Posts Tagged 'property prices'

Recession graph – shape: canoe – property still falling

I was talking to a North American this week. Some of the updates are all over my Twitter feed. While there’s generally optimism in my blog posts, I’m trying a persona of gloom on Twitter.

The average price of a house sale in Detroit in Jan/Feb? Well, according to her, $8000. That’s a pretty interesting number because it shows the depth of the sub-prime woes and just how much oversupply there is for housing in places that are dependent on industries that are in trouble. The motor manufacturing sector hasn’t yet died, but it’s getting a discounting from the local population!

While Sir Martin Sorrell famously suggested the dot.com bust recovery graph would track the shape of a bath, Canadians talk about a canoe shape. My friend reckons it’ll be a canoe!

Fire Canoe #2 by peter bowers

My previous discussions have pondered whether the graph shape will actually an ‘L’ with a long horizontal or a ‘W’ with a fake bounce in the middle or a ‘wonky W’ that bounces a bit but doesn’t end ahead or a ‘lightning strike’ with plateaux areas of comfort that are followed by slides.

The important thing to note, oh graph watchers, is the issue of microscope views. When you look through a microscope, even a straight line has jagged edges. So, as we ponder the recessionary descent, the graph is certainly not going to be a smooth freefall.

If there is general agreement that it’s still a fall… does it matter if there are plateaux? Yes, if you get fooled into thinking that a plateau is the bottom and you are in a hurry to buy back in to take the bounce – and it turns into a further slide.

My sense, with unemployment on the rise, with the banks still locked, with companies feeling further pinches, is that property prices are still on the slide. That they will continue to slide as the lag effect of unemployment euphoria makes way for reality to bite – that it’s a long old slog for many to get back into a job that will pay the same as a pre-crunch set-up.

Recalibration of the whole economy is still going on. The quantitative easing of the UK government may soften some of the effects, but we’re still coming back to earth on the slide. And, whether it’s a plateau or a floor… the bounce isn’t going to be strong or sustained or rapid.

The waiting game continues on a broad sweep of business activity. The vultures are not hungry enough to fly. And, the phoenix can sleep for a good few years in his egg that’s resting on the ashes… but the phoenix is taking strength from the heat to rise again.

Phoenix by BenGoode

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Recession? Property prices defy gravity/logic/market sentiment

I’m trying to be optimistic. But, through it all, I’m pretty convinced the recession graph will be L shaped at best with a long flat line… at worst, a wonky lightning strike down, flat, down, flat…

But, that bellwether, housing saw a bit of a spurt in January. Activity off a low base has been called ‘a recovery’. I like optimism. And, I’d point to those fundamentals we all believed in 2007… that demographics are changing, that the boomers all have parents bequeathing assets on top of their paid off mortgages… so perhaps the property market has permanently re-rated above trend. We need a bit of confidence (along with those other two C’s – customers and cash!)

But, look at the graph in today’s Sunday Times by clicking here

(It’s the Times’s first ever interactive map, they say… nice!)

House prices have rocketed for yonks, so if it’s really true that we’ve hit the worst brick wall in 100 years… I can’t see January sustaining its perk. No. There’s 10-20% further to go this year, they say… (I’d add ‘and some’ in many postcodes!!) because property is a lag indicator and some folks ain’t yet felt REAL SQUEEZE, even if they do need a roof over their heads.

Nonetheless, after bleak winter, there is always spring. The crocuses of the property postcodes are listed in a nice optimistic article here – 10 postcodes that will bounce back first

Scratch a bit? I can see everyone downshifting to Brighton, but Islington? I’ve lived there for yonks and hung out with lovely legal and city types… but, on the same TimesOnline website, there is talk of Allen&Overy laying off 400 and Simmons&Simmons releasing 70 staff. That Upper Street shuffle of lurvely bars, boutiques and cook shops? I can’t see it thronging when last Sunday felt like a bank holiday and the kings of value, LaPorchetta, had nobody in but us at lunchtime.


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