There were supposed to be a number of important points made today as I can finally cover the house price pick. Here is a list of what I was supposed to cover:
- The first house price increase (to June 2010) merely takes us back to where we were in December 2007 in nominal terms.
- Real house prices don’t re-reach their peak for another year after the nominal level returns.
- However, house prices remain 30% overvalued – structural factors imply that this is an “equilibrium”, although not a very nice one.
- Ultimately, in the long-run, we agree with Bernard Hickey and Gareth Morgan that prices need to go back to “fair value”. Our argument is only over the transition path. There is a difference between saying that they economy needs to rebalance (true) and assuming it just magically will – we don’t think it will in the short-term.
Driving growth is:
- Loosening credit conditions,
- Low interest rates,
- Limited supply on the basis of a weak build rate
- Limited supply on the basis that people don’t really want to sell (unemployment stays moderate, interest rates low, lack of forced sales).
2 comments
1 ping
Health of the Nation says:
August 28, 2009 at 5:53 pm (UTC 12 )
In my opinion, house prices begin to decline.
שנה טובה says:
August 31, 2009 at 10:05 pm (UTC 12 )
I’v read your breakfast news and it’s quiet interesting. In our country the houses’ prices are climbing up very fast since last quater either.
It seems to be no rebalance or equilibrium.
As the mortgage’s interest are relatively low it looks like the continious recession doesnt effect that erea.
Interest Rates » TVHE » The 24% price pick says:
August 27, 2009 at 5:00 pm (UTC 12 )
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