From: "Tumbleweed"
Newsgroups: uk.politics.misc alt.politics.british alt.politics.bush uk.finance
Subject: Re: The crumbling housing market and the impending recession.
Date: Wed, 3 May 2006 08:04:28 +0100
"Virgils Ghost" wrote in message
news:l6O5g.219248$zy2.54683@fe08.news.easynews.com...
> "Troy Steadman" wrote in message
> news:1146593066.371665.125200@e56g2000cwe.googlegroups.com...
>> Crowley wrote:
>>> Latest Moneyweek article predicts trouble ahead ................
>>>
>>> "The storm clouds are gathering, taxes and utility bills are rising
>>> while job security is falling. We're on the cusp of what could still
>>> yet turn into a full-blown recession and things could get a lot worse
>>> before they get better ...................... "
>>> http://www.moneyweek.com/file/11314/where-is-the-housing-crash.html
>>>
>>> Regular readers of MoneyWeek might remember that I've been warning
>>> about an impending housing slowdown in the UK since my first article on
>>> the subject appeared in May 2004.
>>>
>>> But I'd like to remind readers that the last housing crash happened
>>> over a seven-year period, much like a falling line of dominos.
>>
>> There hasn't been a house price "crash" in the UK in living memory.
>
> Contrary to popular belief, a lot of the UK population were indeed alive
> in 1989 and beyond.
>
> "The size of homebuyers' deposits required by lenders decreased. The
> interest rates charged by lenders above the base rate was reduced and the
> ratio of mortgage advance to potential homebuyers' income started to rise.
> People increased their debt liabilities on the assumptions of a continued
> growth in earnings and house prices. In his March 1988 budget, the then
> Chancellor, Nigel Lawson, announced that dual relief for joint property
> holders would be abolished the following August. This prompted a further
> increase in house buying activity. Given a housing stock fixed in the
> short-term, this lead to an
> increase in the price of houses. Between 1987 and 1989 the average price
> of a house increased by £24,000 or 52% from just over £46,000 in 1987 to
> just over £70,000 in 1989; an average increase of just over 21% a year.
>
> Then the unpredictable happened. Iraq invaded Kuwait in 1990 which lead to
> higher oil prices globally and a negative shock to the UK economy.
> Inflation, the annual percentage change in the RPI, rose to 9.5% in 1990
> and the base interest rate, already high, hit 15%. Unemployment, which in
> April 1990 was half its level in January 1987, started to rise.1 The
> unemployment rate, which had been falling steadily since March 1986, began
> to rise back towards 10%. The growth in annual earnings slowed and the
> growth in real GDP fell to -1.4% in 1991.
>
> The knock on effect of these factors was a fall in house prices. The
> annual percentage change in average house prices fell from an increase of
> 21% in 1989 to minus 4% in 1992. The actual average price of houses fell
> by 6% over the same period. The volume of housing transactions also fell
> from just under two million in 1988 to just over a million in 1992.
>
> In these circumstances many homeowners found themselves in the
> uncomfortable position of having negative equity in their property. This
> is where the outstanding balance of the mortgage exceeds the value of the
> house. Some homeowners who, due to either a general decline in economic
> conditions or a change in personal circumstances, such as unemployment,
> could not afford to pay their mortgages, were forced to try to sell their
> homes in an already depressed housing market.3 Many homeowners who were
> unable to sell ultimately found that their houses were repossessed. At the
> depth of the property crash, lenders were repossessing homes at the rate
> of more than 1,500 a week."
>
> http://www.parliament.uk/commons/lib/research/rp2002/rp02-042.pdf
>
> Selective amnesia, perhaps?
>
Hmmm, the end effect of all those rises and falls is an increase in prices
over the period mentioned. Must be you with the selective amnesia.
--
Tumbleweed
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