Sobering thought

I was looking for this awhile ago and could not find it. Anyway here it is, and to those who think property prices are destined to go up over time simply because they 'must' ,or they are tangible just bear in mind prices can be both nominal and real. Here is the verdict on real (adjusted for inflation) in one instance that tells you there is no such thing as one way traffic on real price with property ,it's just is not that simple....

"Some areas of Oslo are still marked by the massive volume of residential construction prompted by the rise in prices. The housing market collapsed at that time. The demand for new dwellings was saturated. It was not until the mid-1980s that real house prices returned to the level in 1899. "
- Governor Svein Gjedrem 2/15/05

Gold is telling us and have been for some time, that something is brewing.

chump said:

"Some areas of Oslo are still marked by the massive volume of residential construction prompted by the rise in prices. The housing market collapsed at that time. The demand for new dwellings was saturated. It was not until the mid-1980s that real house prices returned to the level in 1899. "
- Governor Svein Gjedrem 2/15/05

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Those who fail to learn from the past are doomed to repeat it.

On CNBC this morning they were blasting the home builder company CEOs who came on the network before the bust claiming that things were different this time, that they could manage the supply/demand equation now.

The bubble is being prepared for bursting right now. This is how they do it. Up & down, the bankers profit from the boom & bust sides of the cycle.
Earth calling fibonell...........

laptop1 said:

Gold is telling us and have been for some time, that something is brewing.

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how so, Laptop?

UTB

Two points:-

1) If your only exposure to property is the home you live in then it's value irrelevant.

2) If you have investment properties, then given the massive price increases in recent years, I'm sure most could stand a 10% decline !

Personally, if (and I stress IF) we see a significant house price decline I'll be buying. I suspect that most well capitalised landlords will have a similar plan. This in and of itself may well hold the market up.

Profitaker said:

Two points:-

1) If your only exposure to property is the home you live in then it's value irrelevant.

2) If you have investment properties, then given the massive price increases in recent years, I'm sure most could stand a 10% decline !

Personally, if (and I stress IF) we see a significant house price decline I'll be buying. I suspect that most well capitalised landlords will have a similar plan. This in and of itself may well hold the market up.

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maybe houseprices are propped up by an excess of landlords already. When realisation hits that rental yields are less than a savings account and capital growth is zero, they could run for the exit - bringing about a crash.

I'm certainly happy to be an ex landlord

UTB

Profitaker said:

1) If your only exposure to property is the home you live in then it's value irrelevant.

Click to expand...

Assuming your don't want/need to move or refinance.

Three points.
1.A real property contraction does not leave you looking at a 10% decline. If it is a post boom adjustment then it's more likely 5 to 10 years in the happening and you take the offset of inflation adjustment on your capital value across that period if you can hold. In other words you bleed your capital value whilst waiting for real inflation adjusted growth to recommence. Much like stocks ,but because of it's more sticky nature not nearly as noticeable.
Yes you are generating income in the process ,but typically this yield would be available to you anyway if it was capitalised before it got a chance to 'decline' so I consider that issue to be cancelled out. The capital value 'lost' in real terms though over 5 to 10 years depends on how incomes rise in that period and obviously the overall rate of inflation.
It's actually this process of almost sereptitious decline that 'fools' people. They barely know it is happening and before you know it they're all either in the land of nod ,or stock gazing etc and 'all of a sudden' properties cheap again.
2.The other side of that kind of 'decline' is the forced sale. Rush for the door prices ar NOT -10%..if you're holding and need out for any reason ( toilet call whatever) anywhere near the top I'll take a third ,or you'll have to walk away from it...that's the auctions in action.
3.I won't to try to evaluate the alternative cost to capital foregone by not employing that stagnating capital in an asset group that is enjoying higher growth and there will be some even if it is just a business of your own. Property for example is a much longer cycle than stocks as mentioned above.Stocks can be through multiple cycles whilst property is building and adjusting through one cycle.

If you'll take 10% though then i might be inclined to flip a few your way should the opportunity arise.

I didn't start this thread to dramatise anything. I do not have a crystal ball afterall. I did think though that people should not rest their investments on fictitious assumptions and indeed the more that do and the more of them that crowd out that market the lower the returns they can all expect going forward..the law of money. Show me a crowd and I just want to be somewhere else.

JTrader said:

The bubble is being prepared for bursting right now. This is how they do it. Up & down, the bankers profit from the boom & bust sides of the cycle.
Earth calling fibonell...........

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Good evening JT and all believers,

"........Through manipulation and propaganda these powerful and influential men were able to "stage" the panic of 1907 in which people lost faith in the banks and pulled their money out causing many banks to fail. All of this was part of J.P. Morgan and others plan to start a Central Bank in America, but they knew the term "central bank" had to be avoided because the people didn't want it. What they came up with was the Federal Reserve System, and with their money and influence it was not difficult to manipulate President Woodrow Wilson to get the Federal Reserve Act Bill passed. When the Federal Reserve system was foisted on an unsuspecting American public, there were absolute guarantees that there would be no more boom and bust cycles. The men who, behind the scenes, were pushing the central bank concept for the international bankers faithfully promised that from then on there would be only steady growth and perpetual prosperity. However, Congressman Charles A. Lindenbergh Sr. accurately proclaimed: "From now on depressions will be scientifically created". Using a central bank to create alternate periods of inflation and deflation, and thus whipsawing the public for vast profit, had been worked out by the international bankers to an exact science. Having built the Federal Reserve as a tool to consolidate and control wealth, the international bankers were now ready for a major killing. Between 1923 and 1929, the Federal Reserve expanded (inflated) the money supply by sixty-two percent. Much of this new money was used to bid the stock market up to dizzying heights. This was the stock market crash of 1929 and it was no accident. It was followed by the worst depression in U.S. history. Although we have not had another depression of that magnitude, we have suffered regular recessions. Each of these has followed a period in which the Fed tromped down hard on the money accelerator and then slammed on the brakes. It is clear that those who run the Federal Reserve run the country.....".

Source: http://www.mendhak.com/paranormal/conspiracies/show.php?id=44

Just by way of example to show that I was not exagerating above ,but was even being a little on the conservative side rather than the extreme....

http://cbs4.com/topstories/local_story_264095336.html

chump said:

I was looking for this awhile ago and could not find it. Anyway here it is, and to those who think property prices are destined to go up over time simply because they 'must' ,or they are tangible just bear in mind prices can be both nominal and real. Here is the verdict on real (adjusted for inflation) in one instance that tells you there is no such thing as one way traffic on real price with property ,it's just is not that simple....

"Some areas of Oslo are still marked by the massive volume of residential construction prompted by the rise in prices. The housing market collapsed at that time. The demand for new dwellings was saturated. It was not until the mid-1980s that real house prices returned to the level in 1899. "
- Governor Svein Gjedrem 2/15/05

Click to expand...

It's actually the fckwits who buy an "investment" in places like Bulgaria or Slovakia - becuase they believe it to be the next hot spot because some PR sponsored article in a weekend newspaper told them so. Those are the people who deserve to be separated from their money....

At last,somebody who lives on the same 'planet' has me. Don't you know City, the US is the only country who bought what they can't afford and isn't worth what they paid for it ?
How naive is that ? At some point the spotlight is going to land that Eastern Europe, Turkey , Med coast etc etc is hugely oversupplied and there is no money safety net just underneath it waiting to catch it for those who can't afford to hold.
I had this conversation with my brother just the other week when he asked why I hadn't bought into anything. Tried to tell him we've got a lot of people with a lot of money dabbling in stuff they basically don't understand..why should I add to the mix.
Buffett keeps on saying he doesn't buy into what he doesn't understand ,but I doubt many people are actually listening....LOL ...

You don't have to go abroad to find those who get into trouble by overmortgaging the property that they are trying to buy or, just getting into trouble with their credit cards.

As far as Spain is concerned, you are right (I don't know the rest), there are no bargains left in property and what is opportunity cannot be assessed by someone going through the ads in his armchair at home. Nevertheless, bargains did exist, but you have to get up off your backside and look for it i.e. go there.

Don't forget the Russians. They sold Alaska to the Americans. Personally, I think the Yanks are capable of striking a good bargain.

Rhody Trader said:

Assuming your don't want/need to move or refinance.

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That's a point. The Americans are great movers. Living in a titchy country like the UK means that we can commute more and, practically, travel in any direction. I say that ironically, I hate too much travelling, myself, but it is possible if one can't get the right price for his house.