Wednesday, May 18, 2005

Fewer First Time Buyers In London

The web site in2perspective has a news flash on the UK. "The percentage of London's first time buyers has dropped to 18%."

"'First time buyers form the foundation of a healthy housing market. If they are unable to buy because of the high property prices and the fear of rising interest rates, the market will quickly draw to a halt,' warned Russell Jervis, MD of haart estate agents."


At 7:04 PM, Blogger John Law said...

good condo article in the NYT.

Landlords Cashing Out as Condo Fever Spreads

Published: May 18, 2005

Apartment building owners faced with dwindling returns are selling their properties to developers willing to pay ever larger premiums so that they can convert rental units into condominiums.

At 7:13 PM, Anonymous Anonymous said...

I KNOW WHAT THE CATALYST WILL BE. Don't ask me how I know, I just do. An earthquake in California. It will get the ball moving.

At 7:34 PM, Anonymous Anonymous said...

Earthquake? We don't even need that. All the bubble talks recently are already "shaking" confidence. The Bay Area market is visibly cooling.

At 7:40 PM, Blogger Melody said...

Please God... no earthquakes. Please don't wish that on anyone!!!

At 7:57 PM, Anonymous Anonymous said...

Regarding the possibility of delay in the bubble...

The artificial lowering of short-term interest rates by the FED generates profitable opportunities that prompt investors to borrow money at lower short-term interest rates and investing in higher yielding longer-term investments. To sustain the positive sloped yield curve the FED must persist with its easy stance. Should the central bank cease with its monetary pumping the shape of the yield curve will tend to flatten and profits from “playing” the yield curve will disappear.

As long as the pace of the monetary pumping is growing and the consequent artificial lowering of short term rates remains in force, there is no way for businessmen to know that they are committing errors. On the contrary, as the loose monetary policy intensifies, it generates apparent profits and a sense of prosperity. The longer the period of loose monetary policy, the more widespread will be the errors. All this leads to a situation where entrepreneurs are committing themselves to unprofitable businesses, which ultimately must be liquidated. It is this liquidation that is called an economic bust or recession.

As a rule what triggers the bust is the central bank reversal of its loose monetary stance. The central bank slows down the monetary pumping and lifts the short-term interest rates. This in turn leads to the flattening or inversion of the yield curve. In order to sustain this inversion the FED must maintain its tighter stance. For should the FED abandon the tighter stance the tendency for rates equalisation will flatten the curve.

Contrary to the mainstream thinking as depicted by the ET, the Mises-Rothbard (MR) framework attributes the predictive capabilities of the yield curve to central bank monetary policies. In short, an upward or a downward sloping yield curve is the product of the central bank policies. To the extent that investors are forming expectations regarding future course of monetary policy this only tends to reinforce the shape of the curve as set by the central bank.

FEd would rather have recession than bust in real estate because even if we are hungrier tomorrow, there wills till be peace because we can look at our big equity.

At 8:15 PM, Blogger John Law said...

there doesn't have to be a cause. what cause the 2000 market to go down?

At 9:07 PM, Anonymous Anonymous said...

It is too late for the FED to choose a recession over a real estate bust. They could have made the call 3-4 years ago but they chose to defer the recession.

Their current choice is a depression now or an economic armageddon of biblical proportion later.

At 4:27 AM, Anonymous Anonymous said...

7:13 might have a point in a different way. If we accept that the muckety-mucks can cause the bubble to burst when they please, or that any other major disruption of the economy will do it for them, then it seems rational that any forthcoming major negative event, most likely domestic, can trigger the burst. That way, there will be something convenient to blame it on. Remember that in bureaucracies, it is not so important to get the credit, as it is to avoid the blame.

At 7:24 AM, Anonymous Anonymous said...


Thou giveth Ben great confidence that I watch this Blog.


At 8:04 AM, Anonymous Anonymous said...

In a Reply to (;07

" Their current choice is a depression now or an economic armageddon of biblical proportion later."

Such a pessimistic outlook rarely occurs. Despite the mounting economic issues a recession is likely, not a depression. (I need more facts to back it up)

At 8:12 AM, Anonymous Anonymous said...

Having LAN problems again. Should be up and running soon.


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