Friday, June 06, 2008

Soft landing ...

For many years I've been perplexed at how the housing market has been sustained and why anyone thinks we are not heading for recession. Whilst the FTSE collapse between 2000-2003 was straightforward enough (I had it pegged as dropping from 6500 to 2500, though it did drop to 3300 it rose again shortly afterwards), the housing market has remained completely out of sync with historical norms.

The buy-to-let and other enthusiasts have certainly had a good ride but eventually prices will return to a more balanced level. According to the Times prices dropped by 2.4% last month. The question is, how much further is there left to go :- 20%, 30% or even 40%?

Well, the market reckons it's going to drop by around 30%. That's quite a shocker! Of course, some pundits have gone as high as a 40% drop which tends to make people look at you as though you're the enemy of the free world. Unfortunately, as with all things, the drop will probably overshoot its historical position as it heads south. We're currently around 45% above where we should be.

To even whisper 40-55% earns the pundit a one way ticket to Bedlam and above that figure, well, you're just being silly.

Whilst I'm not going to try and put a figure on how much it is going to overshoot (I'm in the silly region), I thought I'd put up this wonderful old video and leave you with the wise old words of "always look on the bright side of life".

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