Singing Pig

Speedy thing you seem very dismissive of the US property market levelling out - what makes you so convinced that this is not the case?

The nature of many of the elements to the current property market is that they are unique to this time, because of that I would find it difficult to have such confidence in my abilities to predict the future.

But hats off to your  confidence in the reading of the current situation.

Marvin 

I can answer your question for speedy.  The US subprime issues are now spreading to Alt-A mortgages, IE prime.  Except Alt-A accounts for double the financial exposure that sub-prime did, at 2 trillion. Oh, alt-a is the equivalent of self-cert in the UK.

check this muttha out, he has been correct on EVERY call he has made so far... He has been on CNN. 

http://www.youtube.com/watch?v=pmeBSWI9sF8 Skip to 2:50.

41% of all these loans  are not getting paid, IE potentially 820 billion dollars is yet to be written off...

When the IMF calculated the prospective cost of the Credit crunch, they came up with a cool 1 trillion dollars.  This was solely based on sub prime, not alt-a not prime.  We have only seen 240 Billion in write-downs so far, with banks only able to raise 47 billion of sov. weath funds and idiot speculative investors, this year.  Times arent tight yet and 47 billion is the best they can do.  We are potentially not even 10% into this credit crisis yet, and thats a fairly conservative value.

 Its going to be a bloodbath.  Oh, the US isnt even in recession yet, they havent even seen any real effect of job cuts on the housing market YET. This is not only going to kill the US, its going to kill us. A LOT of UK banks had these toxic loans on their books.  Which ones? They dont know.  Thats why banks wont lend to each other. Get it?

 So, what about supply and demand then piggies?  I thought house prices only went up? Or did you forget that one day, the money you borrow has to be paid back?  Face it, UK house prices are based on a pyramid selling scam.

as an aside, I include this from HPC..... Please pick out any flaws in the thinking....

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Bull or Bear? Bear



We all know the modus operandi of the property gurus of the last decade. Buy property, get bigger loan on property and buy more property ad infinitum. Cash generation was not the prime consideration - it was the aquisition of more assets that were assumed to have an ever increasing value. Worked fine and dandy as long as we had HPI.

Now we can assume house price deflation for at least couple of years, which seems reasonable considering how the Haliwide indices are heading and the momentum of the market. What position does that put a typical property investor in?

Let's imagine the aspiring property tycoon sitting on 15 properties with an assumed market value of £2m and £1.4m in debt - ie LTV of 70%. His average rent is 500pm and with costs and voids his net rental income is £75k. In 2007 at 5% IO his annual mortgage costs were £70k, he trousered the £5k profit and consoled himself with the thought of the increase in the value of his property (£100,000+). Life is good.

In 2008 his rental income has increased by 5% to £79k but his IO mortgages have been refinanced at 6.9% which means an annual cost of £97k. He now has an annual cash flow of -£18,000. That will max out his unsecured borrowing or use up all his other earnings in less than 12 months. He's also looking at losing £100,000+ in the value of his property.

2009 looks much the same - unaffordable negative cash flow and further asset depreciation

2010 if he staggers on this far his equity will be wiped out and he can't refinance

Game over - and that was assuming a LTV of 70% in 2007! 

If your yield today isnt greater than 8%, then you are going to go negative cashflow. Simple.  Thats before costs, thats before you take a profit. Oh, and that assumes rents go up, which according to previous recession stats, doesnt happen.

Serious question, why is this point of view flawed according to the pigs? 

K3lly:

brit1234:

Pod:

brit1234:

People should of sold a year ago, now it is too late and likely to make a loss.

hey brit, where would we be without these nuggets of wisdom eh?  so glad i clicked into this thread! 

 

Oh I had them about Mar 07 that the market was at its peak, common sense really.

Brit

With your incredible ability to forecast the markets you should turn your hand to equities - you'd make a much bigger profit than messing around in the resi market!

A third of my savings are in equities, all the rest in high interest cash accounts.  I have never had any intention to mess about with the property market, it was well over valued and everyone else had jumped on this band wagon.  It was just another dot com bust waiting to happen. 

marvin:

Speedy thing you seem very dismissive of the US property market levelling out - what makes you so convinced that this is not the case?

There has been hundreds of commentators who have said the US market is leveling out over the last 18 months.  All have been wrong and all seem to have a vested interest in talking the market up.

The one economist that has really stood out from the crowd  is Peter Schiff who states the downturn in the US is far from over and going to get a lot worse.  He has been mocked by the vested interests till now to which they are all eating humble pie.

The credit crunch will stop when prices fall back down to normal levels, say 3.5 times average salary. 

HI Sam,

I am curious to know if you would buy property as a PPR or investment @ 30% of it's cost today? I think remember you posting that you agreed with the IMF in their predicted falls of 30%.
 

The game plan I am sticking is to wait until prices fall 30%, by which stage the recession will be hitting hard, people are going to be really really squeezed.  Once prices have fallen to what I would consider a more sensible level (yes, around 25-30% lower, inflation corrected), I will be looking to go out to find a distressed seller, and try to get whatever further discount I can, bearing in mind I am a buyer with a significant deposit.  Whether that means taking a direct approach, a la our BMV friends next door, or perhaps approaching the banks instead, I am not sure yet.  I believe I have between 18-24 months before we get anywhere near that stage; it may take far longer, it may spin itself out quickly.
But by buying from a distressed seller, I will be hedging against any further price falls, and protect the seller from having bankrupcy/reposession proceedings carried out against them; a big no-no if you are a professional.

 Typically, once everyone is screaming "dont get into property, its the worst investment ever" I will be looking to buy.   I will not be looking for an investment though, purely my own home.
 

Are you looking to buy anytime soon, or are you waiting by the sidelines? 

marvin:

Speedy thing you seem very dismissive of the US property market levelling out - what makes you so convinced that this is not the case?

The nature of many of the elements to the current property market is that they are unique to this time, because of that I would find it difficult to have such confidence in my abilities to predict the future.

But hats off to your  confidence in the reading of the current situation.

Marvin 

I just came back from Florida - one of the worst hit states. Prices had fallen by 21% in the last 12 months. They are still falling (although admittedly maybe not by quite so much), and I see no reason to think they will bottom for at least a couple of years.