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Evaluating UK interest rates

Thursday, May 15, 2014

England's odds of winning the World Cup are about 30-1 - which reflects a rather low level of confidence that we have a realistic chance. However, the Governor of the Bank of England seems to think that a safer bet would be to back the recovery of the UK economy, judging by Mark Carney's launch of the latest Inflation Report yesterday. He likened the path the economy has to follow to that of England's task in Brazil, and said that the Bank's priority was to steer the economy through the opening rounds, all the way to victory. 

read more...»

Unit 1 Micro: Housing Market Failure

Tuesday, May 06, 2014

Here is an updated revision presentation covering aspects of market imperfections / market failure in the UK housing industry. 

I have also linked to a recent presentation on the economics of rent controls.

read more...»

UK Housing Industry: Turning Houses into Gold!

Thursday, May 01, 2014

Britain’s crisis of housing affordability is nothing to do with foreign speculators, according to Paul Cheshire writing in the Spring 2014 issue of CentrePiece magazine. Rather, it is a result of decades of misguided planning policies that constrain the supply of land and turn houses into something like gold or artworks. Houses have been converted from places in which to live into people’s most important financial asset.

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Financing the current account deficit

Wednesday, April 02, 2014

More on the implications of the UK’s massive current account deficit. Geoff has put together almost everything you need on the topic here, and he points out that the main implication is a net leakage from the circular flow of income, reducing AD and weakening multiplier effects.

A current account deficit is not necessarily a disaster; after all, imports are good too, sustaining our standard of living and is partly a reflection of the demand for intermediate goods our economy needs to stay efficient.

I’m going to pick up on the the statement that there is nothing wrong with a trade deficit. It simply means that a country must rely on foreign direct investment or borrowed money to make up the difference.

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Unit 2 Macro: London House Prices continue to Surge

Friday, March 28, 2014

There seems little that is stopping the surge in London house prices at the moment but do you think the rapid acceleration of prices is good for either London or the wider UK economy? 

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Geographical mobility of labour in the UK

Saturday, March 22, 2014

One type of market failure that contributes to inequality and unemployment is the geographical immobility of labour

If the labour market really ‘cleared’ effectively, wages would equalise across the economy. Workers would drift away from regions with low wages and/or high unemployment towards areas where wages were higher and labour was scarce. 

Instead, we see wide disparities in earnings and pockets of regional unemployment - at the same time as skills shortages and wage inflation elsewhere.

Why are people finding it hard to move across the UK in search of work?

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Unit 2 Macro: Hurdle Rates and New Housebuilding

Tuesday, March 18, 2014

The government wants more new homes to be built, so too do hard-pressed home-buyers facing a continued problem of low property affordability. But cautious construction companies are reluctant to press ahead favouring share buy-backs (returning money to their shareholders) and only a limited expansion of new building.

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Rethinking Slums

Thursday, February 13, 2014

You all know about exploding rates of urbanisation and the growth of mega cities. There’s much to celebrate in this trend, and economists are keen to advise countries how to urbanise successfully.

After all, for most subsistence farmers, life can be so grim that even life in a slum or shanty town can be a marked improvement. I’ve reluctantly admitted this fact to myself, and come to see slums as a stepping stone on the process of development.

A new study, reported in the Economist, suggests I might be wrong, and that we shouldn’t be ready to tolerate slums, and should be more determined to see their eradication – they might even be a barrier to development.

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Unit 1 Micro: Housing Rent Controls

Tuesday, November 26, 2013

The cost of renting property in many parts of the UK continues to rise - would rent controls make any difference? Here is an updated Unit 1 economics revision presentation.

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Unit 1 Micro: US food authorities take step to ban transfats

Friday, November 08, 2013

Here is an example of direct intervention in markets to address some of the information failures associated with the obesity epidemic. US food authorities have taken the first step towards banning artificial transfats, substances that are found in processed foods. They say it is a move that could prevent 20,000 heart attacks and 7,000 deaths a year. According to the BBC website

"Artificial trans fats are used both in processed food and in restaurants as a way to improve the shelf life or flavour of foods. The fats are created when hydrogen is added to vegetable oil, making it a solid."

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Immigration - the Fiscal Costs and Benefits

Tuesday, November 05, 2013

UK immigrants who arrived since 2000 are less likely to receive benefits and less likely to live in social housing than UK natives. What’s more, over the decade from 2001 to 2011, they made a considerable positive net contribution to the UK’s fiscal system, and thus helped to relieve the fiscal burden on UK-born workers.

The positive contribution is particularly evident for UK immigrants from the European Economic Area (EEA – the European Union plus three small neighbours): they contributed about 34% more in taxes than they received in benefits over the period 2001-11.

These are the central findings of a comprehensive analysis of the fiscal consequences of immigration to the UK, published today by the Centre for Research and Analysis of Migration (CReAM) at University College London.

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Introduction to Micro: UK Housing Shortage

Tuesday, September 10, 2013

As part of our introduction to micro economics we have been looking at the shortage of housing in the UK. The chronic shortage of affordable and suitable housing raises many micro (and macro) issues and I find it a good example of an issue where different policy measures can be looked at in a non-technical way as a path into supply and demand analysis. It also covers the ground with topics such as scarcity, changing needs and wants, affordability, cost-benefit principles, opportunity cost and production possibilities.

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The UK Peace Index - highlighting the opportunity cost of violent crime

Wednesday, April 24, 2013

I'm always sightly dubious about statistics and information represented by campaign organisations - I'm left with the reservation that information can presented in any way that you want to prove whatever point that you are trying to make (wasn't it an economist who came up with the phrase 'lies, damned lies and statistics'?).  So this fascinating report from an organisation called 'Vision of Humanity' needs to be looked at with an open mind.

However, if you take it at face value, it offers some really interesting information.

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Unit 1 Micro: Rent Controls - Evaluating Government Intervention

Thursday, December 13, 2012

Here is a streamed revision presentation on rent controls in the housing market - designed for AS micro students.

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Unit 2 Macro Building on the Green Belt in a Drive for Growth

Thursday, September 27, 2012

Former Labour Deputy Prime Minister John Prescott was once (perhaps) quoted as saying: "The Green Belt is one of Labour's greatest achievements, and we intend to build on it!". Danny Boyle's dramatic and wonderful London 2012 Olympic opening ceremony "Isle's of Beauty" began with an unforgettable rural landscape which was soon to be transformed by an altogether harsher industrial landscape during the pandemonium. 

For many years we have regarded our greenbelt protected land as a bulwark against urban sprawl and over-rapid commercial and industrial development. But this is about to change with a change in planning laws and regulations that will make it easier to turn farmland into business parks and new housing?

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Contour Crafting: Automated Construction as a Destructive Technology

Wednesday, August 29, 2012

Here is a thought-provoking talk by Behrokh Khoshnevis, Professor of Industrial & Systems Engineering and is the Director of Manufacturing Engineering Graduate Program at the University of Southern California (USC). He offers ways in which 3D manufacturing can revolutionise the construction industry and make it possible for customised building projects at a fraction of the financial and environmental cost. But what of the risks of a sizeable rise in technological unemployment?

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Unit 1 Micro: Revision on Maximum Rents in Housing

Sunday, April 01, 2012

The housing sectors of many towns and cities around the world have often been the target for different forms of government intervention including planning regulations, subsidies and direct price controls.

Price controls are legal restrictions on how high or low a market price may go. They can take two forms: a price ceiling, a maximum that price sellers are allowed to charge for a good, or a price floor, a minimum price buyers are required to pay for a good.

Our focus in this blog is the decision by the authorities in New York to extend arrangement for rent controls for a million rent-regulated units in the Big Apple. This provides an opportunity to look at the basic supply and demand analysis for housing rent controls and build a critical evaluation of some of their effects.

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Unit 1 Micro: Government launches New Buy Loan Guarantee Scheme

Monday, March 12, 2012

Here is a fresh attempt by the British government to breathe life into the moribund housing market. People in England are being offered financial help to climb onto or up the housing ladder as the government’s new mortgage indemnity scheme launches. Under the terms of the scheme, both the construction industry and taxpayers will act as co-guarantors on new homes bought by existing or first-time buyers. Will it work in boosting demand for new build homes? Is this scheme designed to help house-buyers or builders? Or is there a real risk of government failure?

Basics:

* Builders will pay 3.5 per cent of the price of the home
* Taxpayers will provide an additional guarantee of 5.5 per cent that will only be used if there is a major property crash.
* Mortgage lenders will be able to lend up to 95 per cent of the sale price which means new buyers in many instances will only need to find a five per cent deposit or £10,000 on a new £200,000 home. The typical deposit on a mortgage now is closer to £36,000
* The scheme is available on houses and flats valued under £500,000 in England only

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Unit 2 Macro: The UK Housing Market in 2011

Monday, December 26, 2011

This blog provides a chart-based overview of developments in the UK housing market in 2011. The housing industry has a big effect on macroeconomic variables such as output, employment and investment. Has there been a marked recovery in property prices, new housing starts and mortgage lending?

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Unit 1 Micro: Empty Housing and Economic Efficiency

Thursday, December 15, 2011

Housing Starts

Channel 4 recently focused on the causes and effects of the hundreds of thousands of empty homes in the United Kingdom. Why is it given persistent shortages of affordable housing that perhaps a million homes lie empty and unused whilst an estimated two million families are in severe housing needs. New housebuilding has collapsed and in Britain we are building 100,000 fewer new houses every year than we need just to keep up with the changing mix of households and demographic change.

An interesting exercise is to show students some of the Channel 4 Campaign videos and then get them to put together policy ideas as to how to reduce the volume of empty homes and reduce the length of housing waiting lists.

Links to some of the Channel 4 videos can be accessed below:

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Government Plans to boost the Housing Market

Monday, November 21, 2011

The Government has announced today a scheme to help first time buyers on to the property ladder. It has been reported widely in the press with mixed reactions. The BBC article outlines the main proposals (here is the link to The Daily Telegraph). It is interesting from a political point of view that this government should chose to intervene in this market, though perhaps we should not be too surprised as it was the Conservatives that brought in the ‘Right to Buy’ legislation in 1980.

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Unit 1 Micro: FirstBuy, Affordability and Effective Demand in Property

Sunday, July 10, 2011

For hundreds of thousands of first-time buyers, getting a solid foothold on the housing ladder has been tough in recent years. Falling prices and lower mortgage interest rates ought to have improved affordability for would-be purchases of a new house or flat but the barrier of having to save up a deposit in order to qualify for a mortgage has become higher causing many to be frozen out of the market. The number of people renting private accommodation in England has increased by 55% in the past six years as first-time buyers struggle to make purchases.

Economists use a term known as effective demand to describe demand that is backed up by a willingness and ability to buy. There are few better case studies in low effective demand than the difficulties facing first time buyers in the UK property market. A new government scheme is designed to offer relief.

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Chinese inward investment in the London property market

Sunday, June 12, 2011

In mainland China, authorities have put restrictions on property speculators to dampen the market, while in Hong Kong prices have risen by 70% in less than two years. But the 25% depreciation of sterling over the last two years makes the London property market a real draw for property investors from China. Sky News reports that one in three of buyers of new properties in London come from China and Hong Kong, mainly in the £400,000 - £1mn bracket, either seeking accommodation for their children studying in London or simply an investment. If - or when - the sterling/dollar exchange rate recovers, their return will be enhanced by the increased return they could get when they take their money out of the UK market again.

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AS Macro: Extended House Price Deflation?

Thursday, May 05, 2011

A pessimistic forecast for the UK economy produced by the National Institute for Economic and Social Research (NIESR) suggests that the UK housing market is set to remain in the doldrums for some time to come. The NIESR has predicted a 4.5 per cent average fall in house prices in real terms this year, with further falls averaging 1.5 per cent for the following five years. The background to this forecast of house price deflation is that mortgage finance remains hard to come by (there has been a steep fall in the average mortgage loan to house price deal on offer). And mortgage interest rates are set to rise from their current low levels.  Weak demand is thus the main driver of falling prices. The NIESR argues that “(housing) supply constraints were less important than is often argued since supply just about kept pace with household formation.”

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Timetric: Mortgage Lending and Mortgage Rates

Monday, March 14, 2011

Want to purchase a property? Chances are that you will need a mortgage to finance the deal and you will also need to find someone prepared to lend you the money. The fallout from the credit crunch continues to haunt the UK mortgage market with monthly loans to property-buyers stuck at very low levels. The average mortgage interest rate on a standard variable rate loan is low but most mortgage lenders have cut the % loan to housing valuation ratio meaning that buyers must find a hefty deposit to clinch the deal. Our Timetric chart (below) is always updated so you can keep up to speed with what is happening to mortgage lending and the cost of home loans in the UK property market.

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House Price Rollercoaster

Sunday, March 13, 2011

This is a terrific visualisation of what has happened to US house prices since the late nineteenth century - we ride the rollercoaster based on data from the Case Shiller index.

And if you want the latest Case Shiller data on US house prices - based on the 20 city survey, then click on the Timetric charts below .... hold onto your hats, the Florida property price data in particular looks pretty scary

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Combining monetary and fiscal policy to curb inflation in China

Wednesday, February 16, 2011

Inflation is rising in China, and many of the reasons are the same as those given by Mervyn King for the rise in the UK - food prices are up 10.3% and the producer price index has risen to 6.6%, giving an annual inflation rate of 4.9% in January.

This is in spite of three interest rate rises in the last four months, and has brought about a further rise from 5.81% to 6.06% by the Central Bank.

The growth of the property owning middle class is recognised as having a role here - the National Bureau of Statistics also announced changes in how it calculates consumer price inflation.

In spite of the fact that there is still a huge proportion of the population who live on a very low income, and poor families spend up to half their incomes on food, housing has now been given a much larger share of the new consumer price index (CPI) basket, and food prices have been given less weight, it said.

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UK House Prices

Tuesday, January 18, 2011

Our Timetric chart here covers the annual % change in house prices.

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Beware the return of the Gazunderer

Saturday, October 16, 2010

The fragility of the UK housing market becomes more apparent with each passing day. And anecdotal evidence of the balance of power shifting towards buyers and away from sellers comes with news of the return of the gazunderer!

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Mortgage equity withdrawal

Friday, October 01, 2010

Mortgage equity is still increasing according to the latest surveys. Homeowners have stopped using their homes as “cash machines” and are still increasing their financial stake in their homes.
Figures from the Bank of England show that homeowners’ equity rose by another £6.2bn in the second quarter of 2010.

From July 1998 to March 2008 homeowners had borrowed an extra £328bn against the rising value of their homes, in a process called mortgage equity withdrawal. This reversal in the trend clearly means adverse affects for consumer spending. Read more here.

Housing market and negative equity

Tuesday, August 31, 2010

Home owners who bought at the tail-end of the property boom face another four years of negative equity before they recover what they paid, new figures reveal today.

David Orr, chief executive of the National Housing Federation, said:

“Even though price rises look sluggish for the next few years, affordability is not improving for many low-to-middle income households as banks continue to restrict their mortgage lending and house prices remain historically expensive in relation to salaries. There’s a very real risk that an entire generation will be locked out of the housing market for the foreseeable future and people will increasingly look to buy or rent an affordable home instead.”

read more...»

China’s housing market - fantastic interactive resource

Monday, June 07, 2010

The Wall Street Journal has excelled itself with this superb resource providing background on the Chinese housing market (bubble?)

Housing and the British Economy

Saturday, June 05, 2010

Here are some charts of recent developments in the UK housing market and some revision notes on the impact of the housing recession on macroeconomic performance

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Revision Presentation - Housing & the UK Economy in 2010

Tuesday, January 26, 2010

This new revision presentation examines the links between the housing market and the UK economy.

Launch revision presentation

Download printable slide handout

50-year decline in housing affordability

Wednesday, January 20, 2010

The BBC website has a summary of the key points in a report issued by the Halifax about the housing market over the last 50 years. The main headline is that houses have become less affordable, with the average annual price rise of 2.7% outstripping the 2% annual rise in incomes over the period. There have been 4 periods of boom in house prices: 1971-73, 1977-80, 1985-89, and 1998-2007, with the greatest acceleration in the last decade. In 1959 the average house cost £2,507 (compared with an average price in December 2009 of £162,103 according to Nationwide Building Society) and about 14% of them did not have an indoor toilet (compared with 0.2% in 1996). In 1967 22% of houses did not have a basic hot water supply, and built-in central heating was a rare facility.

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Tentative signs of a pulse in the housing market

Thursday, July 30, 2009

Whisper it quietly but there are some signs of a turning point in sentiment, lending, activity and price levels in the UK residential housing market after a very difficult eighteen months. There is a chance that average price levels might end the year slightly higher than they started. Here is a brief selection of charts that offer a modicum of optimism and an incentive for me to spend some of August looking for a good value property on the Northumberland coast!

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Big question: housing

Friday, July 03, 2009

The Big Question in today’s Independent looks at the housing market.

Revision: Deflation in Residential and Commercial Property

Thursday, May 14, 2009

Background:

There has been a period of steep and sustained deflation in the average prices of property in the UK. Commercial property is 40% down from the July 2007 peak and residential property is - on average - down by 20% since the peak in the autumn of 2007. Land Securities, Britain’s largest real estate company has just revealed a £4.7bn fall in the value of its investments. It’s retail properties fell in value by 37 per cent and fared only slightly worse than its stock of London offices, which were down by 34 per cent. The commercial property sector is suffering from a slump in demand and sharp rise in vacancy rates. Housebuilders have made big cut-backs to the number of new homes being built. Both commercial and residential property markets are experiencing excess supply.

 

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Revision presentation - UK Housing Market 2009

Wednesday, March 25, 2009

This updated revision presentation profiles the UK housing market considers the links between the housing market and the UK economy. Asset prices have become hugely important in driving macroeconomic activity - although policy makers in the Treasury and the Bank of England have probably made serious errors in allowing the property bubble to go on for too long before that asset price bubble burst in spectacular fashion.

Launch interactive presentation on UK housing market

Official recession figures and graphics

Friday, January 23, 2009

This BBC resource has bang-up-to-date graphs and data for the performance of the macroeconomy – GDP, Unemployment, House prices, Inflation, Repossession and Interest rates – as well as some interesting regional comparisons and the opportunity to check your own personal inflation rate. It should be read by anyone studying macroeconomics, especially those taking AQA Unit 6 next week!

Homeowners step away from equity loans

Thursday, January 01, 2009

During the housing boom millions of property-owners in Britain opted to unlock some of the equity in their homes by extending their mortgage and using it as a prop for extra spending such as a new car or other big-ticket consumer durables. Housing equity loans have also been made available by some lenders for older households to maintain their spending during retirement.

The Bank of England’s estimate of mortgage equity withdrawal (MEW) is intended to measure that part of consumer borrowing from mortgage lenders that is not invested in the housing market. It takes the increase in housing finance (net mortgage lending and capital grants) and subtracts households’ investment in housing (purchases of new houses and houses from other sectors, improvements to property, and the transactions costs of moving house).

But as the housing recession deepens and prices fall at an annual rate of more than ten per cent, the pattern of equity borrowing has reversed. For the second quarter in succession, people invested nearly £6 billion into housing equity - in effect thousands of people have taken the decision to scale back on equity loans and focus instead on repaying some of the outstanding mortgage debt as and when funds allow.

This change in borrowing psychology has been accompanied by tighter lending criteria being used by lenders making it more difficult and expensive for people to extend their mortgage. Just as the days of the 95% - 100% mortgage have gone for now, so the steady flow of equity release marketing coming through letter boxes has dried up completely. It is all part of the complex process of de-leveraging - an attempt by financial institutions to cut their lending and rebuild their balance sheets.

For the best part of a decade the booming housing market was a significant crutch for domestic consumer spending. Now that equity withdrawal has gone into reverse and with unemployment expected to rise by up to one million over the next year, there are two major drivers of household spending pointing firmly in a downwards direction. The collapse in equity withdrawal is evidence of greater caution among consumers but is yet more bad news for retailers.

The BBC covers the latest data in this article

Barclays Boss says housing downturn is only half done

Tuesday, December 16, 2008

The CEO of Barclays Bank John Varley has painted a pessimistic picture of the likely path for UK house prices over the coming year. In an interview with Sky News he forecast that average prices still had a long way to fall with a fifteen per cent decline likely over the next twelve months.

read more...»

The UK Housing Slump in Charts

Monday, December 08, 2008

Here is an updated 14 chart series bringing together the latest UK housing market data charts. Available for download as a PowerPoint file

Slide titles:
House prices now falling faster than in previous property recessions
The asking price trend tells us it is a buyers market
Confidence is melting away in construction
Jobs will go in building … can public sector investment projects limit the downside?
New housing starts have collapsed – supply responding to falling demand
And capital investment in new dwellings is falling sharply – a casualty of the recession
Base rates are down but mortgage interest rates have only dipped a little
Prices are more affordable for first time buyers – but mortgage availability is poor
Tracker rates have become more popular – I wonder why!
Nowhere is recession proof!
And fewer property owners are prepared to extract equity from their homes
Mortgage supply dries up
The property recession will amplify the broader economic downturn
But might just help our trade deficit!

Presentation
The_UK_Housing_Slump_in_Charts.ppt

How low can they go?

Thursday, December 04, 2008

As the UK’s service sector shows signs of weakening, unemployment rises and households find it more difficult to pay bills and mortgages, home repossessions are expected to rise. But will even a 1% cut in base rate be enough to alleviate the downward pressure in the economy?

One possible problem is the extent to which a lower base rate will feed into lower mortgage payments. Many households (58% in August 2008) are still on fixed deals, meaning their monthly repayments will not change. And some tracker mortgages are ‘collared’ (there is a minimum interest rate paid, regardless of base rate) and homeowners will be checking the small print today to ensure they can benefit fully from any cut in base rate. There is evidence, too, that new tracker deals coming onto the market are less generous than in the past - and this will typically affect those households finding things hardest at present, for example those with low deposits or customers unwilling or unable to find a large ‘set up’ fee.

Another issue is the liquidity trap - a theory proposed by man-of-the-moment (after many years where his ideas were in the wilderness), John Maynard Keynes. Put simply, the lower the base rate, the fewer opportunities the Bank of England has to make further cuts to stimulate spending (consumption and investment). Also, during a period of deep recession (or ‘dark depression’ as a year 12 student put it in an essay he wrote for me recently!) households and firms will not want to spend and may even choose to save when interest rates are falling.

So even for households where the cut in base rate is passed on in full, how much of this windfall will they actually spend? And how much of it will they save instead?

Mortgages - A Return to Rationing

Wednesday, December 03, 2008

Rationing is a means by which demand and supply can be brought into a degree of balance. There are plenty of ways in which rationing can take place – for example by suppliers offering products on a first-come first served basis, or through auctions, allocated on the basis of an assessment of need or through the issue of rationing coupons as we saw in the second world war.

During the years of easily available finance for purchasing a house, mortgage rationing has barely existed – only to the extent that the price (the mortgage rate) acted as a device to limit the effective demand from prospective home-buyers. But now rationing is firmly back in the news.

read more...»

For Sale Signs Foresaken

Friday, November 28, 2008

I am grateful to one of my students Will Hedges for spotting this super story about one of the victims of the property slump!

Over to Will….....

A sign of the times?

“The collapse in demand for houses has caused estate agents like Savills or Winkworth to cut back on their purchases of “for sale” signs. Kremer Signs, the biggest UK supplier has recorded “45 percent drop in revenue” as demand for the signs is slashed due to a knock on effect of the housing market. According to Mr Gosney, the office manager, estate agents are only ordering a maximum of 30 boards at a time where they used to order 150 or so. As a result of the loss of demand, Kremer signs have obviously looked to cut costs so inevitably “labour shredding” has occurred. 25 of the 65 employees have lost their jobs and the future is looking tough for Kremer Signs who are left with thousands of signs they cannot sell. Perhaps they are not too far off needing to produce a sign for themselves!”

More here from the Daily Mail including a memorable photo

 

Buyers desert the property market - with good reason

Thursday, October 30, 2008

The latest house price figures from the Nationwide Building Society are as dire as expected with prices falling at an annual rate of just under 15 per cent. Average prices are now almost £30,000 less than at the same point in 2007.

More significantly, property values are currently declining at a pace of around 5 per cent every three months.  This is much steeper than in the last housing recession in the early 1990s.

As I have written before, I am currently out of the housing market and I greet each month’s decline in average prices with unbridled glee.

Despite the recent declines, property remains expensive and it would be a fool who entered the market now believing that prices will rebound in the near term.

Look at the chart below which tracks the base mortgage rate from the Nationwide and the standard variable rate from HBoS.

Neither has passed through any of the recent reduction in official policy interest rates and it will be interesting to see if they do so when the MPC cuts interest rates again next week – probably by 0.5 per cent and possibly by more.

Falling prices
Tighter credit
An economy heading into recession

It will take more than the odd base rate reduction to turn this market around. Gary Duncan is excellent in this short video clip available on the Times website.

Negative equity - why is it a problem?

Tuesday, October 21, 2008

Negative equity occurs when the value of an asset falls below the outstanding debt left to pay on that asset. Term is most commonly used in connection with property prices and describes a situation where the market value of a house is less than the existing mortgage debt.

read more...»

Mortgage Market - Closed for Business

Monday, September 29, 2008

The latest data on the value of UK mortgage lending to the property market is simply staggering - Banks and building societies lent just £143m in home loans in August, just 5% of July’s lending figure and only 2% of the lending in August 2007. The market for home loans has imploded and house prices will take a complete battering unless there is a rebound in mortgage loans

read more...»

Housing - a buyers market

Saturday, September 27, 2008

This BBC report covers the RICS survey which finds that average asking prices are sliding at a rapid rate. When properties sell for a value close to their initial asking price, it is a safe bet that there are sufficient prospective buyers out there for sellers to hold on before accepting a bid. When asking prices are on the slide, this is indicative that weeks and months of waiting around for people to have a look round prompts home-owners to shave their valuations or perhaps take their properties off the market until market conditions improve. The latest figures from the RICS do indeed show a steep decline in monthly sales and a rising stock of unsold homes. This is classic microeconomics - unsold stocks drive prices lower.

read more...»

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