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".


Anonymous said...

If you (and the other silly types) are in Bedlam, then it seems fairly obvious who's running the asylum... ;D

swardley said...

Outside a lunatic asylum one day,
As I was breaking up stones,
Up pops a lunatic and said to me
Good Morning, Mr Jones
How much a week do you get for that
thirty bob, I sighed.
He looked at me, began to grin
And this is what he cried.
Come inside, you silly bugger, come inside,
I thought you'd have a bit more sense.
Working for a living, take my tip,
Act a little barmy and become a lunatic.
Oh, you get your meals quite regular
And four new suits beside.
With your Thirty bob a week, and a wife and kids to keep
Come inside you silly bugger come inside.

Bird said...

Well, there's no laughing matter in the fates of those who really run amuck in financial crises, but, while a 30% drop in the value of the real estate part of their limited economies represents a tragedy for them, it's not actually such a great fortune we're looking at there.
Now, consider how much the likes of Roman Abramovich is out of pocket. That'd make you smile.
I nicked the 'come inside you silly bugger' text, by the way - thanks and apologies - for my philanthropic gesture toward those who are ever more up the wall and round thebend in these trying times...

swardley said...

My sympathy is reserved for those in our society who are least able to cope with the financial crisis. This is why I strongly believe that measures should be taken to rapidly expand social housing and provide protection for our poorest and most vulnerable.