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The Coming "Bull Trap" in Housing / per Conf. Call #3

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Like LuckyOne, I think UK home prices are overvalued, and it would be far too dangerous to "buy the bounce". Transaction costs are too high, and it is slow process to sell, so I am recommending that would be home buyers ignore the "buy" signal, and stay on the sidelines. It may feel good to be ahead, watch your home value go up for 6-9 months (if we see that), but is it really worthwhile to find yourself locked in, if we see a resumption of the downtrend? The other dangerous posibility is that "the bounce" will be very short lived, only a month or two. If that happens, you may find yourself losing money on your UK home even before the closing has happened.

 

Do be careful.

 

I’m ‘buying the bounce’. I’ve put a small amount of money on SHB.

 

http://www.shaftesbury.co.uk/about.php

 

big.gif

 

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I want to get the word out, so people will be more inclined to resist the temptation to buy.

 

The irony is that buyers entering now, and a brief rise, will only serve to prolong the price falls, thus any recovery. Everyone is so short termist it amazes me. A shorter sharper steeper decline and crash is considerably better than a state led, bailed out, subsidised, hpc, and recession.

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The irony is that buyers entering now, and a brief rise, will only serve to prolong the price falls, thus any recovery. Everyone is so short termist it amazes me. A shorter sharper steeper decline and crash is considerably better than a state led, bailed out, subsidised, hpc, and recession.

 

Some buyers are clearly unconcerned by short term though. Spoke to somebody earlier today who gave me this insight into his thinking. Money in the bank makes nothing, money invested in traditional equities makes nothing(more likely losses), money invested in anything else, well i just don't understand he says.

 

So i asked if he thought it would go up in value, he simply didn't care, it's mine, i own it and i don't plan moving he quips. Suppose it's difficult to decide on whether to buy now i teased, it might go down in value, you might be better to wait but then it may be sold. Yes came the reply and my savings could be worth less or gone up in smoke. :huh:

 

Oh did mention a few nice precious coins or such ilk, but he'd seen all that noise in the press, looked like someone doing an hard sell, how come if it's so good the price of gold's falling :rolleyes:

 

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The game's afoot!

 

Barratt / BDEV.L is now trading above the 252d.MA ... update

chartp.gif

 

Let slip the "dogs of war" (hyping EA's)

 

1239075908052931800.jpg

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Pardon my ignorance but why would builders share prices going up mean the national average of house prices is going to shoot up?

Can it not just mean that maybe in the coming months, falls won't be as much as they were in past months i.e still negative?

 

Where have you been?

I think that this correlation has been ablely demonstrated by me, several times.

 

Others, like Spline have also picked up on it.

/see:

 

It may or may not happen this time, but the historical record is so amazingly strong, you should be paying attention when it happens.

 

If we soon get a "dead cat bounce" in home prices, it will have repeated yet again.

 

WHY does it happen?

I cannot say for sure, but I believe that there are two main things are at work:

 

+ One both measures reflect sentiment towards residential property, and the change shows up in Homebuilder shares faster and more transparently than in the Property indices

 

+ People who work for the homebuilders see things changing "on the ground", and though the may not be allowed to buy shares in their own companies, they are free to buy the shares in competitor companies. So prices turn when they get a whiff of the change.

 

I used 252 trading days (= 1 year) as a filter, to show when a move has gone far enough that a new trend is being signalled. This Moving Average works well in several markets that I trade in.

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The game's afoot!

 

Barratt / BDEV.L is now trading above the 252d.MA ... update

chartp.gif

 

Let slip the "dogs of war" (hyping EA's)

 

 

haha :)

 

We fell back to 116p, slightly above the 252day MA. Me itching to buy. What indicators to watch that we dont fall below the 252d ma? exercising caution here ...

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Some buyers are clearly unconcerned by short term though. Spoke to somebody earlier today who gave me this insight into his thinking. Money in the bank makes nothing, money invested in traditional equities makes nothing(more likely losses), money invested in anything else, well i just don't understand he says.

 

So i asked if he thought it would go up in value, he simply didn't care, it's mine, i own it and i don't plan moving he quips. Suppose it's difficult to decide on whether to buy now i teased, it might go down in value, you might be better to wait but then it may be sold. Yes came the reply and my savings could be worth less or gone up in smoke. :huh:

 

Oh did mention a few nice precious coins or such ilk, but he'd seen all that noise in the press, looked like someone doing an hard sell, how come if it's so good the price of gold's falling :rolleyes:

 

Home "ownership" is, I would argue, now fundamentally programmed into the UK/USA mindset (and soon to be Asia). Attempts to model it in traditional ways just won't work. Logically we know that paying £x for an apartment (as I am considering) is ludicrous - but I will do it nevertheless as it is a place to live that require no future income stream in X years.

 

We have three primary classes in the UK: the Gentry (land owners for at least 7 generations), the Poor (social housing, social pay), and the Middle Class. The noise, as ever, is around the Middle Class as they aspire to the Gentry and hope to avoid the Poor.

 

I do believe the "price" of UK housing will fall, and given that inflation is 12-18mo away, it would appear to be nominal in the 1st instance. After that though, looking at the bald numbers will help little if, as I suspect, the cost of a pint of milk (for example) will be approaching £2 by 2011.

 

B

 

 

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Home "ownership" is, I would argue, now fundamentally programmed into the UK/USA mindset (and soon to be Asia). Attempts to model it in traditional ways just won't work. Logically we know that paying £x for an apartment (as I am considering) is ludicrous - but I will do it nevertheless as it is a place to live that require no future income stream in X years.

 

We have three primary classes in the UK: the Gentry (land owners for at least 7 generations), the Poor (social housing, social pay), and the Middle Class. The noise, as ever, is around the Middle Class as they aspire to the Gentry and hope to avoid the Poor.

 

I do believe the "price" of UK housing will fall, and given that inflation is 12-18mo away, it would appear to be nominal in the 1st instance. After that though, looking at the bald numbers will help little if, as I suspect, the cost of a pint of milk (for example) will be approaching £2 by 2011.

 

B

 

Milk should cost that now. Farmers are getting ripped off and cows are being pushed to their natural limits.

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I haven't read the whole thread, but remember in the last crash there were many runs where prices went up, particularly in the 1st few months of every year. Dead cat bounce? Maybe, but more just a reality of the inherent volatility you get when the transactions are low.

 

Right you are.

No one has said this yet, so maybe I need to say it:

 

A prominent DC bounce is an important part of the correction, because when the slide comes AFTER the bounce it kills hopes that many have, and crushes expectations that people can make money investing on the long side. Imagine how people will feel if they buy now, see a 6% rally, and then watch in horror as hopes-for-recovery are snuffed out, and prices resume their slide. The willingness to invest after that will be even lower than it is today.

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From Nationwide quartley UK in the last down turn

 

Q1 1989 59534

Q2 1989 62244

Q3 1989 62782

Q4 1989 61495

Q1 1990 59587

Q2 1990 58982

Q3 1990 57245

Q4 1990 54919

Q1 1991 54547

Q2 1991 55418

Q3 1991 54903

Q4 1991 53635

Q1 1992 52187

Q2 1992 52663

Q3 1992 52243

Q4 1992 50168

Q1 1993 50128

Q2 1993 51918

Q3 1993 51746

Q4 1993 51050

Q1 1994 51327

Q2 1994 51362

Q3 1994 51731

Q4 1994 52114

Q1 1995 51084

Q2 1995 51633

Q3 1995 51334

Q4 1995 50930

Q1 1996 51367

Q2 1996 53032

Q3 1996 54008

Q4 1996 55169

Q1 1997 55810

Q2 1997 58403

Q3 1997 60754

Q4 1997 61830

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The game's afoot!

 

Barratt / BDEV.L is now trading above the 252d.MA ... update

chartp.gif

 

Let slip the "dogs of war" (hyping EA's)

 

1239075908052931800.jpg

 

RIGHT on schedule, we see this...

 

Is it time to buy property? David Budworth

 

It's started again. At my local Indian restaurant, the other day, I overheard a conversation that went something like this.

 

Person A: "My shares have been appalling."

 

Person B: "Mine too. I'm thinking of selling them and investing in property."

 

Person A: "Good idea. Property is bound to do better than shares over the next five years, don't you think?"

 

How low can the stock market go?

What will be next bubbles in world economy?

Person B: "Absolutely."

 

Nothing, it seems, can shake Britons confidence in bricks and mortar, even a near 20 per cent drop in house prices. But here are five myths about property that need to be challenged.

 

... Fortunately, he goes on to debunk the idea:

 

/more: http://www.timesonline.co.uk/tol/money/inv...icle6059138.ece

 

 

 

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Has anyone else bought SHB?

I doubled up my position at 280

Shaftesbury's Strategy

Shaftesbury’s strategy is very clear and focused. The Group invests only in those districts within the West End which have an enduring demand from occupiers and popularity with their customers. Our investments are all close to the unique cluster of shops, restaurants, theatres, cinemas and world class galleries, museums and historic sites, which are the essence of London’s West End. These districts all have excellent access to a wide choice of public transport both day and night.

 

We invest in locations close to streets traditionally regarded as prime with the aim of assembling clusters of buildings or villages where we see opportunities to create rental growth. This approach allows us to benefit from active estate management across our villages, with bold projects and innovative changes of use. We have a wide range of unit sizes and uses within our portfolio which provide us with great flexibility in meeting the needs of tenants and adapting to changing conditions.

 

An essential ingredient of this strategy is our encouragement of new trading concepts. Many of our retail and restaurant tenants are unique. At the same time well known international brands are choosing to locate their first UK stores in our villages. I

 

==

 

I like the transport connection,

but retail is gonna get hammered hard, so be sure you have some stops in place

 

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...

Fortunately, he goes on to debunk the idea:

 

/more: http://www.timesonline.co.uk/tol/money/inv...icle6059138.ece

 

I've had my comment posted on the Timesonline website! :D

 

There would be thousands of people living in tent/caravan cities if there was a shortage of property. Everybody is living somewhere; presumably in a property. In any case, there are more than 1 million properties listed as ‘empty’ on the Council Tax register. Where is the shortage?

 

Mr Z Nik, Manchester, UK

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this one i particularly like, from march 1991.

"Wednesday 13 MAR 1991 - The Times - House prices predicted to rise 66% over five years

House prices in the UK are predicted to rise by an average of 66 per cent over the next five years as the housing market recovers from the slump through falling inflation and interest rates. The Housing Mortgage Corporation, in its latest house price..."

plus ca change.

 

Right.

We have seen the Guillotine drop (which shows the old cycle is down)

 

Now we are experiencing the Dead Cat bounce

 

Next, comes the "sandpaper slide" where all the bulls get taught a lesson about how

hard it is to outlast a long downturn after a huge bubble run-up.

 

It will last for some years

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'ERE WE GO, 'ere we go, 'ere we go - DEAD CAT Bounce

========

 

House price plunge slows as rising demand boosts sales

By Daniel Thomas, Property Correspondent

 

Published: April 27 2009

 

House prices fell at the lowest monthly rate for a year in April, fuelling hopes among housing experts that a bottom is being reached in the market.

 

Prices fell by 0.3 per cent in the month, according to the national housing market survey from Hometrack, taking prices down by 10.1 per cent over the last 12 months.

 

Hometrack said this would add to optimism among estate agents on the back of increased levels of market activity and sales during the first three months of 2009.

 

April experienced continued growth in the number of buyers registering with agents, with applicant numbers up by 6 per cent throughout the month and by almost 32 per cent in the past three months.

 

The increase in demand, Hometrack said, together with a move to more realistic pricing, has supported a 15 per cent rise in the number of sales in April. Sales are up by 70 per cent over the last three months, albeit from a very low base.

 

The average time taken to sell has fallen for a third consecutive month, standing at an average of 10.4 weeks compared to a recent high of 12.3 weeks in January this year. The proportion of asking prices being achieved continued to rise, at 89.6 per cent in April compared to a January low of 88.3 per cent.

 

Hometrack's Richard Donnell said the numbers should not be taken as grounds for too much optimism, however. Hometrack expects to see just 600,000 open market sales in 2009, about half what would be considered a normal market.

 

Mr Donnell said that buyers of family housing and cash investors picking up bargains were behind the improved sales volumes of recent months.

 

He asked: "Is this pick-up in activity merely a seasonal blip supported by pent-up demand, or the beginning of a more sustainable trend? The market cannot operate indefinitely with just one sub-set of active buyers.

 

"In the rush to seek out the green shoots of recovery, the importance of first-time buyers in driving the market is often underestimated. And the fact remains that the majority remain affordability constrained and unable to access mortgage finance."

 

According to a separate study by propertyfinder.com today, almost half of a survey of 2,345 people said prices would rise in the next year, a significant improvement in confidence.

 

/see: http://www.ft.com/cms/s/0/677f29b0-32c3-11...?nclick_check=1

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A work colleague has been in the mortgage/finance industry in the UK for the past 20 years. I overheard him say that it would soon be a good time to buy UK property. I suggested there was much further falls to come and was interested to see what he made of the two graphs frizzers recently posted in moneyweek:

 

http://www.moneyweek.com/investments/prope...hart-14664.aspx

 

He asked me where I thought we were and i said "in the bull trap".

 

He replied "nah we are at capitulation. In 9-12 months time we will be through despair."

 

This guy is pretty smart and worked in the mortgage industry right the way through the last housing crash so i dont feel i can just dismiss it out of hand. However, it does seem wildly optimistic.

 

I mentioned that job losses havent even really begun (especially here in edinburgh), wages were stagnant if not falling, rents were cheaper than mortgages - to which there wasnt much of a reply beyond the job losses wont be as dramatic as folks think as they will mostly be through voluntary redundancy and retirements. But these jobs are not coming back! I exclaimed! Where are the jobs for those who want to get their first house! No reply to that one....

 

Anyone else out there believe we are going through capitulation just now and will be at the bottom of despair in 9-12 months? If so why? I am genuinely interested to hear any contrary voices.

 

 

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But of more significance perhaps, mortgage approvals fell in March.

 

http://news.bbc.co.uk/1/hi/business/8020201.stm

 

Although a confirmed bear on UK housing market I didn't expect to see this yet.

 

I was expecting a levelling off in prices (and accompanying slow increase in approvals) before the next leg down caused by increasing unemployment.

 

Although a single swallow does not a summer make, a drop in approvals now in the traditional spring bounce time could be potentially very significant?

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A work colleague has been in the mortgage/finance industry in the UK for the past 20 years...

 

He asked me where I thought we were and i said "in the bull trap".

 

He replied "nah we are at capitulation. In 9-12 months time we will be through despair."

 

I would say at 20% down it was perhaps approaching the beginning of Capitulation.

But hope has come roaring back in this Dead Cat bounce and so we will now need to see this phase

play out before the real slide comes some months from now when rates shoot up and lead to a

prolonged slide into real capitualtion.

 

The excesses of a 14 year bull market will not be corrected after a mere 18 months, and 20% drop.

He should know better

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But of more significance perhaps, mortgage approvals fell in March.

...

Although a single swallow does not a summer make, a drop in approvals now in the traditional spring bounce time could be potentially very significant?

 

"mortgages approved for house purchases fell to 26,097 in March, down (only) 6.8% from February"

_45705837_uk_mortgage_466.gif

 

the upwards rally will not come in a straight line.

but perhaps it is near halfway thru after a few months of recovery in mortgages

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A work colleague has been in the mortgage/finance industry in the UK for the past 20 years.

 

This guy is pretty smart and worked in the mortgage industry right the way through the last housing crash so i dont feel i can just dismiss it out of hand. However, it does seem wildly optimistic.

 

I mentioned that job losses havent even really begun (especially here in edinburgh)

 

Has he worked in the mortgage industry for 20 years in Edinburgh or was he in London during the last crash?

 

The reason I ask is because the last crash felt very much London and the South East focused with the rest of the UK being impacted to a much lesser degree. Am I correct in this recollection?

 

Capitulation is when sellers slash prices to just get out of the market and leave it behind like a bad memory. The main contenders for capitulation will be 2nd properties and these are typically 2 bedroom flats. When the average price of these gets back to somewhere close to the long term trend line (e.g. 1997/8 prices rolled forward with some inflation each year) we'll have hit capitulation. Until then, it's still to come.

 

 

 

 

 

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"mortgages approved for house purchases fell to 26,097 in March, down (only) 6.8% from February"

_45705837_uk_mortgage_466.gif

 

the upwards rally will not come in a straight line.

but perhaps it is near halfway thru after a few months of recovery in mortgages

 

I can see us bouncing along at this level of approvals for many many months; lenders don't want to lend and borrowers are losing their jobs.

 

There's no rule that says the graph has to rise or fall significantly immediately.

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