House Prices Up 2% in Jan, End Of Recession?

[Tomataheeed]

I have to backtrack and eat some humble pie: I posted my question above before I came upon this.

 

'Now' is suddenly looking like a very good time for buyers with deposit and mortgage agreed to buy indeed. Quick.

 

 

What difference will QE make directly for house prices though? I confess to not really understanding all the impacts of thse measures. I know you've talked about inflation, but I don't see it - there are pressures up and down....I see deflation as a bigger risk right now.

[L00b]

What difference will QE make directly for house prices though? I confess to not really understanding all the impacts of thse measures. I know you've talked about inflation, but I don't see it - there are pressures up and down....I see deflation as a bigger risk right now.

 

QE won't have a direct impact on house prices as such/yet. But it will have a direct impact on the actual value of accrued deposits, which themselves may come under pressure from hyperinflationary developments (as in: people having to dib in savings to cater to base essentials), whereby still less people inclined to buy houses in such a climate.

 

I should link you to that article I linked a while back (can't remember if it was in this thread or not ), explaining in simple terms how deflation can coexist with hyperinflation (each depends on the goods/services concerned), and how printing money always leads to hyperinflation.

 

Weaker & weaker pound = more & more expensive imports, which in the UK is pretty much everything (including, importantly, food and energy), except the air we breathe (...just!)

 

The next major move to expect from the government/bank of england, will be ratcheting interest rates up & up to contain it (in a while yet), eventually arriving at the kind of interest rates last seen in the 80s. Whereby, now that the banknotes' press is definitely rolling for sure and (at least this is my belief) hyperinflation is definitely on the cards, it makes sense to buy now & get a record-low mortgage rate, and pay off as much of the capital as possible before this ratcheting starts in order to 'contain' future payment levels.

Edited March 5, 2009 by L00b

[Tomataheeed]

QE won't have a direct impact on house prices as such/yet. But it will have a direct impact on the actual value of accrued deposits, which themselves may come under pressure from hyperinflationary developments (as in: people having to dib in savings to cater to base essentials), whereby still less people inclined to buy houses in such a climate.

 

I should link you to that article I linked a while back (can't remember if it was in this thread or not ), explaining in simple terms how deflation can coexist with hyperinflation (each depends on the goods/services concerned), and how printing money always leads to hyperinflation.

 

Weaker & weaker pound = more & more expensive imports, which in the UK is pretty much everything (including, importantly, food and energy), except the air we breathe (...just!)

 

The next major move to expect from the government/bank of england, will be ratcheting interest rates up & up to contain it (in a while yet), eventually arriving at the kind of interest rates last seen in the 80s. Whereby, now that the banknotes' press is definitely rolling for sure and (at least this is my belief) hyperinflation is definitely on the cards, it makes sense to buy now & get a record-low mortgage rate, and pay off as much of the capital as possible before this ratcheting starts in order to 'contain' future payment levels.

 

 

I enjoyed "life on mars" as much as the next man...didn't think I'd have to go and live in the 1970's myself. Oh well, at least I get to grow some stupid moustache. Terry Mac perm as well...althoguh I don't think it will look so good in red !

[Tricky]

...I should link you to that article I linked a while back (can't remember if it was in this thread or not ), explaining in simple terms how deflation can coexist with hyperinflation (each depends on the goods/services concerned), and how printing money always leads to hyperinflation...

 

It would be good if you could. It's an area I'm sadly lacking in knowledge of. Especially about whether hyperinflation can coexist with deflation as I am persuaded that the US will suffer deflation but I'm unsure whether that means the UK is guaranteed the same.

[Dimitri 11]

What difference will QE make directly for house prices though?

 

Absolutely no idea but I saw an interview by Jim Rogers the other day and he commented that QE doesn't work in terms of 'fixing' the economy. Also it has NEVER worked ever in history. More cause for optimism then.

[L00b]

Ah, here we go, found it at last (link is embedded in post):

 

My point is that deflation precedes and/or coexist with 'accelerated inflation'.

 

See e.g. (only e.g.) here for a very brief summary.

 

My gut call is based on witnessing big price falls in items not required to exist (TV, cars, kitchens... big ticket stuff you don't have to buy on a regular basis to live and work) and witnessing smaller but consistent price increases in stuff required to exist (food, petrol, utilities... small ticket stuff you absolutely must buy on a regular basis to live and work). Example symptoms here, just to show it's not just me who's noticing this when doing weekly shopping (pretty standardised week-on-week, so as good an indicator as the statisticians' "sample basket" IMHO)

 

In absolute value, the volume of the small ticket stuff is orders of magnitudes more important than the big ticket stuff, but less perceptible by most because of it's "regular purchase + small price" nature.

[Tomataheeed]

Ah, here we go, found it at last (link is embedded in post):

 

 

This is always the case though - PCs, plasma TVs etc always come down in price whilst other things go up in price. Is it just that this becomes more extreme? I can see cars and electrical goods dropping in price like a stone because as you say, they don't need to be bought.

[L00b]

This is always the case though - PCs, plasma TVs etc always come down in price whilst other things go up in price. Is it just that this becomes more extreme? I can see cars and electrical goods dropping in price like a stone because as you say, they don't need to be bought.

 

It's no surprise that retailers who don't do food/essentials have been getting it in the neck worse, as they're the companies most reliant on the "in-with-the-new-at-a-premium, out-with-the-old-at-a-discount" model you suggest.

 

It is becoming more extreme, because we're not talking about 'manageable' seasonal sales patterns anymore, or incidental end-of-line/promotional reductions whilst the latest tech is released at a premium: we're talking a complete halt in demand on an ever-increasing number of product lines, in proportion to their redundancy for life needs. With a corresponding effect at the national scale in terms of economics: companies, jobs, income, tax on income, duty on imports, etc, etc.

 

Cars and electrical goods are dropping in price (-ish, a lot of manufacturers have taken to up their price lists lately, to offer 'juicier' discounts with a nil net effect), but most people are still not buying them at lower prices (what proportion of such brown/white/'silver' goods were bought on personal finance? )

 

However, all people are buying essentials (e.g. food) at steadily-rising prices. Soon to rise even faster, as the £ tumbles.

Edited March 5, 2009 by L00b

[Tomataheeed]

It's no surprise that retailers who don't do food/essentials have been getting it in the neck worse, as they're the companies most reliant on the "in-with-the-new-at-a-premium, out-with-the-old-at-a-discount" model you suggest.

 

It is becoming more extreme, because we're not talking about 'manageable' seasonal sales patterns anymore, or incidental end-of-line/promotional reductions whilst the latest tech is released at a premium: we're talking a complete halt in demand on an ever-increasing number of product lines, in proportion to their redundancy for life needs. With a corresponding effect at the national scale in terms of economics: companies, jobs, income, tax on income, duty on imports, etc, etc.

 

Cars and electrical goods are dropping in price (-ish, a lot of manufacturers have taken to up their price lists lately, to offer 'juicier' discounts with a nil net effect), but most people are still not buying them at lower prices (what proportion of such brown/white/'silver' goods were bought on personal finance? )

 

However, all people are buying essentials (e.g. food) at steadily-rising prices. Soon to rise even faster, as the £ tumbles.

 

So all I need to do is switch from buying expensive food type items to good value cars and electrical gadgets ?

[L00b]

Sure, if you can sustain youself on a diet of silicon, metal alloys and plastic. And you're sure to make a killing with the book and the Cosmo article, as well