We had this discussion when it was happening.

Anyone who predicted a 50% nominal drop 'before xmas' was proved completely wrong. There was however a real terms reduction that some people woke up to and tried to back-peddle, stating they'd always maintained their '50% off by xmas' was based on a real terms correction to save a bit of face.

Non of them bought anything anyway and still managed to miss the boat.

michaels

I think you need to remeber 'that' chart about speculative bubbles where there was some sort of small rise on the down=slope ('trap'?) suggesting that after the inital fall there would be a small rally before the clamitous collapse. The small rally is just prooving much larger and longer lasting than the graph implied.....

Thrugelmir

The immortal words of Sir John Templeton.

“Bull-markets are born on pessimism, grow on scepticism, mature on optimism and die on euphoria.”

westernpromise

Thrugelmir wrote: »

The immortal words of Sir John Templeton.

I’m not sure I’m following your point.

The Halifax house prices graph suggest prices undulating in a generally upward direction with about 15 years from trough to trough. We are currently just past the bottom of a trough. That says 7 or 8 years of inflation to be expected if the same pattern repeats.

The flaw of course is that this is mortgaged house prices, not all house prices, and that there is no regional breakdown. Probably there is one available via the source data wherever that is to be found. But it does seem that the mood music for the next few years will be in an upwards direction.

I bought in ’99 and ’12 so quite happy with timing, although I didn’t plan either buy around timing because I don’t think you can.

dktreesea

Depends what kind of housing. For normal residential housing, I don't see that dropping in price. Our population grows by at least 400,000 every year. That's plenty of working people coming onto the market and needing housing, a lot of which will be first time buyers. Rental property is a different matter. If landlords are having to sell up because the UC way, of paying everything in one lump sum direct to the claimant, means they miss out on the rent, I don't see BTL being such a great way to make money going forward.

Thrugelmir

westernpromise wrote: »

I’m not sure I’m following your point.

The words quoted speak for themselves.

I agree every generation says this time it's different. However there's been 8 centuries of financial folly.

dktreesea

Thrugelmir wrote: »

The immortal words of Sir John Templeton.


Quote:
“Bull-markets are born on pessimism, grow on scepticism, mature on optimism and die on euphoria.”

Euphoria though, is just what we're not likely to have. Mortgage finance is too hard to get for a significant proportion of the population, given their low wages. Well, relative to the current prices of houses, at least. The population grows at a steady 400,000 people every single year. If Cameron seriously thinks there's a chance we will vote ourselves out of the EU, he's dreaming and turning his own hair grey for nothing. Scotland voting for independence was a much better bet and even then people backed off and voted for the Union instead.


Concessions on in-work benefits won't stop the people from coming. One of the London bus operators has recently hired a whole load of Romanian bus drivers with no experience of their vehicles. How much more with the Romanians earn compared to back home? Seven times their Romanian salaries.
Even if, of the 600k+ immigrants who arrive each year (keeping in mind the net, of around 400k takes into account emigration and births over deaths) only 10% buy a house during, say, the following three years, That's still 60,000 houses swallowed up out of the local market by foreigners.


I know this sounds miniscule compared to the local housing stock, but it's what's for sale that matters, not the total housing stock. Would our housing crisis be so bad if all the empty properties came onto the market? The Telegraph in 2015 estimated this at 218,000. Shelter reckon there are 279,000 empty homes.

Thrugelmir

dktreesea wrote: »

Euphoria though, is just what we're not likely to have.

That's with reference to investors. "a feeling or state of intense excitement and happiness."

With an ageing population. There'll be a lot of property hitting the market over time.

chucknorris

Thrugelmir wrote: »

That's with reference to investors. "a feeling or state of intense excitement and happiness."

With an ageing population. There'll be a lot of property hitting the market over time.

The only problem is Thrug, that my 'intense excitement and happiness' (not that I actually feel that excited about it) occurs at being able to buy at 50% below peak, not anything remotely comparatively looking expensive! So, in other words, my bull markets are born on pessimism, and die on optimism (euphoria doesn't happen, after all, it is only money).

Thrugelmir

chucknorris wrote: »

The only problem is Thrug, that my 'intense excitement and happiness' (not that I actually feel that excited about it) occurs at being able to buy at 50% below peak, not anything remotely comparatively looking expensive! So, in other words, my bull markets are born on pessimism, and die on optimism (euphoria doesn't happen, after all, it is only money).

Not even money Chuck it's just numbers.