London Agents ‘Sold Out’ as Home Prices Reach Record

So, it doesn't take BIG demand to push prices up.

Something to think about.

Too bad you don't live in London - you could take advantage.

But mind you, it might be a long commute to your job.

the "L" in LIC is London, right?

In the UK all mortgages are floating, so their rates have never been lower. It is also possible to self-certify your income ( and therefore the amount you want to borrow.)
Just to put this info in perspective, as rates climb back, mortgage payments could double or triple.

Maly: exactly. The longest period you could get a fixed rate for is a few years (maybe 5 max?)

http://propertiesforlondon.co.uk/2009/05/19/number-of-houses-sold-rise/

"In contrast to Globrix, it said just 61,000 new homes came on the market during the four weeks to May 9, compared with 135,000 in May last year. It added that this was the lowest level of new homes advertised on its site during the month since 2003, when it advertised only about 35 per cent of properties, compared with 90 per cent now."

There's a recipe for NYC real estate recovery. Cut the number of properties for sale by 50%. All we have to do is get SE listings down to 10,000-12,000 and higher prices here we come!

It is also possible to self-certify your income ( and therefore the amount you want to borrow.)

So London has Liar loans too! Thought only us Americans were reckless. but it looks like they are trying to ban Self-Certifying mortgages, high LTV and start regulating the "buy to let" market, which is just British for investor property...

Borrowers with poor credit could be banned from taking out
mortgages that have a high ratio to their income under the
proposals. The FSA pulled away from introducing outright limits
on mortgages relative to the value of the home, or relative to
income. It did say that it may introduce them “if the initial
proposals do not have sufficient effect.”
Self-certification loans don’t require consumers to
validate their income. Only the U.S. and Ireland had a
“similarly significant” amount of mortgages that didn’t
require document verification, the FSA said.
require document verification, the FSA said.
By 2007, customers’ incomes weren’t checked accounted in 45
percent of new mortgages in the U.K., according to the
regulator’s statistics, with 44 lenders offering the products.
Now only two lenders do, the FSA said.

Isn't self certifying just another way of saying, If I showed you my tax returns you'd never lend to me, so let me lie..

Or have liar loans with artificially low payments for the first couple of years ...oh wait! Haven't we seen this movie before?

We need bad mortgages, so borrowers can realize the American or British dream without paying for it... NO wait, I'm cold. Anyone see the NY Times piece on the person who lost their home because of the banks, it was only half way through the article you read she decided to borrow to pay for restaurants and an SUV on an 8-10$ an hour salary.

no cite, RS? the UK is considering restricting those measures facilitating easy homeownership. who knows if they'll be successful, but that could easily create a spate of buying in order to buy before the availability of credit changes.

http://www.calculatedriskblog.com/2009/10/uk-fsa-more-intrusive-and.html

"They are going to ban stated income loans, limit risk layering (a key problem), limit arrears charges, hold mortgage lenders personally accountable, and require affordability tests.

This is a good model for the U.S."

Aboutready, did you read about the Texas model? After the S&L debacle, the Texas legislature imposed conservative mortgage rules (including a max 80%LTV). Texas seems by and large to have bypassed the bubble and bust, in spite of the national climate.

These are the builders and brokers pushing for this. The bankers and ultimate buyers of the loans(if they were sold) must have been smoking crack crack to write those loans regardless of the regulatory frame work. And now the truth about Moody's comes out. Everyone was gaming the system, even the woman who took out a mortgage to buy an SUV..

http://news.bbc.co.uk/2/hi/business/8313853.stm

Some more on UK mortgages.

Good post, Keith, It's a shame our leaders in Washingotn can't follow suit. They just blame the bankers for resisitng the change, instead of doing their job and supporting the regulators.

Now the truth about Moody's comes out?! I remember the "It could be structured by cows and we would rate it" from over a year ago:

Wednesday, October 22, 2008
S&P: "We’d Do a Deal Structured by Cows" And Other Rating Agency Dirty Linen

Most eyes were on the plunging equity markets today, and the rating agencies must be plenty glad for the air cover. The House Oversight Committee unearthed some real dirt today. From CNBC (hat tip reader Michael):

In a hearing today before the House Oversight Committee, the credit rating agencies are being portrayed as profit-hungry institutions that would give any deal their blessing for the right price.

Case in point: this instant message exchange between two unidentified Standard & Poor’s officials about a mortgage-backed security deal on 4/5/2007:

Official #1: Btw (by the way) that deal is ridiculous.

Official #2: I know right…model def (definitely) does not capture half the risk.

Official #1: We should not be rating it.

Official #2: We rate every deal. It could be structured by cows and we would rate it.

A former executive of Moody’s says conflicts of interest got in the way of rating agencies properly valuing mortgage backed securities.

Former Managing Director Jerome Fons, who worked at Moody’s until August of 2007, says Moody’s was focused on “maxmizing revenues,” leading it to make the firm more “issuer friendly.”

Bloomberg gives Moody’s top billing in this sorry affair:
Employees at Moody’s Investors Service told executives that issuing dubious creditworthy ratings to mortgage-backed securities made it appear they were incompetent or “sold our soul to the devil for revenue,” according to e-mails obtained by U.S. House investigators.

The e-mail was one of several documents made public today at a hearing of the House Oversight and Government Reform Committee in Washington, which is reviewing the role played by Moody’s, Standard & Poor’s and Fitch Ratings in the global credit freeze.

“The story of the credit rating agencies is a story of colossal failure,” Committee Chairman Henry Waxman, a California Democrat, said at the hearing. “The result is that our entire financial system is now at risk.”…

Former executives from S&P and Moody’s told lawmakers today that credit raters relied on outdated models in a “race to the bottom” to maximize profits.

http://www.nakedcapitalism.com/2008/10/s-wed-do-deal-structured-by-cows-and.html

http://www.nytimes.com/2009/10/19/business/economy/19foreclosed.html?ref=business

There were so many crooks, But if there was one place in the system where we could've stopped the madness it was with the rating agencies. Think about it, there were millions of borrowers, hundreds of banks, etc but only four nationally recognized rating agencies, who lied and/or acted negligently benefiting from the role bestowed upon them by Government regulation.

I just read that nytimes article. What does it mean when they write "They used credit cards to finance restaurant meals?" I mean we pay for meals with CC cars but I certainly wouldn't say we're financing them. Or is that just a nice way to say that they don't pay off their CC bill at the end of each month?

"Too bad you don't live in London - you could take advantage."

Funny, but on the way down steve used London as an example for what was happening in NYC. I guess that's not true anymore on the way back up.

This does make me at least pause as regards my Manhattan residential bearishness.

London has a long history of being fairly closely correlated to Manhattan as regards residential real estate.

This thread is similar to the one on inflation that I commented on where I have just returned from Europe and it’s apparent that there’s significant inflation occurring across the board. Here in the US we have only seen in the stock market. If like in Europe it spreads to overall economy then we’re in for quite a ride.

Yesterday, I wrote:
"I just returned from Europe and there is no doubt that they're got some serious inflation going on. We don't see it because dollar is pegged to yuan. So, my conclusion is that combination of strong euro/weak dollar and eu inflation then NY real estate prices must look really cheap, maybe having to go back ~ 15-20 yrs. for comp.
I don't see this as a long term trend because situation will change but interesting.
While there, I read several articles where the European investor class is aggressively looking for ways to invest in U.S. and in particular NYC RE (pools, funds, REITS) that supposedly lower risk. Looks like a bonanza for certain types to market this and if I remember correctly has been done before."

Not just in U.K., it's happening in all major cities around the world.
Think we are different? Think again girlfriends.

The dollar has been on a one way trip to hell. I said this 3 months back and i'll say it again.

US Cash = Trash.

new highs on the DOW today.

junk bonds continue to rally.

http://finance.yahoo.com/echarts?s=SHIAX#chart1:symbol=shiax;range=3m;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

Ask yourself.
If things are really as bad as the bears are saying on these boards, why are small businesses rock'n?

enrico75: Yes, I agree short term with what yor're saying BUT if dollar is worthless what is it measured against? Long term trend that I see is deflation all over the place. Dow is same as 10 years ago, no growth hardly anywhere, and really mostly everythings worth less which is what happens in real terms durning inflationary period.

Probability that we're only half way through long term deflationary period?????

"The average cost of a home in the capital rose 6.5 percent, the most since records began in 2002, to 416,157 pounds ($680,000)"

Is everyone missing this??

I thought London was so much more expensive than NYC! Apparently not, if the "average" cost of a home there is about HALF what it is here.

"Funny, but on the way down steve used London as an example for what was happening in NYC. I guess that's not true anymore on the way back up."

Funny, on the way down Juice wouldn't admit we were on the way down.

Are you finally admitting it?

> new highs on the DOW today.

Yes, those who said buy stocks were right. Nothing new there.

Good think you... oh wait, you said buy RE. Sorry.

> If things are really as bad as the bears are saying on these boards, why are small businesses rock'n?

Because they're actually not. Check your facts. Still pretty awful, credit scenario is not good.

"I thought London was so much more expensive than NYC! "

Why is a city of 7,500,000 being compared to an an island of 1,600,000? You forgot the rest of New York CITY.

Yep, London <> Manhattan. I would say that the SW nappy valley roughly corresponds to UWS. Belgravia and environs to UES. Then you have "Greater" London - Richmond, Chiswick ain't cheap either. Can't quite say what Islington/St John's Wood/Hampshire Heath corresponds to.