Moneyweek: Why this housing crash could be worse than the 1990s

carolt

He's not worth it, mewbie.

I agree with chucky (go on, chucky - frame it - you may never see those words again ) that your time would have been spent more profitably doing almost anything. Picking your toenails. Anything.

Nothing could induce me to read through chucky's back posts (shudder emoticon).

fc123

dopester wrote: »

I don't doubt CIH jobs and people doing 'foreigners' does feed through, especially during the boom.

(Personally I tend to avoid anyone offering to do a job or sell something CIH or do a 'foreigner' for many a reason - including on principles - as I try to get a value trader who is legit, and like a receipt.. as to me I've got better chance of seeking a remedy if something goes wrong.)

The CIH / foreigner part of the economy will definitely continue. Even if HMRC seeks to close down on it. Yet what the CIH economy charges for it's services or products is directly linked to circumstances in the wider economy. The CIH economy is not immune to lower demand and having to cut it's own prices whatsoever.

Can you list some further CIH type jobs which you think do well? I've checked London Cleaners and £9ph seems to be a rate proper cleaning companies charge (not CIH types) + extra for cleaning products. Around here the post-offices and newsagents are filling up with cards for people offering services as cleaners and ironing your shirts, but on the other side I only see lower demand.

Many service sector companies begin to be hard hit when increasing number of people have their circumstances change and money gets tighter. More people become inclined to do their own cleaning and ironing, and not pay someone else £9ph to do it.

I just got a flyer through the door..honest to God...I would scan and link (if I had the techy skills) you wouldn't believe it.

OK; Do you require Ironing, weekly shopping. christmas shopping or gift wrapping.
Friendly Mature + Reliable Hours and days to suit you £8 per hour. Call.....

Anyway....I am a bit intimidated by your posts as, as usual, it is reasoned, researched and hard to repsond to But.......but.....

CIH and the Blk economy isn't always trades etc. It can be a restaurant taking 20% cash off the top or buying and selling on Ebay for a few 100 Pwk but not declaring it as a business...or....taking on a temp let shop or stall, only take cash, pay business rates in cash and exit after 3 or 4 months..so undercutting legit traders in area.

London cleaners are £9 phr CIH..trust me ...;)

I just wonder how big the blk economy really is.....far larger than anyone knows and it could prop HPI as they only need to declare enough to get mortgage...then anything on top is spends.

ETA...It is the gift wrapping that has done my head in. I recall the dog walking taking off a few years back and was amazed at that service....figured if you had a dog, you had time to walk it yourself...doh....A whole new service set up to meet demand.

dopester

fc123 wrote: »

I just got a flyer through the door..honest to God...I would scan and link (if I had the techy skills) you wouldn't believe it.

OK; Do you require Ironing, weekly shopping. christmas shopping or gift wrapping.
Friendly Mature + Reliable Hours and days to suit you £8 per hour. Call.....

CIH and the Blk economy isn't always trades etc. It can be a restaurant taking 20% cash off the top or buying and selling on Ebay for a few 100 Pwk but not declaring it as a business...or....taking on a temp let shop or stall, only take cash, pay business rates in cash and exit after 3 or 4 months..so undercutting legit traders in area.

London cleaners are £9 phr CIH..trust me ...;)

I just wonder how big the blk economy really is.....far larger than anyone knows and it could prop HPI as they only need to declare enough to get mortgage...then anything on top is spends.

ETA...It is the gift wrapping that has done my head in. I recall the dog walking taking off a few years back and was amazed at that service....figured if you had a dog, you had time to walk it yourself...doh....A whole new service set up to meet demand.

Points noted. I'd still argue that many restaurants and ebay traders who operate in the shadow economy are finding things much tougher than in the boom years. Not making the same level of profits than they have in the past. There also might be added competition from increasing numbers of previously honest people joining them in the shadow economy.

I can't cover sharp business practices which undercut legit traders but don't doubt such operators can gain lots of relative profit advantages.

It is a couple of notches down from intimidating... challenging I'd say, because increasingly members of this forum seem to be switching into a "back-to-boom" mentality.

Just because you've had a flyer from someone offering to do ironing, Christmas shopping, giftwrapping... I'd be very cautious about interpreting such offers of services as a sign of a healthy economy. You are doing so yes?

Sure there are people who still pay for cleaners, christmas shoppers, gift-wrapping.. and dog-walking. Who still have the money to push out chores into the market. I'm suggesting the number of people offering such services is rising (in shadow economy too), and the demand is falling.. which puts pressures on the fees/hourly rate for such services.

3 months ago we cancelled our pet-plan insurance (near £30 per month). We're not immune and took our time weighing up that difficult decision. Last thing we now want is a health-problem for the dog, but on balance.. it has to go for a dog who has had many good years of life.

In a depression, the service sector is like a shoal of fish trapped on a beach with the tide receding. As real income falls, many service companies starve for customers.

Many customers no longer find it cost-efficient to purchase services they can perform more cheaply for themselves . So they don't purchase.

The reason that services rise as income rises is that the opportunity costs of doing certain things for yourself, like fixing a meal or ironing your shirts rise. This pushes more household chores into the market.

If you're in work making one hundred thousand pounds a year, spending one hundred pounds to eat at a fancy restaurant is a bargain. It economises your time. You find it cheaper to pay someone else to get you dinner rather than take a few hours to make it yourself and then clean up.

But when Conrad McPasty loses his big-earning Estate Agent job, he can heat up some chilli or eat a hot dog. He does not have to keep the limo driver hovering outside, or worry about hailing a cab. It is amazing how many services you can do without when your income falls.

dopester

And to preempt claims that it is genuine "back-to-boom" conditions where things power ahead and it's a great time to buy a house, where businesses such as home-cleaners and dog-walking are set to thrive once again ect ect... I'd suggest the low-interest rates and QE are just desperate measures delaying much worse pain to come.

Desperate measures to try and counter the deflationary forces of rebalance and renewal.

Deflationary forces which will can only strengthen to fully destructive levels if political and special-interests groups (inc businesses in receipt of state-money backing, and baby-boomer asset wealth groups) continue to attempt and keep the order in their favour, at the expense of others - especially younger generations.

Disturbances analogous to economic depressions are characteristic of many complex systems in nature. Paleo-ecologists for example, have established that spectacular forest fires in Yellowstone Part, in which vast numbers of acres are consumed, such as that in the summer of 1988, "occur every 200 or 300 years." In effect there is a "long wave" of forest growth, followed by a major conflagration and a slow period of regeneration.

William H. Romme and Don G. Despain point out that forest systems evolve through various stages of succession. Growth is most luxuriant and varied immediately after a major fire. For quite logical reasons, the forest is not very flammable during the recovery period when a few widely spaced saplings and low-lying vegetation keep the forest floor moist.

Neither are major fires likely during the many decades when "the treetops rise too far above the the forest floor to be easily ignited from below." But during the "climax stage," when the understory of old-growth forests is littered with dead trees and rotting underbrush, a spectacular fire is almost inevitable. It is only a matter of time until lightning strikes in a dry season and the whole flammable mix explodes.*

The long cycle of economic life appears to be shorter than the long cycle of forest growth in Yellowstone Park, and we hope, less combustible. Yet both cycles may function in inheritantly similar ways. Just as it is impossible to prevent or suppress spectacular forest fires by putting out every small fire over time, so too, economic policies that aim to prevent depression by forestalling bankruptcies and enlarging debts may only increase the severity of the ultimate disturbance.

The mounds of debt paper issued by politicians in the leading countries, especially the United States, may merely be littering the understory of the economy with combustible material. When the spark is lit, it will produce a "mighty flame".

Of course, many people no longer believe that the long cycle of boom and bust still operates. They imagine that the climax of the cycle - the period of credit collapse and deflation - is now impossible because politicians have determined to prevent it. The is not the place to go into an extensive analysis of why this view is mistaken. We shall save that for another chapter. Suffice it to say that the populations of the leading industrial countries evidence a touching faith in the powers of politicians.

*The pattern of growth and conflagration is not unique to Yellowstone. Some Florida pine forests for example actually require fires in order to survive. The Florida pines have evolved so that their cones will not open to release their seeds unless they are heated to a high temprature by fire.

chucky

fc123 wrote: »

London cleaners are £9 phr CIH..trust me ...;)

my cleaner is £10 an hour

HAMISH_MCTAVISH

dopester wrote: »

And to preempt claims that it is genuine "back-to-boom" conditions where things power ahead and it's a great time to buy a house,

And there you go again...... Entirely misrepresenting the position of the more positive posters on the board.

Who said we were "back to boom" conditions? I never have, and I don't think anyone else has either.

The recession is not quite over, unemployment will continue to rise for another 6 to 12 months even when it does end, and recovery will not be consistent, with the probability of further ups and downs both in the general economy and house prices for some years to come.

However it is entirely possible to accept those facts, and also accept the facts that even with this recession only an extra 3 out of 100 workers will be unemployed, and half of them will be re-employed within 6 months. And to realise that with the modern reality of 2 income households, mortgage interest benefits, etc most of those who do become unemployed will survive the recession far better than in previous ones.

Things are not great, but they are far from as bad as the doom-mongers like to portray.

And why should people only buy houses in booms? For the 97 out of 100 workers who will retain their employment, this is as good a time as any to buy a house. In fact, it's a better time by far than waiting for houses to return to peak values, which they will do soon enough.

I'd suggest the low-interest rates and QE are just desperate measures delaying much worse pain to come.

I'd suggest the low interest rates and QE have been far more effective than you'd like to admit at preventing the worst excesses of recessionary asset value destruction.

We have indeed learned our lesson from the disastrous early 90's bust, and seem determined not to let that process repeat. I can see why that would p1ss off the doomers who gambled on such a bust to buy a cheap house. But everyone else is rather pleased about it.;)

HAMISH_MCTAVISH

chucky wrote: »

my cleaner is £10 an hour

Mine is £12 an hour, but she is rather good at ironing and will drop off and collect the dry cleaning, etc. And the chap that comes out to clean and detail my car is booked up to 5 weeks in advance.

I've not seen any signs of cutbacks in thse fields.

chucknorris

dopester wrote: »

3 months ago we cancelled our pet-plan insurance (near £30 per month). We're not immune and took our time weighing up that difficult decision. Last thing we now want is a health-problem for the dog, but on balance.. it has to go for a dog who has had many good years of life.

I did too, my dog's insurance was going up to £33 a month as well as a £70 excess introduced the year earlier and a 25% contribution to all vets bills coming next year when he reaches his 9th birthday.

I cancelled it because I thought it was very poor value, if he needs an expensive operation he would still get it, as I would pay for it. I just didn't want to pay £33 a month (plus future rises) which only covered a the first £5,250 anyway (7k less 25% contribution) and anything minor was falling under the £70 excess, so it was awfully bad value.

lostinrates

My dad's cleaner is a lot more expensive.....but he doesn't pay her cash in hand: robably works ot the same for her though..

chucknorris

HAMISH_MCTAVISH wrote: »

Mine is £12 an hour, but she is rather good at ironing and will drop off and collect the dry cleaning, etc. And the chap that comes out to clean and detail my car is booked up to 5 weeks in advance.

I've not seen any signs of cutbacks in thse fields.

Maybe I am falling behind the times I pay both my cleaner and gardner £8 an hour, I will look at again at local rates to make sure we are paying enough. Although I am thinking of doing the gardening myself next year in the better weather it's not that unpleasant to do.