Thursday, June 02, 2005

A House Is Not A Home

Lots of folks have been speculating on the direction of the housing market since the old soothsayer Greenspan made his cryptic comment on the state of the "froth".

Personally, I look to Britain, where the whole thing seems to have been a few years ahead of us, and where they now see a serious cooling of the market. They're not ready to call it a crash, but when they're giving away an entire first year of your mortgage paid, just to entice you to buy up one of their brand-new surplus houses, it's hard to think of it as anything else. Does this sound familiar?

"The boom has seen the value of homes triple in seven years, driven by falling interest rates and rising incomes and employment. That has pushed the ratio of house prices to average earnings to an all-time high."
Or this?

"But [the Nationwide's] survey confirms the view of the Bank of England's monetary policy committee that its five increases in interest rates to 4.75% between November 2003 and August 2004 has taken the heat out of the market. " (Emphasis mine.)
They're on the downward spiral over there, now, with the inflation of housing prices having fallen to their lowest level in 9 years, a slowdown in consumer spending, and the expected continuance of rising interest rates. And because the path of our own housing market has followed theirs so weirdly, I can't help think we're seeing the future over there.

We rent. We're waiting for it.

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