Thursday, 29 November 2007

Hello housing crash and recession here we come

Will there be a recession? Will house prices crash? Those are not questions anyone asks anymore. Today's questions are a) when and b) how bad. The answers appear to be a) very soon and b) very bad.

House prices are falling

The Nationwide confirmed what everyone knew already. House prices fell at their fastest rate for more than 12 years during November, droping 0.8% in just one month. The average home in the UK is now worth £184,099, nearly £12,000 more than in November last year. This is just the start. House prices have a long drop ahead before we return to normality.

Do you like your housing crashes messy?

You have to love this quote in an article from the Times:

"Everyone in Britain has a stake in what happens next. Any fall in (house) prices would effectively redistribute cash from those who have invested in property in recent years to those who, willingly or unwillingly, did not do so. And no one wants to see a messy crash."

This sounds like a home owner talking, and I am not sure that he is right when he says that "no one wants to see a messy crash". Quite a few renters are looking forward to a healthy and dramatic fall in house prices. Besides, does anyone remember any homeowners talking about a "messy bubble" when prices were going up.

Fire Blanchflower from the MPC

Danny Blanchflower, who sits on the Bank of England's monetary policy committee, is an inflator. He wants to debase the currency and rob savers through generating inflation.

Blanchflower wants to cut interest rates again. He says: "Certainly there has been some evidence that people have been taking on mortgages they cannot afford. They have taken these on in the expectation that prices will rise. I am concerned there will be hardship ahead for some."

Blanchflower has already generated enough hardship with his irresponsible inflation creation. His low interest rate policies created a speculative bubble that robbed a generation of first time buyers of the opportunity to buy their own home. Instead, he wants to bail out housing speculators with more interest rate cuts and easy money. Inflators should not be determining monetary policy. He should be fired.

King feels "uncomfortable"

Today, another serial inflator was down at the house of commons, talking the economy down and preparing everyone for a further round of easy money interest rate cuts. Mervyn King told MPS to expect slowing growth and rising inflation. "The most likely outcome is for output growth to slow and inflation to rise at least for a period," he said.

What is his answer to these growing challenges? A new five-week liquidity facility to assure the big banks have cash in the banking system over Christmas. In other worlds, he is going print some more cash. Of course, the banks love him and his easy money policies. Also, the message on future interest rates was very clear. Mervyn and this MPC inflationists will cut rates early next year.

As for the rest of us, we get more inflation. That makes me feel very uncomfortable.

Buy a house and get married

There was a time when couples separated the marriage decision from buying a house. However, this advert from craigslist suggest that it is much more modern to link the two together. Gabe from Arizona is prepared to marry anyone who will buy his unwanted and seemingly unloved house. Whatever happened to love? Did the housing bubble kill romance too?

I suspect that this ad is a prank. Nevertheless, it has provided much amusement for Keith, who produces the excellent housing panic blog.

US housing crash accelerates

The crash across the atlantic is turning out to be worse than anyone imagined. Sales of existing homes fell to a record low in October. Sales are doown 20.7 percent from a year ago, while prices are down over 5 percent. Could it be this bad here in the UK? Go back and look at a chart I did comparing the US and UK housing bubbles. Our bubble was much more inflated with homeowners taking on higher levels of debt. If anything, the correction here will be harder and deeper than anything experienced in the US. Tim Iacono has a great post making the unlikely link between Cher and house prices. As the great lady said, we could only "turn back time"

Another bank records huge loses

This is gettng rather repetitive. Another bank, this time Wells Fargo & Co., the second-largest U.S. mortgage lender will set aside $1.4 billion during the fourth quarter to cover higher losses on home-equity loans caused by deterioration in the real-estate market.

On a related subject, there is a nice post from Maxed out Mama on "bad bankers". After reading the most recent FDIC report, Mama tells us that she wants to "find a banker and whap him with a rolled-up newspaper." However, she also tells us that she will be"gentle" since bankers are in an "emotionally fragile at the moment"

Whatever you say Mama.

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