US housing weakens, UK follows

Economic growth, Financial Events

US housing markets are getting worse. Today’s S&P/Case-Schiller index showed prices declined 8.9% in December. Moody’s said that 10% of homeowners (8.8 million people) had negative equity in their homes. And unsurprisingly, given this background, bank repossessions rose 90% versus January 2007 levels.

Price changes generally follow changes in volume, up or down. And so yesterday’s existing home data from the US Realtors Association indicates that we are still some distance from a price bottom. January’s sales were 23.4% below the level of January 2007. Inventory, the other major indicator, is also still moving in the wrong direction. It is now at 10.3 months, compared to 9.7 months in December.

The underlying problem is that credit availability continues to tighten. The Realtors say ‘subprime loans and other risky mortgage products have virtually disappeared from the market’. And the Fed’s interest rate cuts are having little impact on the price of credit for those able to get loans. The standard 30 year mortgage rate was 6.22% a year ago, and is now 5.76%. Had the rate followed the Fed’s cuts, it would be 3.97%.

The same reluctance to lend is now developing in the UK, following the Northern Rock nationalisation. ‘The Guardian’ reports today that lenders are focused on margin preservation as credit markets tighten, and are no longer ‘worried about market share and volume’. 125% mortgages are unavailable for new applicants, and many major lenders are now demanding 25% deposits for the first time in many years.

In the past, comments ‘The Guardian’, falls in house prices have normally been driven by rising unemployment. This time, however, the main factor is the ‘credit crunch’, which means there is a ‘lack of funds for lenders’. Until this can be resolved, chemical companies will continue to suffer from the double whammy of lower sales into the critical housing market, and higher borrowing costs.

PREVIOUS POST

‘Largest ever peacetime liquidity crisis’ says Bank of England

26/02/2008

US housing markets are getting worse. Today’s S&P/Case-Schiller index show...

Learn more
NEXT POST

Japan’s factory output weakens

28/02/2008

US housing markets are getting worse. Today’s S&P/Case-Schiller index show...

Learn more
More posts
US-China trade war confirms political risk is now a key factor for companies and the economy
12/05/2019

There are few real surprises in life, and President Trump’s decision to launch a full-scale tr...

Read
Uber’s $91bn IPO marks the top for today’s debt-fuelled stock markets
28/04/2019

Uber’s IPO next month is set to effectively “ring the bell” at the top of the post...

Read
The End of “Business as Usual”
21/04/2019

In my interview for Real Vision earlier this month, (where the world’s most successful invest...

Read
Most businesses were nowhere near Ready for Brexit last Friday – we mustn’t make the same mistake again
14/04/2019

Thank goodness for backbench MPs and the European Union. Without their efforts, the UK would by now ...

Read
Don’t get carried away by Beijing’s stimulus
07/04/2019

Residential construction work in Qingdao, China. Government stimulus is unlikely to deliver the econ...

Read
Businesses thrilled by Brexit uncertainty: “It’s exhilarating” says small business owner
01/04/2019

With the European Commission saying that a No Deal is now “likely“, small businesses acr...

Read
Ageing Perennials set to negate central bank stimulus as recession approaches
10/03/2019

The world’s best leading indicator for the global economy is still firmly signalling recession...

Read
BASF prepares its UK supply chain for Brexit
24/02/2019

BASF has been working with Ready for Brexit (the online platform I co-founded last year) as part of ...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more