Jump to content


Photo

18 Year property cycle - using it as a Timing tool


57 replies to this topic

#1 DrBubb

DrBubb

    Tri-Millennium Guru

  • Super Admins
  • PipPipPipPipPip
  • 67,856 posts
  • Gender:Male
  • Location:Hong Kong & London
  • Interests:Trading and investing in stocks and commodities. Writing articles on related subjects, while building this website. I am interested in creating ways for communities

Posted 28 July 2008 - 08:08 PM

Harrison's 18 Year property cycle - using it as a Timing tool

Tools here: Videos, Data, Chart links

Posted Image

Posted Image


Fred Harrison's Cycle, Videos describing it
===================

Intro. to 18 year Cycle : VIDEO


Part.1/ Low 1994-2005 : VIDEO


Part.2/ 2005 & beyond : VIDEO

(Please watch the Videos before commenting here, or at least the third one- less than 10 minutes)
(Also: written comments on YouTube are very helpful, & mention Talk-View.com, to bring traffic here.)

I bought Harrison's book (Boom Bust, House Prices, Banking, and the Depression of 2010), have read it carefully, and prepared three short videos explaining how property price movements since 1994 can be fit into Harrison's cyclical framework.

Now I want to take it to the next level, and combine the 18 year cycle, with various other technical trading tools to try to "nail" the turning points. Can this be done with confidence and precision. Follow the progress of this thread and you will find out.

(BTW, once the Talk-View site is launched, I plan to move the thread over to the new website.)

I welcome any help that other posters may give in developing this thread.
First task:
Locate the Halifax (NSA) Data for the chart at the top of this posting.

TARGET: Pds. 160,000, 20% down by --?? (year-end 2008 perhaps/ And then what?)

Calling the Bottom?: TOOLS, see Post #41

CALCULATIONS:
(US)======= : -2000 : The Peak 2006/7 (+chg.) : 2009-12 (-chg) : Most recent
Property Index : 100.0 : Q2'06 : 189.93 (+ 89.9%) : 114.0e (-40.0%)
Hs'hld income :
Resid.R.Estate
Mortgage Debt

(UK)======= : -2000 : The Peak 2006/7 (+chg.) : 2009-12 (-chg) : Most recent
Property Index : 77.70 : Q3'07- 184.13 (+137.0%) : 100.0e (-46.0%) : 1/09, 150,501 -16.6% in 12mos (N'wide)
Hs'hld income :
Resid.R.Estate
Mortgage Debt

= = = = =
LINKS:
Property Podcast : http://commoditywatc...low-will-it-go/
Halifax/NSA Data : http://www.hbosplc.c...spreadsheet.asp
Nationwide Data : http://www.nationwid..._since_1952.xls
Roller Coaster UK: VIDEO
Curley, Jan. 2008: http://www.haver.com...ent/080108X.htm
By Oct. 2008 ??? : http://diaryofaprope...ill-it-get.html
Kuma's summary, 18 yr.Cycle: http://www.housepric...p;#entry1078462
+ + + + +
Clone, HPC : http://www.housepric...showtopic=83490
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#2 DrBubb

DrBubb

    Tri-Millennium Guru

  • Super Admins
  • PipPipPipPipPip
  • 67,856 posts
  • Gender:Male
  • Location:Hong Kong & London
  • Interests:Trading and investing in stocks and commodities. Writing articles on related subjects, while building this website. I am interested in creating ways for communities

Posted 28 July 2008 - 08:36 PM

OTHER CHARTS and data

Posted Image..Posted Image..

January 8, 2008 / see: Louise Curley

· The seasonally adjusted Halifax Bank of Scotland's Index of house prices showed a slight rise in the price of houses in the United Kingdom in December after declines in the three previous months. The Index rose 1.3% from 629.5 (1983=100) November to 637.7 in December. The Bank also publishes data on the pound price of a house. In December the price rose to 197,039 pounds from 194.500 in November. The average price of all houses in the U.K. in index and pound terms is shown in the first chart

Hometrack: Buying price as a % of asking price
Posted Image
July 10, 2008
Halifax House Price Index June
On an annual basis, house prices in June were 6.1% lower. UK average prices have returned to the level they were at in August 2006. The UK average price remains slightly higher (2%) than two years' ago, more than 10% higher than in June 2005 and almost 40% above that in June 2003.
=====

Data: Standard Average Price (Pounds) Seasonally Adj.
Cal. 2004: 165,310
Cal. 2005: 179,233
Cal. 2006: 195,973

Posted Image

Mon Year Index YoY Price-NSA
=== === ==== === =====
Jan 2005 517.7 12.6 159,956
Feb 2005 517.0 9.6 159,750
Mar 2005 523.7 8.0 161,809
Apr 2005 528.9 5.8 163,428
May 2005 531.6 3.2 164,242
Jun 2005 535.6 2.2 165,501
Jul 2005 536.5 1.4 165,775
Aug 2005 542.8 3.8 167,699
Sep 2005 548.5 3.7 169,465
Oct 2005 547.0 4.2 169,010
Nov 2005 549.8 5.7 169,891
Dec 2005 548.4 5.5 169,438
Jan 2006 539.7 4.2 166,744
Feb 2006 551.6 6.7 170,440
Mar 2006 562.4 7.4 173,778
Apr 2006 581.3 9.9 179,609
May 2006 584.8 10.0 180,680
Jun 2006 579.6 8.2 179,082
Jul 2006 580.9 8.3 179,470
Aug 2006 586.2 8.0 181,122
Sep 2006 593.6 8.2 183,402
Oct 2006 600.3 9.7 185,466
Nov 2006 609.0 10.8 188,172
Dec 2006 594.4 8.4 183,645
Jan 2007 595.7 10.4 184,067
Feb 2007 612.3 11.0 189,197
Mar 2007 625.2 11.2 193,180
Apr 2007 641.5 10.4 198,206
May 2007 644.9 10.3 199,264
Jun 2007 645.5 11.4 199,458
Jul 2007 649.2 11.8 200,578
Aug 2007 650.8 11.0 201,081 : 100 % / The Peak
Sep 2007 647.8 9.1 200,168 : - 00.45% down from the peak
Oct 2007 640.2 6.7 197,817 : - 01.62%
Nov 2007 628.7 3.2 194,258
Dec 2007 632.2 6.4 195,333
Jan 2008 619.1 3.9 191,275
Feb 2008 626.1 2.2 193,448
Mar 2008 616.9 -1.3 190,619
Apr 2008 618.0 -3.7 190,952
May 2008 603.5 -6.4 186,482 : - 07.26%
Jun 2008 588.3 -8.9 181,765 : - 09.61% / (Aug.'06 level)
Jul 2008 577.5 -11.0 178,440 : - 11.26% / (Apr.'06 level)
========
See Updated Databank : xx

Halifax/NSA Data : http://www.hbosplc.c...spreadsheet.asp
= = =
Seasonally-adj.:
July : £177,351 : August last year, prices peaked at £199,600 : Both seasonally adjusted (post#39)
Aug.: £


Economic Data - Halifax UK House Price Index - AllMon(NSA)
Year : Jan. , Feb. , Mar. , Apr. , May. , Jun. , July. , Aug. , Sep. , Oct. , Nov. , Dec
2008 619.1 626.1 616.9 618.0 603.5 588.3 - - - - - -
2007 595.7 612.3 625.2 641.5 644.9 645.5 649.2 650.8 647.8 640.2 628.7 632.2

/see: http://www.moneyfact...priceindex.aspx
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#3 Catflap

Catflap

    Millennium man

  • Members
  • PipPipPipPip
  • 1,295 posts
  • Gender:Male
  • Location:UK

Posted 28 July 2008 - 09:39 PM

Excellent work - would be great to see some of the other charts used in more detail as well if that's possible.

#4 DrBubb

DrBubb

    Tri-Millennium Guru

  • Super Admins
  • PipPipPipPipPip
  • 67,856 posts
  • Gender:Male
  • Location:Hong Kong & London
  • Interests:Trading and investing in stocks and commodities. Writing articles on related subjects, while building this website. I am interested in creating ways for communities

Posted 28 July 2008 - 09:58 PM

QUOTE (Catflap @ Jul 28 2008, 10:39 PM) <{POST_SNAPBACK}>
Excellent work - would be great to see some of the other charts used in more detail as well if that's possible.


Thanks. That detail is coming.
And I do hope that many old and new posters will be willing to post charts and comments on thsi thread.
(and its successor thread on T-V.) My initial thought on the detail I want to use are these:

+ A fall to Pds.160,000 is an easy target. At Pds.5,000 per month, we could get there by year-end.
+ Once that is broken, I could see a futher drop to Pds.140,000 or Pds.124,000 (a 38.8% retracement.)
+ The last move up in 2005 could have stopped at Pds.170,000 - if the BofE had raised rates;
+ Instead, they cut rates by 25bp, and that helped to trigger a big rally to Pds.201,000, nearly 20% more

I want to look for tools which would have helped to forecast that last surge up, the "Winners Curse".
Of course, Harrison forecast "Three more years" from 2005, so he must have had ome strong confidence.
But what other indicators would have helped to justify that forecast??

Here's a Key indicator: Mortgage Approvals


...which seems to have formed a nice V-bottom before the Aug.2005 & Jan.2006 Lows in the index

Aug 2005 542.8 3.8 167,699 (prior low)
Sep 2005 548.5 3.7 169,465
Oct 2005 547.0 4.2 169,010
Nov 2005 549.8 5.7 169,891
Dec 2005 548.4 5.5 169,438
Jan 2006 539.7 4.2 166,744 (low)
Feb 2006 551.6 6.7 170,440
Mar 2006 562.4 7.4 173,778
Apr 2006 581.3 9.9 179,609

The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#5 Joe90

Joe90

    Newbie

  • Members
  • 20 posts

Posted 28 July 2008 - 10:34 PM

Hello.

I notice you've thought of a Fib retracement (38%). Have you tried a Fib projection maybe to arrive at the peak? 61.8%; 100%; 161.8% from the previous peak? Which I guess would be from the '89 peak. Just a thought.

Joe.

#6 DrBubb

DrBubb

    Tri-Millennium Guru

  • Super Admins
  • PipPipPipPipPip
  • 67,856 posts
  • Gender:Male
  • Location:Hong Kong & London
  • Interests:Trading and investing in stocks and commodities. Writing articles on related subjects, while building this website. I am interested in creating ways for communities

Posted 28 July 2008 - 11:58 PM

QUOTE (Joe90 @ Jul 28 2008, 10:34 PM) <{POST_SNAPBACK}>
Hello.

I notice you've thought of a Fib retracement (38%). Have you tried a Fib projection maybe to arrive at the peak? 61.8%; 100%; 161.8% from the previous peak? Which I guess would be from the '89 peak. Just a thought.

Joe.


Yes. That culd be a useful forecatsing technique
With a peak very near Pds.200,000 a 50% retracement of the whole thing would br Pds.100,000.
Gann would take that as key support, I suppose
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#7 AgeingBabyBoomer

AgeingBabyBoomer

    Centurion

  • Members2
  • PipPip
  • 295 posts
  • Gender:Male
  • Location:UK

Posted 29 July 2008 - 12:57 AM

Just watched the vids - I'm impressed with your
clear and concise summary of Harrison's world view.
Good job.
ABB

#8 DrBubb

DrBubb

    Tri-Millennium Guru

  • Super Admins
  • PipPipPipPipPip
  • 67,856 posts
  • Gender:Male
  • Location:Hong Kong & London
  • Interests:Trading and investing in stocks and commodities. Writing articles on related subjects, while building this website. I am interested in creating ways for communities

Posted 29 July 2008 - 06:25 AM

QUOTE (AgeingBabyBoomer @ Jul 29 2008, 01:57 AM) <{POST_SNAPBACK}>
Just watched the vids - I'm impressed with your
clear and concise summary of Harrison's world view.
Good job, ABB


Thanks for the comment, ABB.
I would be most grateful, if some could type comments on the YouTube videos:
Text Comments section - that would help to build interest there.
Also helpful, would be something like:
"I look forward to discussing future property price moves on GEI and Talk-View dotcom."

My ultimate aim is to provide a Forum for intelligent discussion of price moves by those
who understand cycles, and technical analysis. I think we can help each other to find
the Low, and avoid buying too soon.

(BTW, I have just arranged to "point" the Talk-View domain name to this thread.) !!

The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#9 TinBrick

TinBrick

    Centurion

  • Members
  • PipPip
  • 155 posts
  • Gender:Male
  • Location:Ireland

Posted 29 July 2008 - 07:09 AM

QUOTE (DrBubb @ Jul 28 2008, 10:58 PM) <{POST_SNAPBACK}>
+ A fall to Pds.160,000 is an easy target. At Pds.5,000 per month, we could get there by year-end.


Seems to be what IG Index think too - they're giving a spread of 157,100-160,700 for the end of the year.

#10 DrBubb

DrBubb

    Tri-Millennium Guru

  • Super Admins
  • PipPipPipPipPip
  • 67,856 posts
  • Gender:Male
  • Location:Hong Kong & London
  • Interests:Trading and investing in stocks and commodities. Writing articles on related subjects, while building this website. I am interested in creating ways for communities

Posted 29 July 2008 - 09:05 AM



Now, with the Halifax data in hand, I am able to make a better comparison



The collapse off the peak is FAR faster this time.

+ From the July 1989 peak, I saw a -2.42% slide by Dec.1990. (Pds.70,588 to 68,708)
+ The final "real price" low was Pds.60,638 in Jan.1996, down -14.10% from the peak
+ The initial low was Pds.60,196 in Feb.1993, down -14.72% from the peak
+ Less than a year from the Aug.2007 peak, the index is already down -9.61% (June'08)
+ The latest month (June) showed a Pds.4,717 fall (that's -2.53% in a single month !)

+ Targets hit by----- Oct.2010 : Oct.2011 : Oct.2012 / starting from - 9.61% down
: 0.5% monthly falls : - 21.5% : -26.0 % : - 30.3 %
: 1.0% monthly falls : - 31.8% : -39.5 % : - 46.4 %
: 1.5% monthly falls : - 40.8% : -50.6 % : - 58.8 %
: 2.0% monthly falls : - 48.7% : -59.3 % : - 68.4 %

(Note: this is Halifax, non-seasonally adjusted data)
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#11 hotairmail

hotairmail

    Tri-Centurion

  • Members
  • PipPipPip
  • 922 posts

Posted 29 July 2008 - 10:07 AM

QUOTE (DrBubb @ Jul 29 2008, 07:25 AM) <{POST_SNAPBACK}>
My ultimate aim is to provide a Forum for intelligent discussion of price moves by those
who understand cycles, and technical analysis. I think we can help each other to find
the Low, and avoid buying too soon.

(BTW, I have just arranged to "point" the Talk-View domain name to this thread.) !!



I was planning at some point to add a "Buy" traffic light with the monthly "Homeowner Wealth Index" released after Nationwide numbers.

"When will the Property Bear Turn Bull?"

I am not looking at the bottom though. I'm looking for near the bottom at the start of the next up-swing.

I think there will be ample time to decide before jumping in on the first sign of slowing falls - or even occasional positive months. I don't believe there will be a sharp bounce, but a period of stagnation/rehabilitation.

I was thinking along the lines of basing it on simple moving averages of about 6 months.

Edit: By the way re your earlier post - it was October 2008.
I'm not listening to any more nutters.

There are massive and growing deflationary forces on produced goods arising from China resulting in excessively loose monetary policy in the West. We are destined to continue suffering deflation of the general price level in manufactures and serial bubbles and busts in stocks, commodities and property until the average Chinese has the purchasing power of a Westerner.
Be prepared for currency volatility and trade wars.

There is an elephant in the room pretending to be a black swan. Can you see it?

#12 DrBubb

DrBubb

    Tri-Millennium Guru

  • Super Admins
  • PipPipPipPipPip
  • 67,856 posts
  • Gender:Male
  • Location:Hong Kong & London
  • Interests:Trading and investing in stocks and commodities. Writing articles on related subjects, while building this website. I am interested in creating ways for communities

Posted 29 July 2008 - 02:49 PM

QUOTE (hotairmail @ Jul 29 2008, 11:07 AM) <{POST_SNAPBACK}>
I was planning at some point to add a "Buy" traffic light
....I think there will be ample time to decide before jumping in on the first sign of slowing falls - or even occasional positive months. I don't believe there will be a sharp bounce, but a period of stagnation/rehabilitation.
...- it was October 2008.


It is way too soon to talk about a bottom.
The very earliest that I could image is probably October 2010. But I reckon it will be 2011-12.
And even then, you may be offered a good 2-3 trade, not an ideal long term buying opportunity.
That's my idea now, anyway.

I could see the market down by 14-16% from the Top by Oct. 2008

The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#13 DrBubb

DrBubb

    Tri-Millennium Guru

  • Super Admins
  • PipPipPipPipPip
  • 67,856 posts
  • Gender:Male
  • Location:Hong Kong & London
  • Interests:Trading and investing in stocks and commodities. Writing articles on related subjects, while building this website. I am interested in creating ways for communities

Posted 30 July 2008 - 09:29 AM

CATFLAP's TIMING QUESTIONS : (posted on the making the video thread)

= 1/
What caused the mini-boom in UK house prices from 1977-1979?


This is something that has always bugged me as it comes just a few years after the early 70's boom/bust where house prices should have stayed low for a few more years, a bit like the period we had between 1994 and 1997. Just like today, it was in an era of rising commodity prices/stagflation but of much higher (reported) inflation and happened from Q2 1977 to Q4 1979.

Interest rates were 15% in October 1976 but got reduced 21 times to a low of just 5% in October 1977 and yet inflation was 16.5% in 1976 and 15.8% in 1977. Was it the cutting of interest rates by so much in just one year, the year after we got bailed out by the IMF what lead to this mini-boom in house prices?. It lasted just two and a half years and ended in another recession slightly early on the mid-cycle point.

To me it appears that cutting rates down to 5% to stimulate the economy did indeed spark a mini housing boom, but what is really apparent is just how low they were in real terms - inflation was 15.8% for that year so real rates were actually negative by a long way. Looking back we had negative interest rates from the early 70's up until around early 1981 which is near to where commodity based inflation tailed off before it peaked in 1982.

I don't think we've seen seen negative rates like this since, but if the BoE is forced to abandon the 2% inflation target and cuts the base rate in the future then we could see this effect once again and possibly another mini boom in house prices in a few years time - but I hope we don't.

Any thoughts on this - is it valid?



=====
= 2/
Will the bottom in house prices really be around 2012/2013? - it could be the there is mini boom instead

In a 5-year period from late 1974 to late 1979 house prices in the UK increased by a staggering 115% - today we are roughly at the same point as we were back then in late 1974. One year has passed since the peak in house prices ('73 & '07) and we are 8 years into a commodity bull run (starting in '66 & 00) only this time we have inflation which is under-reported through new ways of measuring it (hedonics).

You can see the mini boom/bust before and after 1980 on the HPC graph but it's not where you would expect to see a housing boom on the 18-year economic cycle. Presently, the general HPC consensus is that house prices will trough 5 to 6 years after their 2007 peak just like they did in the very last crash, but I'm starting to think that this might not happen. Why? - because of commodities, inflation and the strong possibility that interest rates get cut right down to save the economy leading to negative interest rates which will support and then boost the housing market in a few years time.

Instead we might find that in 4/5 years time there is a small boom period again in house prices bought on by negative interest rates which is what seems to have happened from early 1977 to late 1979. The other difficulty in predicting the bottom is comparing like with like - is it better to compare this crash occurring in a commodity boom to a previous crash which occurred in a commodity boom (the 1970's) rather than comparing it to the last crash which occurred when commodities were falling?

As I've shown, after the 1973 peak in house prices there was a two and a half year mini boom from Q2 1977 to Q4 1979 which is what you see on the graph - it was in a stagflation time of rising commodity prices just like today. There's nothing to say that there won't be a similar two to three year mini boom this time round starting in say 2011 and peaking in maybe 2013, precisely the point where current HPC theory says it will be the bottom
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#14 DrBubb

DrBubb

    Tri-Millennium Guru

  • Super Admins
  • PipPipPipPipPip
  • 67,856 posts
  • Gender:Male
  • Location:Hong Kong & London
  • Interests:Trading and investing in stocks and commodities. Writing articles on related subjects, while building this website. I am interested in creating ways for communities

Posted 30 July 2008 - 10:59 AM

Thanks for that interesting background.

QUOTE (DrBubb @ Jul 30 2008, 09:29 AM) <{POST_SNAPBACK}>
= 1/
What caused the mini-boom in UK house prices from 1977-1979?

This is something that has always bugged me as it comes just a few years after the early 70's boom/bust where house prices should have stayed low for a few more years, a bit like the period we had between 1994 and 1997. Just like today, it was in an era of rising commodity prices/stagflation but of much higher (reported) inflation and happened from Q2 1977 to Q4 1979.


Harrison's system pegs that Cycle as follows:
Prior Peak...... : 1972
The Low, starts: 1976 (actually: 1975-77 would be a 3-5 year correction)
Recovery .......: 1976-1983 / so this picks up your "mini-boom in 1977-79"
Mini-Recession : 1983?
Take-off......... : 1983-1988
Winners Curse : 1988-1990
The peak ?? ... : 1990 (actual peak was July 1989, per Halifax)



QUOTE (DrBubb @ Jul 30 2008, 09:29 AM) <{POST_SNAPBACK}>
Interest rates were 15% in October 1976 but got reduced 21 times to a low of just 5% in October 1977 and yet inflation was 16.5% in 1976 and 15.8% in 1977. Was it the cutting of interest rates by so much in just one year, the year after we got bailed out by the IMF what lead to this mini-boom in house prices?. It lasted just two and a half years and ended in another recession slightly early on the mid-cycle point.

To me it appears that cutting rates down to 5% to stimulate the economy did indeed spark a mini housing boom, but what is really apparent is just how low they were in real terms - inflation was 15.8% for that year so real rates were actually negative by a long way. Looking back we had negative interest rates from the early 70's up until around early 1981 which is near to where commodity based inflation tailed off before it peaked in 1982.


Right. So that 1982 commodity peak would set the stage for:
Mini-Recession : 1983?
Take-off......... : 1983-1988

QUOTE (DrBubb @ Jul 30 2008, 09:29 AM) <{POST_SNAPBACK}>
I don't think we've seen seen negative rates like this since, but if the BoE is forced to abandon the 2% inflation target and cuts the base rate in the future then we could see this effect once again and possibly another mini boom in house prices in a few years time - but I hope we don't.
Any thoughts on this - is it valid?


We need to approach this question with the idea:
"Anything can happen- but the cyclical narrative suggests the most likely"
At least until it is obvious that the cyclical narrative is out of joint.
So if the UK swings into an inflationary period, and incomes are rising fast, that may help to
raise rents, and by doing that, speed up the arrival of the day where Buying is cheaper than renting.
For now, I wouldnt bet on that yet, I would simply watch to see what develops.
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#15 DrBubb

DrBubb

    Tri-Millennium Guru

  • Super Admins
  • PipPipPipPipPip
  • 67,856 posts
  • Gender:Male
  • Location:Hong Kong & London
  • Interests:Trading and investing in stocks and commodities. Writing articles on related subjects, while building this website. I am interested in creating ways for communities

Posted 30 July 2008 - 11:24 AM

QUOTE (Catflap @ Jul 30 2008)
= 2/
Will the bottom in house prices really be around 2012/2013? - it could be the there is mini boom instead

In a 5-year period from late 1974 to late 1979 house prices in the UK increased by a staggering 115% - today we are roughly at the same point as we were back then in late 1974. One year has passed since the peak in house prices ('73 & '07) and we are 8 years into a commodity bull run (starting in '66 & 00) only this time we have inflation which is under-reported through new ways of measuring it (hedonics).


I am not so sure we are "at the same stage as 1974".
The Uk has experienced massive appreciation in the 14 years to August 2007, and that upsurge (and the
excesses that came with it), have not yet been corrected. I do believe that prices will need to fall to the usual
bottoming-metric (ie. buying is cheaper than renting / yields exceed mortgage rates) before the next upsurge
begins.

QUOTE (Catflap @ Jul 30 2008)
You can see the mini boom/bust before and after 1980 on the HPC graph but it's not where you would expect to see a housing boom on the 18-year economic cycle. Presently, the general HPC consensus is that house prices will trough 5 to 6 years after their 2007 peak just like they did in the very last crash, but I'm starting to think that this might not happen. Why? - because of commodities, inflation and the strong possibility that interest rates get cut right down to save the economy leading to negative interest rates which will support and then boost the housing market in a few years time.


As I implied in the post above, I dont think that negative interest rates will sufficient to re-ignite the property uptrend. Why not? Yields are too low, and buyers are earning less on their properties than mortgage rates to finance the property purchases. "Fools" buy during the Winners Curse period on such metrics, because banks were happy to provide aggresssive loans, and buyers were willing to bet on continuing capital gains. But I think the recent price falls have revealed the inherent risk of this strategy. It will be years before investors and banks go back to such a risky practice.

What COULD re-ignite an upswing would be rapidly rising rents, which could push yields higher, and provide a cashflow argument for buying (so long as rental yields exceed interest rates.) But that would mean that interest rate markets remain sleepy, and ignore the risk of rising inflation. The UK government might get away with that trick for a year or two, but once inflationary expectations have adjusted upwards, so woudl interest rates IMHO.

QUOTE (Catflap @ Jul 30 2008)
... Is it better to compare this crash occurring in a commodity boom to a previous crash which occurred in a commodity boom (the 1970's) rather than comparing it to the last crash which occurred when commodities were falling?

As I've shown, after the 1973 peak in house prices there was a two and a half year mini boom from Q2 1977 to Q4 1979 which is what you see on the graph - it was in a stagflation time of rising commodity prices just like today. There's nothing to say that there won't be a similar two to three year mini boom this time round starting in say 2011 and peaking in maybe 2013, precisely the point where current HPC theory says it will be the bottom


Like I said, the government might get away with a negative interest rate trick for a year or two- although I doubt it will happen. But eventually the markets would wake up. So if you see, a 2010-11 bottom, and a inflation-driven boom starting, you'd better sell into it.
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#16 DrBubb

DrBubb

    Tri-Millennium Guru

  • Super Admins
  • PipPipPipPipPip
  • 67,856 posts
  • Gender:Male
  • Location:Hong Kong & London
  • Interests:Trading and investing in stocks and commodities. Writing articles on related subjects, while building this website. I am interested in creating ways for communities

Posted 30 July 2008 - 11:21 PM

I have now filled in the missing figures, for the House Price Crash table

QUOTE (DrBubb @ Jul 29 2008, 09:05 AM) <{POST_SNAPBACK}>
The collapse off the peak is FAR faster this time.
+ Less than a year from the Aug.2007 peak, the index is already down -9.61% (June'08)
+ The latest month (June) showed a Pds.4,717 fall (that's -2.53% in a single month !)

+ Targets hit by----- ..Oct.2010 : Oct.2011 : Oct.2012 / starting from - 9.61% down
: 0.5% monthly falls :.. - 21.5% : -26.0 % : - 30.3 %
: 1.0% monthly falls: - 31.8% : -39.5% : - 46.4%
: 1.5% monthly falls :.. - 40.8% : -50.6 % : - 58.8 %
: 2.0% monthly falls :.. - 48.7% : -59.3 % : - 68.4 %

(Note: this is Halifax, non-seasonally adjusted data)


The market is currently falling at over 2% per month.
Look at the MASSIVE FALL (40%) we can get by Oct.2011, if the market slide
simply averages just 1% per month. A 2%+ drop per month is huge !
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#17 DrBubb

DrBubb

    Tri-Millennium Guru

  • Super Admins
  • PipPipPipPipPip
  • 67,856 posts
  • Gender:Male
  • Location:Hong Kong & London
  • Interests:Trading and investing in stocks and commodities. Writing articles on related subjects, while building this website. I am interested in creating ways for communities

Posted 31 July 2008 - 09:02 AM

In an parallel attempt to decipher the cyclical influences I have put the Nationwide Quarterly data
on a Logarithmic scale, so it is easier to see dips in a long term context.


Raw Data source: http://www.nationwid..._since_1952.xls

Over this period (1952 to 2008) Prices rose from Pds.1,891 to a Pds.184,131 peak in Q3.2007.
The latest price for Nationwide "All Houses (UK)" was Pds.174,514 for Q2.2008

Low Points:
L#1: Qx.1957 (- n/a -): 3.268 : Pds. 1,853
L#2: Q4.1968 (+56 q): 3.650 : Pds. 4,089
L#3: Q4.1981 (+52 q): 4.377 : Pds 31,557
L#4: Q4.1995 (+56 q): 4.707 : Pds 50,930
L#5: Q4.2008 (+52 q): 5.10E: Pds.126,000 (a fall of 31.6% from 184,131 high in Q3.2007)
L#6: Qx.2022 (+56 q):

Interestingly, this provides a different cycle (of 13-14 years between lows) and different future low points than Harrison's work.
The projected Low of Pds.126,000 in Q4.2008 is only a guess based on trendlines. The timing assumes 13 years (52 quarters) from the prior low of Q4.1995.

The important long term trendline is near Pds.170,000 in Q3.2008. That is less than a 10% fall from the Quarterly high, and has been broken already, I believe, if we used July prices.

It is possible that we may see an "early" low in 2010-11, a brief "inflationary bounce" as Catflap has described and then the 7-year mini-recession may come along with the 13-14 year cycle low that I have described here.

We will have to watch carefully what measures the government takes to prop up a rapidly deflating property bubble.
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#18 DrBubb

DrBubb

    Tri-Millennium Guru

  • Super Admins
  • PipPipPipPipPip
  • 67,856 posts
  • Gender:Male
  • Location:Hong Kong & London
  • Interests:Trading and investing in stocks and commodities. Writing articles on related subjects, while building this website. I am interested in creating ways for communities

Posted 31 July 2008 - 01:20 PM

July - Still well over 1% "crash cruise speed"
===============

House price falls continue in July
The price of a typical house fell by 1.7% in July

The price of a typical house is now 15,000 lower than this time last year
Housing purchase activity reaches a new low
Weakening economic conditions raise the likelihood of earlier interest rate cuts

Headlines............................ July 2008 June 2008
Monthly index * Q1 '93 = 100 : 336.3 .:. 342.0
Monthly change*.................. : -1.7% : -0.8%
Annual change .................... : -8.1% : -6.3%
Average price..................... 169,316 172,415
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#19 FWIW

FWIW

    Millennium man

  • Members
  • PipPipPipPip
  • 1,725 posts

Posted 31 July 2008 - 04:50 PM

Hello Dr.Bubb,

My first post here - was lurking here and on HPC for a long time. Saw your videos and wanted to say well done and hi!
I have also read Fred's BoomBust Edition 2 book and found it fascinating.

One of the areas I would like to discuss with you is the application of the 18 year rule (to greatly over-simplify his whole book!) to other countries. Fred mentions that the rule holds true no matter if a land starved island(UK) or massive expansive (Oz).

As I am invested in property in Dubai, I am intersted in hearing your views on wether this rule will apply in Dubai.
Of particular note is that in the Year 2002 - Foreign ownership allowed in limited freezone areas.

Using Fred's generalised 18 year rule, I have come up with the following:

2002 Boom
2003 Boom
2004 Boom
2005 Boom
2006 Boom
2007 Boom
2008 Boom / mini-recession
2009 Boom / mini-recession
2010 Boom
2011 Boom
2012 Boom
2013 Boom / Winner's Curse
2014 Boom / Winner's Curse
2015 Boom / Peaking
2016 Bust
2017 Bust
2018 Bust
2019 Bust

Of course the global gredit crunch could disrupt the cycle, but I expect Dubai to folow these rules.

What do you think? In 2014 I would probably get out off Dubai and back into the UK.

Regards,

FWIW

#20 DrBubb

DrBubb

    Tri-Millennium Guru

  • Super Admins
  • PipPipPipPipPip
  • 67,856 posts
  • Gender:Male
  • Location:Hong Kong & London
  • Interests:Trading and investing in stocks and commodities. Writing articles on related subjects, while building this website. I am interested in creating ways for communities

Posted 31 July 2008 - 05:01 PM

QUOTE (FWIW @ Jul 31 2008, 05:50 PM) <{POST_SNAPBACK}>
One of the areas I would like to discuss with you is the application of the 18 year rule (to greatly over-simplify his whole book!) to other countries. Fred mentions that the rule holds true no matter if a land starved island(UK) or massive expansive (Oz).

As I am invested in property in Dubai, I am intersted in hearing your views on wether this rule will apply in Dubai.
Of particular note is that in the Year 2002 - Foreign ownership allowed in limited freezone areas.


It is possible that the cycle may unfold that way in Dubai.
But I think we will soon be due for the Mini-Recession, so I have edited your text above for years 2008-2015:,
adding the words after the "/":

2008 Boom / mini-recession
2009 Boom / mini-recession
...
2013 Boom / Winner's Curse
2014 Boom / Winner's Curse
2015 Boom / Peaking

However, to be more confident about this, I think it would be a good idea to look at several decades of price history- if you can find it. To see how well the 18 year time frame has worked in the past.

Do you have a chart of Dubai prices? (If not, use oil prices maybe, where I see a 30 year cycle)

Also, please listen to the last part of my Part-2 about Harrison's cycle. And remember that the 18 years is only a guideline, and the actualk periods can get disrupted by Wars, and big developments like Peak Oil.


The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix




0 user(s) are reading this topic

0 members, 0 guests, 0 anonymous users