With the US subprime crisis spreading to Europe, shockwaves in Northern Rock which would spread to other banks, UK economy growth not looking healthy, increasing trade deficits, sharply rising mortgage costs, falling corporate profits and job cuts especially in the City, and as market turmoils escalates, housing price which shows a first drop of 2.6% (from Rightmove last month), this are the signs of the beginning of a housing crash. PROPERTY SHARES ARE A SELL!

Not me.
I have no idea what might happen to the housing market. I just comment on the financing of it. The market itself is 12 months behind the lenders.

and not me but, I won't deny that I am choosing some of the more quality stocks for future investment when the time is more appropriate.

Mortgage lenders putting up rates despite BOE keeping rate fixed.


Bradford & Bingley is raising rates on its standard residential, buy-to-let and self-certification mortgages by between 0.05% and 0.55%. It claimed the move was part of its "normal business activity", which has seen it repricing its mortgages on a monthly basis for the past 18 months.

It added that it had nothing to do with Monday's announcement that it had racked up an 8 million pre-tax loss in the four months to the end of April after suffering a further 89 million hit from the credit squeeze and a 36 million charge from increasing arrears.

As a result of the changes, a two-year fixed rate loan for someone with a 75% deposit who pays a 999 fee will rise by 0.2% to 6.49%.

But the biggest rises were seen across the group's buy-to-let range, with fixed rate deals jumping by 0.55% and variable ones increasing by 0.45%, leaving a three-year fix with a 1.5% fee at 7.44%.

Abbey is raising its rates by between 0.07% and 0.26% on a range of its products, including those for people with only a 15% deposit and its five-year fixed rate loans. The move will leave a five-year fixed rate deal for someone with a 25% deposit 0.26% higher at 6.45%.

It is the second time that the UK's third largest lender has increased its mortgage rates in two weeks and it warned that there were likely to be further changes to come.

What the above journalist failed to mention was that Abbey had made its rates much cheaper through the introduced channels and higher through the direct channels in response to the AMI & FSA concerns about dual pricing. In effect they have levelled the playing field and their fixed rates are as low as 5.69%!!
Disengenuous reporting if ever I read it.
Also, anyone who believes the B&B have not raised their rates due to Mondays announcement is in cloud cuckoo land. They have nothing to lend out really and so the best way to deal with that is to be unattractive.
Finally, further changes to come could mean anything!!!!! Hardly a warning except in the septic minds of journalists who love to put the fear of God in everyone.
The trouble is, the lie becomes the truth and the prophecy self fulfills.
I could rewrite that story with identical facts and you would believe that free beer was here!! Neither are true but a bit of honesty would not go amiss.

Further evidence that Britain's housing slump is gathering pace has been provided by figures from Halifax, which show that house prices are plunging at twice the rate of the property market's drastic downturn in the early Nineties.

House prices fell by a further 2.4 per cent last month, extending losses that have left them down by 6.6 per cent since January, wiping £13,000 off the value of the average home.

Prices have fallen twice as fast in the past five months as in the same period in 1992, during the most recent property crash, when they fell by only 3.3 per cent, based on Halifax figures. The decline in prices this year is the biggest five-month fall since records began in 1991. If the deterioration in house prices continues at its present pace, the value of a home will slump by more in six months this year than in the whole of 1992, when prices fell by a total of 7.2 per cent. Some economists forecast that prices could fall by up to 12 per cent this year, followed by further declines next year.

After the Bank of England took a hardline decision to keep rates on hold yesterday there were fears that it could raise interest rates later this year after the European Central Bank issued a surprise warning that surging inflation may force it to lift eurozone rates as early as next month. The emerging threat of higher base rates in the UK will add to the growing pressure on families struggling with the rising cost of living.

Bradford & Bingley is expected to aggravate the pain today, when the troubled lender increases rates on all of its home-loan products, although it has not said by how much.

All the property stocks are crashing today because the banks are asking them to revalue their properties which has slumped in value.

Thousands facing negative equity
By Richard Scott
Personal finance correspondent, BBC News


More than 23,200 people who took out 100% mortgages in the year to 31 March could face negative equity, according to figures obtained by the BBC.

Falling house prices mean the amount borrowed could be greater than the value of their properties.

The data from the Council of Mortgage Lenders comes as figures show the housing market is slowing down further.

Separate housing figures suggest the number of transactions per estate agent has hit a 30-year low.

These figures from the Royal Institution of Chartered Surveyors come as banks are imposing stricter requirements on borrowers, in the wake of the credit crisis.

Yes Al - but lots of those in negative equity early 90s now have substantial asset in their homes. Key is serviceability - if that no problem, then blips in short term valuation of no great significance. Time getting near imo to remember that shares can go up as well as down - my only holding at present in housebuilding sector is ABBY (no debt) but may soon be tempted to catch the falling knife. Same imo applies to some of the banks but always DYOR.

Persimmon (LSE: PSN.L - news) , down nearly 9% to 387p, is the FTSE 100's worst performer today after Goldman Sachs lowered its stance on the index's sole housebuilder to 'sell' from 'neutral'.

The broker said the Persimmon will be unable to escape the effects of a housing downturn and land writedowns despite its disciplined management and high quality land holdings.

Persimmon was also hit by a Royal Institution of Chartered Surveyors (RICS) survey that showed chartered surveyors completed just 17.4 transactions each over the last three months versus 18.5 in the period to April.

Guscavalier

was interested to read your earlier thread, because I had also looked at Housebuilders with a contrarian view, and like you had discounted BDEV and TW. due to weak balance sheets. The two I'm following are PSN and BWY which seem sronger and should emerge on the other side. I was looking at a 12 month view before buying, but this was just guess work, so I have decided to use charts to decide on my timing.

The plan is to use the 50 and 200 ma, when looking back at PSN i noticed that the 50ma crossed the 200ma = dead cross in August 2007 a very good sell signal. When the 50ma moves above 200ma in the future this could indicate a buy signal = golden cross. I had a look back at some graphs in 2002/03 and it seemed to work then, I would miss the first rise in price this way but it should still be near the bottom.

I would also wait for some companies to fail or to be taken over first before I would expect any buy signals. But like you I still have some homework to do on the timing of the buy signals, and also which company would be the best one to follow.

Merrill Lynch reviewed the UK Housebuilding sector this morning, downgrading all the major players.

Barratt Developments, Bellway, Berkeley, Galliford Try and Redrow were moved from 'neutral' to 'underperform', while Persimmon was dropped to 'neutral' from 'buy'.

The broker has new price targets for Barratt at 90p, Bellway at 525p, Berkeley at 700p, Bovis at 300p, Galliford Try at 35p, Kier at 1,000p, Persimmon at 400p, Redrow at 170p and Taylor Wimpey at 70p.

In a note to clients, Merrill Lynch said it believes given the deteriorating market backdrop that UK housebuilders have experienced over the past three months, the early 1990s housing market recession has increasing relevance as a comparator.

The broker said it thinks unemployment levels will be of critical importance as the single most important determinant of consumer confidence and housing transactions as this was the case in the early 1990s recession.

If, as Merrill suspects, unemployment trends higher, then it thinks this will put additional pressure on housing transaction volumes and the broker advises, more than anything else, to watch this variable closely.

The broker has cut its volume and house price assumptions for 2009, with volume projections from flat to down 10% and house prices from 5% lower to a drop of 10%.

Merrill believes we have gone beyond the tipping point and are now clearly seeing a UK housing market being squeezed on opposing fronts, by a lack both of willing lenders, as well as willing purchasers.

spitfire43- be interesting to hear when your 'golden cross' is triggered. Certainly an interesting guide and from the Merrill Lynch outlook the more help we can get the better. Not easy to get the timing right with contrarian investing since negative sentiment can continue to rule even if most of the outlook for a sector has been discounted. I tend to buy a few shares with a view to average down if lower levels are reached. I have done this with Royal Bank Scot and Barc recently. However, have not made an initial move with the builders. Will continue with the homework!

Now there is a new crisis in addition to the sub-prime mortgages, prime mortgages are the next disaster to hit the building and banking sector.

That is why the property sector is continuing its steep downtrend today.

telegraph saying this morning BDEV on the brink. Needs a debt for equity swap and quickly! Currently down another staggering 26%, TW. 20% etc etc.

Will we have any housebuilders in 1 mnths time?

This is obviously the second leg of the credit crisis. Looks as though a few builders are following NRK. Unfortunately I hold PSN. At least they are one of the strongest. If they go the lot will go!

looking very grim for BDEV, they are in horrible position with huge debts and falling sales, I would think it would be over a year before I could consider a contrarian purchase in this sector. I will look for the Golden Cross and continue to monitor and research the sector.

I have been making small purchases in the bank sector with LLOY and looking at RBS, but hesitating for now because it feels like they could go lower, dragged further down by the housing sector.

Thanks for the reference, dealerdear.


Plight of Barratt and Taylor Wimpey deepens as shares fall more than 20pc
By David Litterick
Last Updated: 10:49am BST 11/06/2008


The plight of Barratt Developments worsened this morning after shares fell a further 25pc to just 68.25p as fears mounted that the housebuilder's woes are so severe that it will have to resort to a debt-for-equity swap to stand a chance of survival.

Taylor Wimpey also fell by 20pc to 52p, after a flurry of negative coverage saying that the company would also have to raise capital to try and repair its struggling balance sheet. Both companies now have net debt which far exceeds their market value.

Barratt shares have tumbled 85pc since the beginning of 2008, while Taylor Wimpey has fallen 74pc.

Shares in the rest of the sector were hit this morning, but to a lesser extent.

There are fears many housebuilders will now be forced into drastic writedowns in the value of their land banks

The share price falls follow a bad day for housebuilder's yesterday, when Barratt saw its shares slump 29 to 91p after brokers said there was no end in sight to the collapse in the housing market.

In a savage note, Dresdner Kleinwort withdrew its target price on Barratt in a note titled: "Don't buy [at any price]."

Barratt was not alone in feeling the pain. Persimmon shares tumbled 41 to 387p and Taylor Wimpey slumped 12 to 65p.

If a builder goes under what effect that will have on a bank sp I don't know.

Apart from that analysts are becoming very +ve about RBS. Another one on CNBC a few moments ago saying good things.

is there any likelyhood of BDEV being suspended followwing a near 50% drop in SP in two day? do they have to issue an RNS?[possibly not because their woes are inn public domain already]

Providing they don't go bust anyone care to speculate a buy-in point with a view for long-term recovery. people are always going to need new houses

please feel free to comment.

Alex