Thursday, 21 August 2008

Alice's bubble wrap

Councils want power to offer competitive mortgages

When ideas like this are floated, we must be in deep trouble.

"Council chiefs have called for extra powers to allow them to offer competitive mortgages in an attempt to rescue the housing market. In a letter published in today's Times, they argue that the public sector should be able to help first-time buyers and those unable to secure a home loan. Critics believe that the move could lead to higher council tax if borrowers defaulted."

It is difficult to know where to start with this one. Perhaps, I should keep it simple and ask the rhetorical question "would the local council leaders in Manchester, Bristol and Lambeth make good bankers?"

City sceptical on retail sales figures

"The City reacted with wry disbelief when government figures out today showed that the volume of retail sales in the high street rose by 0.8% in July."

I had a look at the retail sale numbers this morning. They seemed way too weird. I didn't bother posting them.

UK homes for rent exceed demand

"Supply of rental accommodation rose at its quickest pace on record in the three months to July, outstripping the increase in demand from tenants, according to the latest data from the Royal Institution of Chartered Surveyors."

I've been saying this for a couple of months. Rents are not going up, and all those buy-to-let monkeys are in trouble.

The US downturn is getting closer

"The Conference Board reports today that the Composite Index of Leading Economic Indicators declined 0.7 percent in July, following no change in June and a 0.1 percent decline in May. "

Chart of the Day: LEI

Big picture, putting all the bad US news onto one chart.

The Risks of Real Estate

A Motley fool article that is about 5 years too late.

Wall-to-wall homes

Just in case you haven't seen this "must read" piece from Merrill.

Subprime Mortgage Bonds Lead `Extinct' Credits

"Subprime mortgage-backed bonds lead credit products rendered ``extinct'' by the collapse of the U.S. housing market." At last, some progress....

Money & morals

Another great post from stumbling and mumbling.

Here is what caused the crisis

"Dear Mr. Berko: Can you explain to me in simple English how this banking crisis happened?"

8 comments:

seema said...

Local councils giving out mortgages, the world has turned mad.

Rebecca Wilder said...

Just because the LEI indicator fell in the US does not mean that the US is, or will be, in a recession. This month, the sharp drop due primarily to the strong surges in unemployment claims and reduced building permits. All that really says is that the housing and labor markets are deteriorating; that is certainly not new information.

I have a question regarding the UK housing market. Is the secondary mortgage market sponsored by government entities, as in the US (Fannie Mae and Freddie Mac)? Or is is private, where commercial banks make the loans with no implicit (or explicit) guarantee from the government?

electro-kevin said...

In truth the downturn doesn't appear to be here yet.

I hear builders saying that they are still busy, the restaurants are still full as are the pubs. The theater I went to on Monday was jam packed and so were the trains on the way back. As one columnist said today "I'll believe there's a recession when the nail boutiques start shutting up shop."

dearieme said...

"would the local council leaders in Manchester, Bristol and Lambeth make good bankers?" Given that bankers don't make good bankers, the chances must be remote.

Anonymous said...

electro-kevin - well some sectors are finding life difficult.
http://www.shropshirestar.com/2008/08/21/estate-agent-axes-60-jobs/

RenterGirl said...

Homes for rent exceeding demand, eh? We could have told them that last year. Also, it's the type of housing available, and where it is well, located. Plentiful rabbit hutches. Not enough proper family houses. And reality is hitting desperate buy-to-letters, some of whom are cuting their losses and selling up, or drastically reducing prices. Add on Buy-to-leave-empty no longer profitable in a bubble, and more upmarket flast being offloaded in that market and you've got the next step in this disaster.

Alice Cook said...

rebecca,

Mercifully, there are state owned mortgage companies here in the UK.

As for your point re: the US, you would agree that growth prospects are rather grim and rising unemploymed, coupled with lower hosuing starts do provide us with some idea where things are going.

I liked your blog btw.

Alice

Rebecca Wilder said...

Hi Alice,

The housing starts number, 965k, is at least not bad news and was higher than what the markets expected (960k). The number was expected to decline, given that there was a change in the NY building code that resulted in unsustainably high starts (1.06m) the month before.

But to answer your question, no, I don’t think that these indicators signal a worsening (or grim) US economy. As was expected, the labor market remains extremely soft, financial stocks are responding to any new news that comes along (hence, the declines), and starts continue declining (shouldn’t build if there is a huge unsold inventory out there).

In fact, I believe quite the opposite: as long as the housing market assumes some sort of stabilization, and it looks like existing home sales may have hit bottom (http://1.bp.blogspot.com/_Et4TQ-a0gGU/SK63OrXWBzI/AAAAAAAAAcM/Tvw_bgKb5PQ/s1600-h/existing_sales_chart.bmp), then the outlook for the US economy will improve greatly. Certainly, home values will fall until affordability meets tighter lending standards. But if sales have hit a decided bottom, then Wall Street will feel a lot better, the labor market will improve (600,000 construction jobs slashed since last year), and consumer confidence will re-emerge. Unfortunately, I can’t say the same thing for the UK, whose outlook has gotten decidedly gloomier.

Like your blog; perhaps you want to guest-write something about the UK economy for me on my blog?