As you may know, the UK (especially London) housing market has been white hot the past two years. So much so that the English equivalent of the Fed expressed some concern over the housing market. Well I just ran across this article: http://news.bbc.co.uk/2/hi/business/2649899.stm ...and it doesn't look good at all. The same housing market has been holding up the economies in Europe, Australia, Canada and the US. If the London market which is the hottest market within the UK market (the hottest country per real estate this past year) starts to wind down, the rest are not far behind. In real estate it is usually the one market that is stretched too far that slingshots back. If it spills into the rest of Europe and across the pond, I think it could have very grave repercussions for the stock market. People will be scared out of their wits if this happens!! They fled the market and now they have clambered onto the real estate market at the top. You think the 'consumer' would be able to take a hit like that?!? [Me thinks I hear the printing presses humming as Alan bellows 'Get me more green ink!!']
interesting article. With the ultra aggressive lending practices of late, there is definitely the possibility of a big problem down the road. Unfortunately, bubbles appear much clearer in retrospect.
The London market does seam like a bubble. I heard a lot of the buying is for units to let. With Investment banking staffing levels back to levels of 6 or 7 years ago, it doesn't look good. If your outside a bubble area, housing prices historically have a volatility of around 6% which should mean most here in America won't face the 30% anticipated in London.
For the moment things maybe chugging along in the asset back securities markets... but eventually the credit bubble and the mortgage finance bubble will catch up with the financial markets and some severe financial dislocations maybe inevitable....
This has been the topic on CBSMarketwatch as well. My dad is a major developer and I am very close to the business. Cheeks makes an excellent observation. I have heard the term "suburban slums" being coined. This refers to the record rates of foreclosures and personal bankruptcies occuring in new neighborhoods filled with people who squeaked in on 2-1 Buy downs and now at the same time their payments are increasing, they are either getting laid off, not getting that projected payraise, or the value of their company stock or options isn't diddly compared to what it was. Aye carumba... you don't want Prechter to be right, but holy frijoles - no offense to the frijole worshippers - things do not look good.
A lot of people in US sre still very optimistic about the housing market. They thinks that they have the best investments in the world. That reminds me of the mentality of the investors, when NASDAQ was near its all time high. Hopefully, the housing market in US and UK won't follow the example of Hong Kong.