Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
UK Population Growth - Latest ONS Immigration Statistics and Consequences - 24th Mar 19
The Fed Follows Trump's Tweets, And Does The Right Thing - 24th Mar 19
Yield Curves, 2yr Yield, SPX Stocks and a Crack Up Boom? - 24th Mar 19
Risk/Reward in Silver Favors Buying Now, Not Waiting for Big Moves - 23rd Mar 19
Similarities Between Stock Market Today and Previous Bull Market Tops - 23rd Mar 19
Stock Market DOW Seasonal Trend Analysis - 23rd Mar 19
US Dollar Breakdown on Fed Was Much Worse Than It Looks - 23rd Mar 19
Gold Mid-Tier GDXJ Stocks Fundamentals - 23rd Mar 19
Which Currency Pairs Stand to Benefit from Prevailing Risk Aversion? - 23rd Mar 19
If You Get These 3 Things Right, You’ll Never Have to Worry About Money - 22nd Mar 19
March 2019 Cryptocurrency Technical Analysis - 22nd Mar 19
Turkey Tourist Fakes Market Bargains Haggling Top Tips - 22nd Mar 19
Next Recession: Finding A 48% Yield Amid The Ruins - 22nd Mar 19
Your Future Stock Returns Might Unpleasantly Surprise You - 22nd Mar 19
Fed Acknowledges “Recession Risks”. Run for the Hills! - 22nd Mar 19
Will Bridging Loans Grow in Demand and Usage in 2019? - 22nd Mar 19
Does Fed Know Something Gold Investors Do Not Know? - 21st Mar 19
Gold …Some Confirmations to Watch For - 21st Mar 19
UKIP No Longer About BrExit, Becomes BNP 2.0, Muslim Hate Party - 21st Mar 19
A Message to the Gold Bulls: Relying on the CoT Gives You A False Sense of Security - 20th Mar 19
The Secret to Funding a Green New Deal - 20th Mar 19
Vietnam, Part I: Colonialism and National Liberation - 20th Mar 19
Will the Fed Cut its Interest Rate Forecast, Pushing Gold Higher? - 20th Mar 19
Dow Jones Stock Market Topping Pattern - 20th Mar 19
Gold Stocks Outperform Gold but Not Stocks - 20th Mar 19
Here’s What You’re Not Hearing About the US - China Trade War - 20th Mar 19
US Overdosing on Debt - 19th Mar 19
Looking at the Economic Winter Season Ahead - 19th Mar 19
Will the Stock Market Crash Like 1937? - 19th Mar 19
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19
Gold Price Confirmation of the Warning - 18th Mar 19
Split Stock Market Warning - 18th Mar 19
Stock Market Trend Analysis 2019 - Video - 18th Mar 19
Best Precious Metals Investment and Trades for 2019 - 18th Mar 19
Hurdles for Gold Stocks - 18th Mar 19
Pento: Coming QE & Low Rates Will Be ‘Rocket Fuel for Gold’ - 18th Mar 19
"This is for Tommy Robinson" Shouts Knife Wielding White Supremacist Terrorist in London - 18th Mar 19
This Is How You Create the Biggest Credit Bubble in History - 17th Mar 19
Crude Oil Bulls - For Whom the Bell Tolls - 17th Mar 19
Gold Mining Stocks Fundamentals - 17th Mar 19
Why Buy a Land Rover - Range Rover vs Huge Tree Branch Falling on its Roof - 17th Mar 19
UKIP Urged to Change Name to BNP 2.0 So BrExit Party Can Fight a 2nd EU Referendum - 17th Mar 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast March to September 2019

US and UK Housing Bear Market Trends

News_Letter / UK Housing May 27, 2008 - 10:55 PM GMT

By: NewsLetter

News_Letter The housing bear markets continue to bite into economic activity as the US heads for recession this year and the UK during 2009. The US is still showing no signs of a housing bottom having fallen by 3.1% in the first quarter of 2008 according to government statistics, and foreclosures rising to a all time high as borrowers walk away from homes sinking into negative equity. The UK housing bear market has now entered its 9th month following the peak of August 2007, having gone negative on a year on year basis for April 08 data, which was one of the primary reasons for the meltdown in the UK Labour parties vote in the recent string of May elections.


The Market Oracle Newsletter
May 27th , 2008            Issue #16 Vol. 2

US and UK Housing Bear Market Trends


Dear Subscriber,

The housing bear markets continue to bite into economic activity as the US heads for recession this year and the UK during 2009. The US is still showing no signs of a housing bottom having fallen by 3.1% in the first quarter of 2008 according to government statistics, and foreclosures rising to a all time high as borrowers walk away from homes sinking into negative equity. The UK housing bear market has now entered its 9th month following the peak of August 2007, having gone negative on a year on year basis for April 08 data, which was one of the primary reasons for the meltdown in the UK Labour parties vote in the recent string of May elections.

US housing market bottom pickers seem to be ignoring the fundamentals -

  • Of the large over hang of supply on the market of more than 4.5 million homes that will persist for many years.
  • That the US economy is only now going into a recession that despite the Feds efforts will extend well into 2009 resulting in job losses and more foreclosures.
  • The credit crisis has not hit bottom, risk averse lenders are either unable to or unwilling to lend to prospective borrowers under most circumstances.
  • That inflation is eroding the consumers ability to service mortgages and those that face negative equity are increasingly walking away from their mortgage obligations.

House Price Trends Graph

The US Housing market turned lower in late 2006, the down trend to date is accelerating as the number of unsold properties passes the 4 million mark creating a large over hang of supply. There is no technical or fundamental sign of an imminent bottom. US house prices could easily fall another 15% and then be subjected to many years of consolidation before prices can start to rise higher again. This despite the clear inflationary strategy of devaluing the US dollar as evident by the currency adjusted gap developing between US and UK house prices (green line). The US housing market is clearly in the grips of a vicious cycle of house price falls, leading to more foreclosures leading to further house prices falls. The impact of each turn of the cycle is an greater credit squeeze as leveraged banks losses and risks escalate.

The UK housing market peaked in August 2007 and to date is declining at an annualised rate of 7.5%, which is inline with the two year forecast for a 15% price drop from August 2007 to August 2009. Whilst there are many fundamental reasons for why the UK house prices have been more supported than the US i.e. limited new builds and recent influx of immigration from eastern europe. However the degree to which the UK housing bubble has been inflated gives ample scope for a serious price correction that would extend to a period well beyond the initial 2 year house price forecast period, especially if the recent immigrants flow outward during a UK recession and therefore contributing towards a glut of empty rental properties amongst the sizeable speculative buy to let sector.

Not only have UK house prices risen by 170% since January 1999, against US house prices that currently stand at up 111%. But the currency adjusted increase is 225%, where much of this increase has taken place during the past 2 years. The UK housing market seems destined to give up all of the gains made during 2006 and 2007 and therefore targeting a nominal price decline of at least 19%. Declines beyond these are dependant upon inflation and currency trends which could see a real terms inflation adjusted decline of more than 33% over a 3 year time frame (from August 07).

With US house prices expected to decline by a further 15% this would still make UK house prices more expensive in comparison and therefore could be followed by a severe currency adjustment which implies a sharp drop in the pound against the dollar. Already the British Pound has closely tracked the dollar's decline lower since the summer of 2007, having fallen by 17% against the Euro.

Another major negative for the UK housing market is the impact of the ongoing depression in the financial sector as it comprises a much larger segment of the UK economy than for the US. The UK financial sector helped lift average house prices in London to over £320,000 ($640,000) way beyond average London salary of £42,000 ($86,000), this implies a greater than average fall for London and is backed up by recent statistics which extrapolate towards an annualised fall in house prices of 12%.

Interest Rates Graph

Home owners looking forward to further interest rate cuts will be disappointed as both central banks have signaled a halt to rate cuts. The US has called a halt after deep cuts from 5.25% to 2% against the UK which has cut rates from 5.75% to just 5%. The halt in rate cuts is as a consequence of the surge in inflation that is expected to exceed upper boundaries in the coming months.

As the US market is discovering, government attempts to inflate their way out of a nominal house price falls will not work during a time of an emerging markets demand led secular commodities bull market, throw in the consequences of peak oil and you have all of the hall marks of nominal housing market price falls despite rising inflation, as consumers have even less cash available after paying for the rising costs of necessities then to service increasingly expensive mortgages that have reset to higher interest rates by banks with decimated balance sheets as a consequence of the ongoing credit contraction. Thus an economic environment of building stagflation with deflationary forces equals a cycle of continuing house price falls triggering even further deflationary credit contraction amongst risk averse lenders.

Therefore those looking for an early bottom to the US and especially the UK housing bear markets may be greatly disappointed.

Your housing market analyst,

Nadeem Walayat,
Editor of The Market Oracle

In This Issue
  1. UK Auction Houses See Surge in Lots Offered and Slump in Sales
  2. Immoral Hazard- Incompetence at the Fed
  3. US Housing Crisis and the Last Days of Cheap Resources
  4. American Armageddon: How to Win the Epic Battle for Your Wealth
  5. Caroline Flint UK Housing Market Briefing Notes in FULL
  6. US Housing Dueling Views: Jim Rogers Sees More Pain, Warren Buffet Sees Rebound Under Way
  7. Real Estate and Credit Deflation: The Next Dozen Shoes to Drop
  8. Your Latest Credit Crisis Road Map
  9. Fannie Mae Cumulative Defaults and other Mortgage Market Disasters
  10. UK House Prices Tumbling- Interest Rate Conundrum
1. UK Auction Houses See Surge in Lots Offered and Slump in Sales

By: David_Sandeman

Welcome to the May newsletter that looks primarily at auction activity in April 2008.
The lack of liquidity in the money markets has again been reflected in the subdued sale rate with only 59% of lots finding buyers. This is the national figure and do take a look at the regional variation which is shown in the tables at the bottom of this newsletter.

Read Article

2. Immoral Hazard- Incompetence at the Fed

By: Stephen_Lendman

So says Jeremy Grantham, co-founder of Boston-based investment firm Grantham, Mayo and Van Otterloo, now known as GMO. Some call him the philosopher king of Wall Street because of his highly insightful views on markets and the economy, usually with a longer-term perspective. In a profession of touts, fast-buck and scam artists, Grantham's commentaries are notably refreshing. They're detailed, scholarly, sober, clear and especially important at a time of unparalleled excesses, great economic uncertainty, voices ranging from gloom and doom to blue skies and all clear ahead, so who knows what to believe. Few people sort things out better than he, and whether right or wrong, he makes consummate sense and should be taken seriously.

Read Article

3. US Housing Crisis and the Last Days of Cheap Resources

By: David_Vaughn

Is the housing crisis over? Or even close to reaching its peak? Not according to the experts. It seems we have a way to go before all the dirt settles to the bottom. Which is another way of saying that we really do not know what the long term effects of this housing mess will bring. Many commentators are trying to put a happy face on this crisis and report that only a small number are being hurt by foreclosures, but the entire housing industry is already suffering with the downturn.

Read Article

4. American Armageddon: How to Win the Epic Battle for Your Wealth

By: Money_and_Markets

Martin D. Weiss writes: Just when Wall Street was hoping for some relief from surging energy costs, crude oil prices surged more than $3 on Friday ... spiking to nearly $128 a barrel ... shattering all prior records ... and driving prices at the pump perilously close to $4 per gallon.

Read Article

5. Caroline Flint UK Housing Market Briefing Notes in FULL

By: Nadeem_Walayat

Caroline Flint the UK housing ministers full cabinet meeting first page briefing notes on the state of the UK housing market follows in full. In summary the housing minister expects UK house prices to fall this year by between 5% and 10% which is precisely in line with the Market Oracle forecast for a 7.5% drop for 2008 as of August 2007 (UK House prices to fall by 15% between August 2007 and August 2009).

Read Article

6. US Housing Dueling Views: Jim Rogers Sees More Pain, Warren Buffet Sees Rebound Under Way

By: Keith_Fitz-Gerald

When asked about their outlook for the crisis-ridden U.S. housing and financial-services markets, two U.S. financial experts provided outlooks that completely contradicted one another - once again underscoring how tough it is for investors to predict when the U.S. economy will turn around.

Read Article

7. Real Estate and Credit Deflation: The Next Dozen Shoes to Drop

By: Steve_Moyer

"If the shoe fits, it's too expensive." ~ Adrienne Gusoff
I was offered a very nice position with Fisher Investments of Woodside, California last year and, although I passed on the opportunity, I truly respect their money management track record. At the same time, I have noticed from their website that they are comparing the current equity market with the set-up which existed in 1992; they see this as a brief cyclical downturn prior to a multi-year bull market run rather than an unfolding, post-triple-bubble economic downward spiral. In fact, as I look through the site's archives, the Fisher research team (60 strong, and plenty bright) doesn't address post-bubble possibilities in any way, shape or form.

Read Article

8. Your Latest Credit Crisis Road Map

By: Money_and_Markets

Mike Larson writes: New developments in the credit and bond markets are happening fast and furiously. This week, I'm going to give you my latest take on the most significant news unfolding.

I'll tell you what I'm seeing, why it matters, and what it means to you as an investor. Here goes ...

Read Article

9. Fannie Mae Cumulative Defaults and other Mortgage Market Disasters

By: Mike_Shedlock

Inquiring minds are checking out the Fannie Mae 2008 Q1 10-Q Investor Summary . There are plenty of charts, graphs and other data to consider.

For example, please consider this graph on page 27.

Read Article

10. UK House Prices Tumbling- Interest Rate Conundrum

By: Nadeem_Walayat

UK house price data from Britains biggest mortgage banks for April 08 now show negative house price inflation year on year. Statistics released earlier than usual by the the Nationwide that house prices have now fallen by 1% on a year earlier, closely followed by the Halifax that also shows house prices down by 1%. This was originally forecast by the Market Oracle for the April 2008 house price data in the analysis of November 2007.

Read Article

For more indepth analysis on the financial markets make sure to visit the Market Oracle on a regular basis.

Subscription

You're receiving this Email because you've registered with our website.

How to Subscribe

Click here to register and get our FREE Newsletter

Forward a Message to Someone [FORWARD]

To update your preferences and access the Newsletter archive [PREFERENCES]

How to Unsubscribe - [UNSUBSCRIBE]

 

About: The Market Oracle Newsletter


The Market Oracle is a FREE Financial Markets Forecasting & Analysis Newsletter and online publication.
(c) 2005-2008 MarketOracle.co.uk (Market Oracle Ltd) - The Market Oracle asserts copyright on all articles authored by our editorial team. Any and all information provided within this newsletter is for general information purposes only and Market Oracle do not warrant the accuracy, timeliness or suitability of any information provided in this newsletter. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We recommend that independent professional advice is obtained before you make any investment or trading decisions. ( Market Oracle Ltd , Registered in England and Wales, Company no 6387055. Registered office: 226 Darnall Road, Sheffield S9 5AN , UK )

Terms of Use | Privacy Policy

Copyright 2008 MarketOracle.co.uk

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules