Monday, 29 June 2009

The crash is back on

My faith in the housing crash has been restored. I know I have wobbled. I did begin to doubt, but this data tells me that the prospects for a recovery in the housing market are bleak.

Why? House prices can only rise if there is a sufficient flow of net credit into the market. This chart, which tracks new loans minus repayments, tells us that credit into the market has stalled.

Only when net flows of secured lending begins to seriously increase will house prices begin to rise again. In May, net lending was about as low as it could be without turning negative.

I wonder what the jokers in Westminster and Threadneedle street made of these numbers? Despite all the crazy bailout schemes, guarantees and liquidity those banks still won't lend to the housing speculators.


boiling frog said...

Being approved for a mortgage does not a mortgage make, then. Keep watching the transaction levels in the land registry, and the amount of deposit you require to get a mortgage. Even if you are not in negative equity,if your equity has taken a hit you may be stuck with the choice of selling and moving to rented, renting and moving to rented accommodation, or just stuck. People with low mortgage rates are paying down their debt. Think of it as an 18 year cycle, with 7 more years on the downside before the rise. The crash may be off, but slow steady crumbling is on.

Anonymous said...

exactly; monetary velocity is minimal now, consumers have a preference to pay down debt over consumption. huge secular change in behaviour upon us.

Anonymous said...

nice comment. I love the lord of the ring trilogy myself.

"the orcs are upon us"

"deflation is upon us"

"inflation is upon us"

fantastic stuff !

Anonymous said...

What is interesting is this: in the UK, despite two years of crash, prices haven't come down at all. Whereas in the US, they have come down a lot. Wonder why?

Anonymous said...

House prices need to come down.

House price rises are a bad thing.

When will this message get through?

Until it does, we must assume that we have not yet learned our lessons.