Co-Ed Naked Call Writing

[OneFootInTheGrave]

I don't follow that last bit, OFITG. Do they mean equity is being wiped out as the value of property decreases towards the amount owed, or that the amount owed is actually increasing? Ponzi scheme?

yes.. equity is being wiped out and people with assets end up owning more each passing month due to it...

and ponzi scheme - in this respect would be ever increasing asset prices during last 10 years or so on no real base, but only on ever looser lending standards by the financial institutions...

Even though I am more bearish than most, I did not expect this last quarter to be so bad in terms of output in UK... it is quite shocking really, and one has to wander how will '09 play out...

The house prices themselves did not move THAT much down really, only to 2005 level... and unemployment has only started, not too many repossessions... in 9 months when the real recession strikes - - well I can only hope that record government borrowing can ease the pain more rather than less... UK is really dependent (more than anyone else) on US/EU/Japan actions to bring back demand... otherwise we are totally screwed... as it is I would only expect more of the same in 09 of what we had in this last quarter...

[DanS]

Pump pump pump

[DrSpike]

Not that I think too much should be read into it in the current climate, but for the sake of balance:

http://business.timesonline.co.uk/tol/business/economics/article5666159.ece

[DanS]

Yeh, it was just a blip. Down 2.3% on last month. At least the rate of the price drops is leveling off.

Anyhow, I think by now it is plain to see that the premise of the OP in September '07 was precisely on the mark.

[OneFootInTheGrave]

Yeh, it was just a blip. Down 2.3% on last month. At least the rate of the price drops is leveling off.

Anyhow, I think by now it is plain to see that the premise of the OP in September '07 was precisely on the mark.

Well I'll quote myself, so reality finally struck, I only wish it struck in 2005 as it would not have been as painful as this current 08/09 strike... but eh well... one thing that I should have done, and I did not do is short citibank back than... but eh well again... duh (for Cort) ...

UK housing market will be going down considerably starting in about 6 months from now, because the investors will be scared/have better investments elswhere, and the prices are out of "non owners" reach for a while now... so I think the overdue correction will be coming in shortly.

The government will get involved more, will try to dampen the impact, the rates will go down again, but the fundamentals as wrong as this will eventually cause the bubble to burst. This bubble is primarily fuelled by general lack of new housing and excess "multiple house owner" investment, which will not be enough to sustain the upward trend after a major confidence shake up, which seems to be happening now.

This overall banking credit crunch is just an intro.
If US thinks it's having it bad, wait until the crunch hits UK. IMO Will be worse than late 1980's/ early 1990's despite of the strong economy which will ease/slow the start, but it will only make it into a prolonged and more painful experience for those who keep on thier investmentshoping it will go back to "normal" (that is post y 2000 levels)...

I think that the reason for this correction waiting so long is that it lacked a trigger, and the well performing UK economy just made this illogical purchaser/investor mentality last longer (mentality is the same as with any bubble, think dot com)... but this today looks like the trigger, and in the end sooner the correction happens better it is... if it is going to be hard now, it can only get worse if this unrealistic situation persists for anoter 2-3 years.

The historical average for market prices is about 4x the average salary. Before 1990 crash it peaked about 5x, now it is 6x the average... well perhaps some migh hope we have landed in another "era" where this higher price/salary difference is "normal" but as long as we stay in free market economy my bet is that we will see a correction.

Last time the correction went from 5x the average to 3x the average (total price drop was about 35% and the salaries grew in the meantime) when it hit the bottom mid 1990's... and as usually higher the climb deeper the fall... we might see an even more spectacular adjustment, but I think it will take 5-6 years for this one to hit the bottom despite of big difference (which should speed up the process), as the resistance will be there due to a well performing economy, and the general lack of housing so the better off will pay well for "slowing down" the crash, but they can afford it anyhow ....

Will see of course, but as usual those adjustments eventually happen, and this looks like a really good trigger to shake the confidence which will start the ball visibly rolling in about 6 month from now (after the administrative backlog of the existing purchases clears).

My bet would be that the average which is now 180k will drop down to about 80k when it hits the bottom... so more than a 50% drop and down to slightly below 3x average salary... this would be "normal" turn of events from my POV... so let's see what happens...