House prices to stagnate for 'years'

[Rafa]

This is an interesting point.

...

But the indicies stayed flat

Is this becuase of bad data, or is it because the way the median house prices works, a few fire sales here and there don't really move the price much...

And do a few fire sales here and there matter anyway...?

My statements are based on the indices... and I guess you can see when I say, its you guys saying the markets gonna come crashing down, are actually the ones hoping that 'this time is different'!

 

[wayneL]

Is this becuase of bad data, or is it because the way the median house prices works, a few fire sales here and there don't really move the price much...

And do a few fire sales here and there matter anyway...?

My statements are based on the indices... and I guess you can see when I say, its you guys saying the markets gonna come crashing down, are actually the ones hoping that 'this time is different'!

Rafa,

With respect, you are spinning my post. This was not a few fire sales.

 

[Rafa]

Rafa,

With respect, you are spinning my post. This was not a few fire sales.

Sorry, that was not my intention...

was merely speculating the possibility of the lower price sales not effecting the indices cause they might have been fire sales... or maybe becuase there simply not that many of them...

Or, maybe even that the stats are rigged!

So sorry about that...


PS: I need to find out more about gentrification...

 

[krisbarry]

What the hell has any of this got to do with stagnating house prices...get a bit carried away did we?

Hence the reason why I would like this thread closed down, clearly we are all going around in circles and nothing is being solved here. It really is a useless waste of a thread.

The thread has now become too long, too invloved and inconclusive.

Can we have the padlock please?

 

[chops_a_must]

I didn't say any of this.

Sure about that?

Longer term its going to be more beneficial for the individual to identify a new profession that will allow them to become valuable and hence make property prices seem less over-valued, relative to them.

 

[wayneL]

Hence the reason why I would like this thread closed down, clearly we are all going around in circles and nothing is being solved here. It really is a useless waste of a thread.

The thread has now become too long, too invloved and inconclusive.

Can we have the padlock please?

Kris, we are clearly enjoying jousting over this, nobody is being unreasonable (except the bulls {JOKE}) and nobody is being abused. Just don't read it if you think it is going nowhere

Rafa

Here is a post I put on another forum which gives a very simplified example:

We've all heard and scoffed at the diktat that houses must only ever rise.

I would like to open a discussion of how much of this is actually paid for via the process of gentrification, i.e. the money sunk into property in renovations and additions.

Let's take a small example of 5 houses which all sold at the same time:

1/ @ 100,000
2/ @ 110,000
3/ @ 130,000
4/ @ 150,000
5/ @ 200,000

We have a median value here of 130,000 and a mean of 138,000

The buyer of the first house does an extensive addition and reno on the house and spends 80,000

By a freak occurrence, the same five houses sell at the exact same time 2 years later:

1/ @ 180,000
2/ @ 110,000
3/ @ 130,000
4/ @ 150,000
5/ @ 200,000

In the example there has been absolutely no HPI at all, except for someone paying up for the reno on the 1st house.

But lo! Look how the figures change; we have a median value of 150,000 and a mean of 154,000. It appears that there is an increase of ~15%. But that 15% increase in the reported figures has been paid for by the renovator.

The current boom has partly been a renovating boom as well

On another thread, 1 poster stated that anecdotally, prices in the NW have been stagnant for 2 years, whereas another pointed to a rise in the official figures... gentrification?

I suspect so. New builds must surely add to this as well. This process of gentrification always adds an upward skew on the official figures.

These nominal values could decrease somewhat and the median and mean values could syill show an increase.

Cheers

 

[Rafa]

Ah... thanks for that WayneL
That does make a lot of sense...but i don't think its that simple...

I can only base this on anecdotal evidence, but i know if you do make all these 'value-adds'... you rarely get that money back if the market is in a slump.... i.e. in reality, in a slump, the person who did 80k of value add would be lucky to see 20k of it...

Conversely, In boom time, the person who didn't do any reno's will probably make 40k, based simply on the potential to renovate.

In the end, its the location that matters, hence the old saying in regards to the best house in worst st vs the worst house in the best st.

 

[theasxgorilla]

Sure about that?

Yes I'm sure. I was generally refering to a very hypothetical individual and you started talking about builders.

Perhaps you associated my remark about unionised work forces with the housing industry and tried to join the dots...but in my experience unionisation of the housing industry is low, probably due to the incidence of subcontractors (the "self employed trades people" I refer to) rather than employees.

 

[TjamesX]

I may be wrong, but surely, 'this time is different' means, this time housing will actually crash!

I mean, there have been many booms, followed by plateaus, then followed by another boom... (not adjusted for inflation, i am talking absolute figures here...)

When was there a time in Oz when house prices actually fell substantially?
Why should this time be any different?

I have to say, its you guys saying the market is going to crash, that are the ones hoping for it to be different this time...

I personally don't think that there will be a crash and I don't think the Bears are saying this either, the title of the thread is 'House Prices to stagnate for years'.... and that's exactly what I think they will (on average) do...

To me it seems the bulls are the ones arguing against this statement - Housing will continue to do well, better to get in before its too late!!

It took 7-8 years from the last boom before there was any real movement in median house prices... why will this time be any different? This boom was also much larger in real terms than 89 if you consider the high inflation during the last boom

TJ

 

[tech/a]

The has to be a reason why property is likely to rise in any area.

Whilst not the case in every area of Australia,in MANY areas lack of Rental Property will fuel inflated house prices.
Demand will pick up rents. Investors will build units/apartments.

Those wishing to start their property journey would do well looking for these areas and starting with an apartment or unit.

Yeh I know the value is in the land---it is at least afoot in the door and a chance to keep ahead of capital appreciation.

Rent it out if you have enough equity to at least neutral gear it and you can claim all your interest payments.Buy a hammer---repairs to IP.Buy a lawn Mower---Maintenance for IP.--You get the idea.

 

[Bronte]

U.K. House Prices Rose in February
U.K. property prices accelerated for a second month in February as a shortage of homes for sale mitigated the impact of higher interest rates, a survey showed.
http://www.bloomberg.com:80/apps/news?pid=20601102&sid=a4tm4DghzSHE&refer=uk

 

[Mofra]

As an aside, Dandenong in Melbourne rose 4.1% last month and is highlighted by valuation reports as likely to continue string growth due to the Eastlink works.

I doubt there would be many recent buyers there whining about a housing downturn...

 

[tech/a]

growth due to the Eastlink works.

And there is the reason.
Pretty simple??
Find a REASON

 

[wayneL]

 

[theasxgorilla]

And there is the reason.
Pretty simple??
Find a REASON

...and in this case the reasons could be many:

http://www.revitalisingdandenong.com/dandenong/home/home.htm

 

[tech/a]

Wayne.

Do you honestly believe there is going to be an across the board 20-30% decrease in housing prices?
That the wont be opportunities in abundance?

The only way this was likely for this to occur is a world wide recession/depression.

In which case the arguement of waiting to buy a home when its cheaper---it would then be cheaper---falls as flat as a pancake---as you couldnt afford to buy---you maybe lucky to have a job---or pay the rent,any savings you had youd be scared stiff of losing.

But hell they could drop a dirty bomb in my backyard tommorow!

 

[wayneL]

Wayne.

Do you honestly believe there is going to be an across the board 20-30% decrease in housing prices?

More. But it may or may not be in nominal terms. Real prices (i.e adjusted for inflation) may be how it happens. But I am not discounting the possibility of a drop in actual nominal prices.

That the wont be opportunities in abundance?

Absolutely

The only way this was likely for this to occur is a world wide recession/depression.

Not necessarily, but I believe price stagnation/drop would cause recession/depression, given the economies' current reliance on speculative profits, building and mortgage equity withdrawal.

It could happen either way round, however.

One thing for certain, recession/depression WILL happen. It is simply a question of when. It could be this year, five years, ten years, but when you look at the structural inbalances, it won't take much of a trigger to shunt it over the edge.

In which case the arguement of waiting to buy a home when its cheaper---it would then be cheaper---falls as flat as a pancake---as you couldnt afford to buy---you maybe lucky to have a job---or pay the rent,any savings you had youd be scared stiff of losing.

I have planned for the eventuality. I own IP in the UK I bought at value, the deeds are stapled to the bottom drawer as a basis for any contingency. I have involved myself in endeavours which are recession proof/resistant (particularly my new position). I have positioned myself to make purchases when value is present.

Sentiment will be diabolical at the bottom and thats when folks need to grow some balls and invest.

But hell they could drop a dirty bomb in my backyard tommorow!

Let's pray that never happens

It's my view and I'm working to that view, but I'll be OK nevertheless, things are just fine as they are.

The reason I crap on with all the bear stuff is so that people consider possibilities. Perpetual bullishness can be very profitable, but it can be very dangerous. I know this from experience.

There are some people who have never seen a recession in their adult lives and will be destroyed when it happens, because they refuse to accept the possibility. I would hope that by us bears talking mega doom that people at least consider to cover their @rse.

It's also fun debating this stuff

 

[wayneL]

Sub-prime lending: The elephant in the room.

http://www.telegraph.co.uk/money/ma...VCBQUIV0?xml=/money/2007/02/24/cnusecon24.xml

US mortgage crisis goes into meltdown

By Ambrose Evans-Pritchard
Last Updated: 1:15am GMT 24/02/2007

Panic has begun to sweep the sub-prime mortgage sector in the United States after the bankruptcy of 22 lenders over the past two months, setting off mass liquidation of housing loans packaged as securities.

Analysts say the housing bust is pulling America into recession, citing a 14.4pc drop in housing starts

The rapid deterioration could not come at a worse time for British bank HSBC, which has set aside $10.5bn (£5.4bn) to cover bad loans in the US.

The cost of insuring against default on these loans has rocketed in recent weeks, from 50 basis points over Libor to 1,200, raising fears that a credit crunch could spread to the rest of the property market.

Low-grade BBB-rated securities - measured by the ABX index - have crashed from near par of 100 in early November to 72.5 this week.

Peter Schiff, head of Euro Pacific Capital, said the sector was in an unstoppable meltdown. "It's a self-perpetuating spiral: as sub-prime companies tighten lending they create even more defaults," he said.
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California's ResMae Mortgage filed for bankruptcy last week as it struggled to cope with defaults on a $7.7bn book of sub-prime loans issued last year, while Accredited Home Lenders in San Diego warned that bad debts had reached 7.18pc of its portfolio.

HSBC chief executive Michael Geoghegan, who stepped in to take control of the US division earlier this month claiming "The buck stops at my door", has ousted top executives. But the worst may not be over for Household International, the property arm it acquired for $14.4bn in 2003 to capitalise on the housing boom.

Rating agency Standard & Poor's is shifting its focus to the tier of debt above sub-prime, eyeing loans covering people viewed as better credit risks but who lack the steady income needed for prime status.

S&P has placed 11 loan packages worth $146m on watch for a possible downgrade this week, saying it was most worried about "piggyback" second mortgages. "There is a potential danger of default on these deals," said credit strategist Robert Pollson.

For now, the US Federal Reserve believes the damage can be contained. "I don't think there'll be a large impact on prime mortgages from the sub-prime market," said governor Susan Schmidt Bies.

However, she warned of a "hidden" problem caused by sellers pulling property off the market. " The percentage of homes where nobody is living in them is at a record level. So the potential for inventory correction is still very high," she said.

Nouriel Roubini, economics professor at New York University, says the housing bust is slowly pulling America into recession. He cites a 14.4pc drop in housing starts last month; an expected loss of 600,000 real estate jobs in 2007; a sharp fall in home equity withdrawals - down from 6pc of GDP at the top of the boom; and a squeeze as $1,000bn of mortgages are adjusted upwards this year to higher interest rates.

Mr Roubini said: "America faces a 'reverse cycle' where a credit crunch has hit before the slowdown, a rare pattern. Normally, recession comes first, setting off credit troubles in its wake. We have a housing recession, an auto recession, a manufacturing recession, and a real investment recession already present. If all this happening in what the consensus terms as a 'Goldilocks economy', what would happen if the economy slows down?"

 

[markrmau]

Love the comment in red.

1200bp over LIBOR? I assume that should be 120bp?

 

[Kimosabi]

It's 26 now...

The best place to get info on the US subprime Mortgage Industry Implosion is here ==> http://ml-implode.com/