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Trading Lessons

UK House Prices Crash Warning - Daily Mail Cognitive Dissonance

Housing-Market / UK Housing Aug 11, 2014 - 12:24 PM GMT

By: Nadeem_Walayat

Housing-Market

FEAR Sells, DOOM Sells which is why the mainstream media at least 80% of the time peddle FEAR and DOOM by even turning a positive news story into a DOOM AND GLOOM story as illustrated by Britain's Daily Mail where it does not matter what the event, it is always an imminent catastrophe!

Take the weather, a slightly windy and rainy Sunday / Monday was flagged as Britain being about to be hit by a hurricane as illustrated by the Daily Mails headline.


Hurricane Bertha to hit tomorrow morning - Daily Mail

Torrential rain and gale force winds cause flash flooding and power cuts.... and the worst is still to come with Hurricane Bertha to hit ...

Here's a quick look back at history of the Daily Mails reporting on the prospects for the stock market which apparently is nearly always on the brink of a crash -

Market crash and street riots within a year ... - Daily Mail

27 Feb 2012 - Just when you thought unemployment was dropping and stock markets were surging back, these three analysts today sent out a stark warning...

Well that did not quite pan out as expected as the stock market (FTSE) in a little over a year stood some 17% HIGHER!

And today the Daily Mail gives its fear treatment to the UK housing market -

Property price crash could happen within months as sellers finally outstrip buyers - Daily Mail

adding in brackets when you actually get to the article (but they'll continue to rise for another year).

The article itself is a master piece in cognitive dissonance, where the paper apparently holds two opposing views at the SAME TIME. This is why most retail investors literally miss WHOLE BULL MARKETS because those that are the most vocal i.e. 95% of the media are the LEAST perceptionally aware of what actually drives markets - SENTIMENT, as I have pointed out several times over the years -

19 Aug 2013 - UK House Prices Bull Market Soaring Momentum

What Academics and Journalists Will Never Understand About Markets

In having immersed by myself in the markets for 30 years now, I know that what many academics tend to take for granted rarely matches reality. Whilst I covered many aspects of trading markets in my last ebook (Stocks Stealth Bull Market 2013 and Beyond - Free Download). However in terms of economic trends what academics will always fail to grasp is that markets are NOT driven by fundamentals but by SENTIMENT and it is SENTIMENT that CREATES the fundamentals! Which is why the academic economists rarely have any real clue as to what is going in the markets because they are nearly always looking in the WRONG direction i.e. they are looking at the CAUSE rather than the EFFECT, as in reality it is the EFFECT that makes itself manifest in the price charts long before the CAUSE appears in the economic data that academics focus upon, which is why the SAME economic data can and is used by economists and pseudo-economist (journalists) such as that which we see on TV news shows to explain EITHER price rises OR falls.

You can only know the markets IF you TRADE the markets! The pseudo and academics economists will never get you on the right side of trends years ahead of the herd, in fact most press media commentators will be some of the LAST people to jump onboard trends, usually just before they end!

Momentum Drives Housing Market Sentiment and Economic Growth

As house price rises continue to accelerate, many people sat on the sidelines waiting for prices to fall or even crash will realise that it is just not going to happen, and in their despair at the relentless accelerating trend of rising prices, in increasing numbers will feel no choice but to jump onboard the housing bull market as a they see the houses they have been viewing sold and asking prices trending ever higher.

As house prices rise, home owners see the value of their houses rise £x thousands per month, in many cases by more than their salaries, this will encourage many to borrow and spend more, and save less which will meet the governments primary objective for inflating the economy by means of the housing market. Everyone will be playing the game of how much has my house value increased by, a quick analysis of my own housing portfolio (based in Zoopla estimates) shows a 5.5% increase in housing wealth over just the past 6 months! Does this make me feel richer, more willing to spend? Well, being only human, YES it does!

UK House Prices 5 Year Forecast

It is now over 7 months since excerpted analysis and the concluding 5 year trend forecast from the then forthcoming UK Housing Market ebook was published as excerpted below-

UK House Prices Forecast 2014 to 2018 - Conclusion

This forecast is based on the non seasonally adjusted Halifax House prices index that I have been tracking for over 25 years. The current house prices index for November 2013 is 174,671, with the starting point for the house prices forecast being my interim forecast as of July 2013 and its existing trend forecast into Mid 2014 of 187,000. Therefore this house prices forecast seeks to extend the existing forecast from Mid 2014 into the end of 2018 i.e. for 5 full years forward.

My concluding UK house prices forecast is for the Halifax NSA house prices index to target a trend to an average price of £270,600 by the end of 2018 which represents a 55% price rise on the most recent Halifax house prices data £174,671, that will make the the great bear market of 2008-2009 appear as a mere blip on the charts as the following forecast trend trajectory chart illustrates:

Additionally, a video version of excerpts of the forecast was posted during early January 2014 -

UK House Prices Forecast video

Current State of the UK House Prices Forecast

The updated halifax average house prices (NSA) graph to July 2014 at £189,726 which is set against the forecast index level for July 2014 of £188,244 that illustrates house prices over the past 7 months have shown <1% deviation from the forecast trend and therefore the long-term trend forecast remains on track to achieve a 55% rise in average house prices by the end of 2018.

My article during June concluded that house prices momentum was expected to continue to accelerate over the summer months and therefore to result in a slightly above forecast trend trajectory which is coming to pass with UK house prices not expected to deviate much further beyond +1% from forecast before converging towards forecast trend as I continue to expect house prices to OSCILATE around the forecast trend., therefore implying a slowdown towards trend -1%.

Source and Comments: http://www.marketoracle.co.uk/Article46844.html

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2014 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Housing Markets Forecast 2014-2018The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

zahlen2k
24 Aug 14, 04:47
2016 correction

Hi Nadeem

Thanks for your update much appreciated.

I have exchanged contracts on a new build appartment in zone 4 London. I think though, London, well the "prime" or good suburbs at least have probably peaked for a couple of years now. And things are starting to be priced more sensibly I feel.

My question is about the rest of the UK. You mentioned there will be a mid cycle correction coming up 2016 which will be an opportunity to accumulate. As I mentioned Im interested investing outside of London. Do you think prices revert to this current level in the 2016 correction? Or still be higher than the mid 2014 average.

Also I know from your youth you had made alot during the 87 crash shorting the Dow on IG. DO you use IG's house price index at all?

Thanks alot

Zahir


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