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Time to feel bearish again?


Libspero

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That was the global recession tgat wasnt.

Dumb fuck economists.

https://www.ft.com/content/9fd110e4-6c1f-11e9-a9a5-351eeaef6d84

Less than a month ago in the imposing setting of the IMF’s HQ2 building in Washington DC, Gita Gopinath, its new chief economist, had a bleak message for the world. Disappointing data had led the fund to cut its forecasts for global growth yet again, any recovery pencilled in for the second half of this year was “precarious” and this toxic combination meant that spring 2019 was a “delicate moment” for the global economy.

IR wont have an averse effect til they are well clear of growth figures.

US could stand rates at 4%

 

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JoeDavola
On 03/04/2019 at 00:00, Bobthebuilder said:

I have been dumbfounded by the rise in property values since 1997, i was 27 years old then, i am now 50. Its completely mental.

This is why I'm thinking of buying even though I think housing is terrible value; I'm 35 and I can see them keeping things inflated until I'm 50 (the value of sterling just going down).

I think the only thing that's gonna cause a significant decrease in prices would be some big event outside of the government's control. In the absence of that the UK psyche is such that people will pay and do stupid things (i.e. 35 year mortgages) to get a house.

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Noallegiance
9 hours ago, JoeDavola said:

This is why I'm thinking of buying even though I think housing is terrible value; I'm 35 and I can see them keeping things inflated until I'm 50 (the value of sterling just going down).

I think the only thing that's gonna cause a significant decrease in prices would be some big event outside of the government's control. In the absence of that the UK psyche is such that people will pay and do stupid things (i.e. 35 year mortgages) to get a house.

I toy with this as I'm in my thirties with a young family.

I just can't bring myself to be voluntarily under crushing debt when I know the truths of things.

On the plus side, I would never make the same decision my brother has ever made about anything. They always turn out shit. And he could be buying a house this year! A good sign!

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JoeDavola
15 minutes ago, Noallegiance said:

I toy with this as I'm in my thirties with a young family.

I just can't bring myself to be voluntarily under crushing debt when I know the truths of things.

On the plus side, I would never make the same decision my brother has ever made about anything. They always turn out shit. And he could be buying a house this year! A good sign!

Hey I agree - when looked at logically, buying a house is a bad idea financially.

In fact I think the reason why 'you can't lose with houses' is part of the national psyche is because of the years when there was significant wage inflation over the years coupled with drops in interest rates and houses multiplying in value over 20 years (even when adjusted for inflation). But you have none of that now, with wages static or dropping in real terms, and houses pushed to their very limit price wise without demolishing sterling because the IR's are as low as they can go.

So the young who buy a home now won't get the big paper gains that their parents did - they'll just have 35 years of crushing debt plus the stress and cost of maintaining a property on top of that. I'm convinced that a significant percentage of those who are taking out these big mortgages will die before they ever pay them off.

But most people who have families want the security of ownership, and I understand that.

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Bobthebuilder
38 minutes ago, JoeDavola said:

Hey I agree - when looked at logically, buying a house is a bad idea financially.

In fact I think the reason why 'you can't lose with houses' is part of the national psyche is because of the years when there was significant wage inflation over the years coupled with drops in interest rates and houses multiplying in value over 20 years (even when adjusted for inflation). But you have none of that now, with wages static or dropping in real terms, and houses pushed to their very limit price wise without demolishing sterling because the IR's are as low as they can go.

So the young who buy a home now won't get the big paper gains that their parents did - they'll just have 35 years of crushing debt plus the stress and cost of maintaining a property on top of that. I'm convinced that a significant percentage of those who are taking out these big mortgages will die before they ever pay them off.

But most people who have families want the security of ownership, and I understand that.

Good post.

Buying a home is so hard to gauge. There never seems a right time to do it.

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Noallegiance
2 hours ago, Bobthebuilder said:

Good post.

Buying a home is so hard to gauge. There never seems a right time to do it.

Kinda like having kids. We waited until it was comfortable for us to do so.

Right now I'm am acutely uncomfortable with being forced to borrow £400k for a family home. There so much more pressure than just the high digits, too. I'd be forced into doing types of work I don't want to do for hours I don't want to do with peopIe I don't want to in companies I don't give a shit about with amidst zero time to do what I want to do. All for a house I knew I overpaid for, trying to shell out £600k+ before I die.

Not good for the psyche. I rent. I feel free. When I get the same feeling with the prospect of buying, that will be the time.

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JoeDavola
2 hours ago, Noallegiance said:

Kinda like having kids. We waited until it was comfortable for us to do so.

Right now I'm am acutely uncomfortable with being forced to borrow £400k for a family home. There so much more pressure than just the high digits, too. I'd be forced into doing types of work I don't want to do for hours I don't want to do with peopIe I don't want to in companies I don't give a shit about with amidst zero time to do what I want to do. All for a house I knew I overpaid for, trying to shell out £600k+ before I die.

Not good for the psyche. I rent. I feel free. When I get the same feeling with the prospect of buying, that will be the time.

Yeah you have to remember that we all end up dead at the end of this, regardless of whether we own a property or not. Might as well have as much fun with as little stress as possible along the way.

How much would it cost per month to rent the house that you'd hand over 600K plus additional thousands of maintenance over a lifetime to own?

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Noallegiance
7 hours ago, JoeDavola said:

 

How much would it cost per month to rent the house that you'd hand over 600K plus additional thousands of maintenance over a lifetime to own?

At current rental levels, assuming an age of mid 70's, £462k!

Which is horrific enough without interest and maintenance.

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JoeDavola
5 hours ago, Noallegiance said:

At current rental levels, assuming an age of mid 70's, £462k!

Which is horrific enough without interest and maintenance.

Jesus.

I assume you're in the South. Move oop north?

The other option is to rent somewhere cheaper when the kids are small and only rent the big place during the years when you'll get the most use of it, downsizing again when the kids leave home.

Which is a lot of effort I know to try and compensate for the fucked up cost of shelter.

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I agree with all the above.  If I were starting out I'm not sure what I'd do.  A couple of other things to bear in mind are what happens if you want to move and find it difficult to sell.  This is where renting wins out when you can be free with a month's notice but this is minor compared with what happens when you retire.  If you have managed to pay off the mortgage and have a freehold house you can have a worry-free retirement otherwise if you're still renting then you could end up working well into retirement just to pay the rent.  I agree having children and wanting to feel settled at this inbetween stage in life is the over-riding reason for buying though.

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Noallegiance
1 hour ago, JoeDavola said:

Jesus.

I assume you're in the South. Move oop north?

The other option is to rent somewhere cheaper when the kids are small and only rent the big place during the years when you'll get the most use of it, downsizing again when the kids leave home.

Which is a lot of effort I know to try and compensate for the fucked up cost of shelter.

I am down south. My eldest had lived in five places in the first six years of his life and is settled at his new school. Shan't be asking him to move again unless we're served.

It is a small one! Three bed bungalow for five of us. Cheapest family home in the area without living in Shitsville but it's a great location and garden.

Gonna need more space in less than four years when the eldest approaches secondary school age and gets bored sharing with his younger brother. 

Things are gonna get crowded.

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Bank of England are getting their excuses in early..  look over there,  look at China !  B|

China’s debt-fuelled plans to prop up economic growth could push its already high debts up to dangerous levels, raising the chance of a painful crunch for the global economy, the Bank of England fears.

A further fall in China's economic growth risks making its debts “significantly less sustainable” with serious implications for markets, Deputy Governor Sir Jon Cunliffe has warned.

The world’s second-largest economy has debts amounting to more than twice its entire annual GDP

etc..

https://www.telegraph.co.uk/business/2019/05/07/chinas-runaway-stimulus-risks-new-debt-crisis-bank-england-deputy/

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Noallegiance
49 minutes ago, Libspero said:

Bank of England are getting their excuses in early..  look over there,  look at China !  B|

 

 

Yeah it's all them

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Democorruptcy
23 hours ago, JoeDavola said:

Hey I agree - when looked at logically, buying a house is a bad idea financially.

In fact I think the reason why 'you can't lose with houses' is part of the national psyche is because of the years when there was significant wage inflation over the years coupled with drops in interest rates and houses multiplying in value over 20 years (even when adjusted for inflation). But you have none of that now, with wages static or dropping in real terms, and houses pushed to their very limit price wise without demolishing sterling because the IR's are as low as they can go.

So the young who buy a home now won't get the big paper gains that their parents did - they'll just have 35 years of crushing debt plus the stress and cost of maintaining a property on top of that. I'm convinced that a significant percentage of those who are taking out these big mortgages will die before they ever pay them off.

But most people who have families want the security of ownership, and I understand that.

I'm not convinced about this significant wage inflation over the last 20 years. I see it more as a significant rise in lending multiples (and BTL IO etc)

1998 lending was 3x main + 1 second income, wages were £18k and £6k and the average house was £60k.

Now BoE are happy with no more than 15% of mortgages greater than 4.5x household income. Just using 4.5x and ignoring the 15% of mortgages greater than that, with wages of £25k and £15k = £180k. That £180k means house prices have tripled

Wages haven't even doubled £24k to £40k but house prices have tripled because of the significant rise in lending multiples.

If we were still using 1998 lending multiples 3x main + 1x second on wages now, the average house would be £90k, i.e. at £180k+ they are 100% more than they would have been.

The way to make houses more affordable and give families a disposable second income again, is to roll back lending multiples.

Edit to add, re the young now not having the same gains, lending multiples cannot triple again from here?

 

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53 minutes ago, Democorruptcy said:

I'm not convinced about this significant wage inflation over the last 20 years. I see it more as a significant rise in lending multiples (and BTL IO etc)

1998 lending was 3x main + 1 second income, wages were £18k and £6k and the average house was £60k.

Now BoE are happy with no more than 15% of mortgages greater than 4.5x household income. Just using 4.5x and ignoring the 15% of mortgages greater than that, with wages of £25k and £15k = £180k. That £180k means house prices have tripled

Wages haven't even doubled £24k to £40k but house prices have tripled because of the significant rise in lending multiples.

If we were still using 1998 lending multiples 3x main + 1x second on wages now, the average house would be £90k, i.e. at £180k+ they are 100% more than they would have been.

The way to make houses more affordable and give families a disposable second income again, is to roll back lending multiples.

Edit to add, re the young now not having the same gains, lending multiples cannot triple again from here?

 

I think your last point is the most salient, and although returns on stocks are forecast to be much lower in the next 10-20 years they are sure to beat property as an investment.

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JoeDavola
17 hours ago, MrXxx said:

although returns on stocks are forecast to be much lower in the next 10-20 years they are sure to beat property as an investment.

Agree 100%.

I'm looking at a (small) house at the moment, and even with my 50% deposit and historically low mortgage rates the cost of ownership is going to be much greater every month compared to the rent I'm paying on my flat at the moment.

If interest rates ever do go up this whole thing collapses big time. I'm surprised it hasn't done so already - the only way I can imagine families are paying these prices is that one person's wage gets used virtually in it's entirety to service the housing costs.

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It's now got interesting at long last!!!

Looking at the weekly technicals for my FTSE100 high yield portfolio, the shares are either still in a downtrend or there are no buy signals yet for those that are at the bottom.

But....I have initial buy signals for my canary FTSE short ETFs. I'm expecting a confirmation at the close this week. We'll see. Same for the VIX.

Maybe time next week to implement my hedging strategy.

BTC done well YTD and PMs and miners look like they may turn up soon (just had a fake buy signal).

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Noallegiance
4 hours ago, JoeDavola said:

Agree 100%.

I'm looking at a (small) house at the moment, and even with my 50% deposit and historically low mortgage rates the cost of ownership is going to be much greater every month compared to the rent I'm paying on my flat at the moment.

If interest rates ever do go up this whole thing collapses big time. I'm surprised it hasn't done so already - the only way I can imagine families are paying these prices is that one person's wage gets used virtually in it's entirety to service the housing costs.

Got it in one.

My take home = rent + £100. And I have a qualification I use for work! 

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Bobthebuilder
53 minutes ago, Noallegiance said:

Got it in one.

My take home = rent + £100. And I have a qualification I use for work! 

Thats shocking, depressing really. Im an old git now and out of the loop a bit but this housing crap has to crash, it cant go on like this.

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Noallegiance
3 hours ago, Bobthebuilder said:

Thats shocking, depressing really. Im an old git now and out of the loop a bit but this housing crap has to crash, it cant go on like this.

Well it's taking it's sweet friggin time.

Depressing is spot on.

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13 hours ago, Noallegiance said:

Got it in one.

My take home = rent + £100. And I have a qualification I use for work! 

I`ll be honest if this is the case what's the point/insentive in working?...life is too precious to waste for such a small return...and I am assuming this is per week?

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sancho panza
15 hours ago, Bobthebuilder said:

Thats shocking, depressing really. Im an old git now and out of the loop a bit but this housing crap has to crash, it cant go on like this.

I was having a chat with an NHS colleague last night.Wife wants to buy a £500,000 hosue.Wanted to go through the maths with me.I showed him some of the places he could rent for a £1000 in the same area(we're talking gross yields of circa 1.5% at that level before maintenance costs).

 

Obviously each to their own but he was surprised when we went through the numbers how badly they stack up for buying at the moment.And that's without looking at this crash's canary-Australia-and considering issues of negative equity/HTB-couldn't believe it but HTB is available for £500k houses-

 

Looking at somewhere like Leicester.Avrage hosue circa £200k average salary £23k......................the well off people are leaving.

https://www.payscale.com/research/UK/Location=Leicester-England%3A-Leicestershire/Hourly_Rate

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Noallegiance
2 hours ago, MrXxx said:

I`ll be honest if this is the case what's the point/insentive in working?...life is too precious to waste for such a small return...and I am assuming this is per week?

Per month.

Luckily the wife works so we can cover all the bills.

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