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

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Nice chart. Seems like a robust inverse relationship.

 

Nevertheless, Rising unemployment doesnt rule out a multi-month Dead Cat bounce.

But once it is done, and fall to fresh lows will really crush optimism, and negative sentimeny will help give the market the strong negative sentimeny it needs to create a true bottom

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THERE'S NOT MUCH LIFE in this Dead Cat

 

The recovery: weak but still alive

Home economics: David smith

 

Have the housing market’s green shoots already withered and died? The winter rise in mortgage approvals, renewed interest among potential buyers and other measures of housing activity seemed to tell of a situation in which the market was slowly beginning to regain a bit of confidence.

 

These gentle signs of a pick-up were not, it should be said, strong enough to be consistent with an early rise in prices, though in this context it should be said that the market is distorted on both sides. Demand is weak, but so too is supply. It is possible that what economists call equilibrium, when prices are neither falling nor rising, will be achieved at a lower level of transactions this time than in the past. We are not there yet, and the question for the moment is whether the rise in activity to levels consistent with stable prices has already stalled, or worse.

 

Last week, the British Bankers’ Association (BBA) reported that March was a weaker month for mortgage lending than expected. Mortgage approvals by the big banks, having risen for three months from a low point in November, slipped back by nearly 7%, from 28,024 in February to 26,097 in March — leaving them down by just over 25% on a year earlier. Other measures were also weaker: gross mortgage lending fell from £9.2bn to £8.9bn and net lending from £3.9bn to £3.7bn. Nationwide said prices dropped by 0.4% last month, not quite reversing March’s 0.9% rise.

 

Some people saw this as instant confirmation that the apparent pick-up in market activity was a dead-cat bounce, smothered by rising unemployment. Was it? The BBA’s own verdict, from David Dooks, its head of statistics, was that the numbers are consistent with a gentle upward trend in lending. It is a characteristic of such uptrends that you get occasional reversals. Indeed, in contrast to the BBA, Bank of England figures on Friday showed a 4% rise in approvals in March to 39,230.

 

/more: http://business.timesonline.co.uk/tol/busi...icle6205992.ece

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Several charts updated on page one

 

US cycle vs. UK cycle

CTXvsBDEV.gif.jpg

The UK is being speeded up by recent Uk actions

Note how the UK cycle is lagging behind the US cycle

 

Idealised 18 1/3-Year U.S. Real Estate Cycle, 1870-1955

 

TURN: -19th Cent- : ----------20th Century---------- : --21st Cent--

High: 1871 , 1889 , 1908 , 1926 , 1945 , 1964 , 1982 , 2000 , 2019 ,

Act.: 1871 , 1887 , 1905 , 1925 , 1946 , ???? , ???? , 2005?, 2020?,

Low : 1880 , 1898 , 1917 , 1935 , 1954 , 1971 , 1991 , 2009 , 2028 ,

Act.: 1877 , 1897 , 1917 , 1933 , 1958 , 1975 , 1991 , 2010?

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I have begun to produce an Index for house prices in the UK outside London...

 

( From the thread entitled: Supply/Demand Law challenged )

 

I'm not having a dig but you have been expecting an imminent UK housing crash since circa 2001. Just saying after 10 years of the "bloody obvious" not happening, maybe the context within which people act needs to be factored in differently...

No Crash ? It really depends on where you live.

 

(I have just pulled down this data. How it was derived, I will explain later)

 

Do you recall my clear call of a Top in July 2007, on Commodity Watch Radio ? :

 

I forecast "crash cruise speed" in mid-2007, and then became bullish, expecting a Dead Cat Bounce in March 2009.

 

THE REST OF THE UK - what prices look like, when you remove London from the National data:

DeadCatUK.jpg

 

Since 2008, there have been two divergent pathways: London property, which fell for a few months and then recovered to fresh highs thanks to ultra-low interest rates (below the rate of inflation, and the lowest rates in UK history.) Despite the low interest rates, the vast majority of UK homes remain locked into "crash mode" with only a brief pause in 2009-10.

 

UknonLondon.gif.jpg

 

Peak : 166,265 - Sep.2007

Low- : 120,616 - Mar.2009 : - 27.5%

Rally : 135,331 - Aug.2010 : +12.2%

Latest 128,737 - Jun.2011 :: Down from the high : - 22.6% / -GBP 37,528

 

This certainly looks like an ongoing crash to me. Over 17 months, prices-outside-London retraced only 32.2% of their GBP 45,649 drop.

 

Yes, London is different - but London's day is coming too, I reckon.

 

Meantime, only about 12% of the UK's houses are in London, so the above chart represents reality for about 88% of UK homeowners.

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