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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Archive for April, 2009

Re: financial market outlook

Posted by WARREN MOSLER on 30th April 2009


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>   
>   On Thu, Apr 30, 2009 at 7:01 AM, Joshua wrote:
>   
>   The 82-83 Reagan rally was good for roughly 70% to the upside from trough to
>   peak. I clearly have been too pessimistic.
>   
>   At this point, are you looking for substantial upside in equities from here in light of
>   7% deficit/GDP? My concern has been that the decimation in non-bank lending
>   (roughly 75% of prior total lending) would be more than enough to offset the
>   positive effects of deficit.
>   

That caused the economy to weaken/inventory liquidation to intensify until the deficit got high enough to reverse that effect. And now proactive deficit spending is kicking in.

>   
>   Are Bernanke’s programs really reinvigorating securitization markets? Clearly
>   something is working for them.
>   

It’s mainly the increased deficit spending that’s turning the tide. Yes, the Fed did a few things that helped some, but overlooked what they could have done (and should still do) to ‘normalize banking’.

Also, we can get a V shaped financial market recovery as it was pricing oblivion, while the real economy looks more L shaped.

And we are also always subject to external shocks like swine flu, wars, supply shocks, etc.


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Posted in Articles | 5 Comments »

China allowing state enterprise to invest in Taiwan

Posted by WARREN MOSLER on 30th April 2009


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Cheaper to buy Taiwan than to invade?

China Makes First Taiwan Investment as Relations Thaw

by Tim Culpan and Janet Ong

Apr 30 (Bloomberg) — China Mobile Ltd. agreed to buy 12 percent of Far EasTone Telecommunications Co., the first investment by a Chinese state-owned company in Taiwan since a civil war ended six decades ago.

Taiwan’s benchmark Taiex index surged 5.7 percent, the biggest gain since Oct. 30, today on speculation more Chinese companies will invest on the island. The NT$17.8 billion ($529 million) purchase, announced by China Mobile yesterday, underscores how warming political relations between the two sides are leading to closer economic ties.

“This is a landmark deal. China Mobile will lead the way for other Chinese companies that have been waiting to invest in Taiwan but were hesitating,” said C.Y. Huang, vice chairman of Polaris Securities in Taipei. “This will open the floodgates for more Chinese investments into Taiwan.”

The Chinese government said this week it would end a ban on investments in the island on May 1 following an agreement to open cross-border operations for financial-services companies, expand direct flights and cooperate in fighting crime.

China Mobile agreed to pay NT$40 a share, or 14 percent higher than Far EasTone’s closing price yesterday, for the stake in Taiwan’s third-largest phone company. China Mobile will get a seat on the Taipei-based company’s board and become its second- largest shareholder, Far EasTone spokeswoman Alison Kao said. The deal is subject to approval from regulators and shareholders.


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Posted in Articles, China | No Comments »

Japan industrial output up more than expected

Posted by WARREN MOSLER on 30th April 2009


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The Great Mike Masters Global Inventory Liquidation pretty much ran its course by year end, and now depleted inventories are beginning to be replaced as high and rising government deficits support incomes and savings:

Japan’s Factory Output Rises as Twice Predicted Pace

by Jason Clenfield

Apr 30 (Bloomberg) — Japan’s industrial output rose for the first time in six months, twice the pace predicted by economists, adding to evidence the worst of the recession may be over.

Factory production climbed 1.6 percent from February, when it dropped 9.4 percent, the Trade Ministry said today in Tokyo. The median estimate of 33 economists surveyed by Bloomberg News was for a 0.8 percent gain.

Companies plan to increase production in April and May to replenish inventories that fell 3.3 percent last month, the report showed. Stocks rose after yesterday’s U.S. gross domestic product figures showed consumer spending jumped the most in two years in the first quarter.


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Posted in Articles, Japan | No Comments »

50 years of housing starts

Posted by WARREN MOSLER on 30th April 2009


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The population was just over 200 million in 1970 vs 300 million today.

We went off the gold standard internationally in 1971 as housing took off to population adjusted highs that have drifted ever lower since.

Housing is in for a large percentage gain from current levels just to get back to levels modest by historical standards.


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Posted in Housing | 1 Comment »

2009-04-30 USER

Posted by WARREN MOSLER on 30th April 2009


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Karim writes:

  • Initial claims -13k to 631k; continuing claims up another 133k (up every week this year) to 6271k
  • Suggests another 650-700k drop in payrolls and rise in ue rate from 8.5% to 9% for April employment report
  • Those numbers will in turn cause the data we received today on incomes and wages for March, to worsen from already historically weak levels.
  • Personal income -0.3% m/m and +0.3% y/y
  • Wage and salary component of income -0.5% m/m and -1.2% y/y (prior all-time low was -0.3% y/y)
  • Personal spending -0.2%. Q1 profile for real personal spending= +0.9% in Jan, +0.1% in Feb, and -0.2% in Mar. This will create a challenge for the PCE component of GDP for Q2.
  • ECI up 0.3% q/q and 2.1% y/y in Q1, both all-time lows
  • Chicago PMI for April up from 31.4 to 40.1
  • Looks like national ISM should bounce to about 39-40 tomorrow after 36.3
  • Fed comments yesterday seem to echo what I heard from ECB/BOE: Recent bounce in PMIs seem unrelated to prospects for recovery in late 2009/early 2010.


Personal Income MoM (Mar)

Survey -0.2%
Actual -0.3%
Prior -0.2%
Revised n/a

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Personal Income YoY (Mar)

Survey n/a
Actual 0.3%
Prior 1.0%
Revised n/a

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Personal Income ALLX (Mar)

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Personal Spending (Mar)

Survey -0.1%
Actual -0.2%
Prior 0.2%
Revised 0.4%

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PCE Deflator YoY (Mar)

Survey 0.7%
Actual 0.6%
Prior 1.0%
Revised 0.9%

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PCE Core MoM (Mar)

Survey 0.1%
Actual 0.2%
Prior 0.2%
Revised n/a

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PCE Core YoY (Mar)

Survey 1.8%
Actual 1.8%
Prior 1.8%
Revised n/a

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Employment Cost Index (1Q)

Survey 0.5%
Actual 0.3%
Prior 0.5%
Revised 0.6%

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Employment Cost Index ALLX (1Q)

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Initial Jobless Claims (Apr 25)

Survey 640K
Actual 631K
Prior 640K
Revised 645K

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Continuing Claims (Apr 18)

Survey 6200K
Actual 6271K
Prior 6137K
Revised 6138K

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Jobless Claims ALLX (Apr 25)

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Chicago Purchasing Manager (Apr)

Survey 35.0
Actual 40.1
Prior 31.4
Revised n/a

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NAPM Milwaukee (Apr)

Survey n/a
Actual 39.0
Prior 30.0
Revised n/a


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Posted in Daily | No Comments »

Note on quantitative easing

Posted by WARREN MOSLER on 29th April 2009


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Note written by an ‘in paradigm’ associate:

Growth in the size of the Fed’s balance sheet indicates that it is acting as a financial intermediary, but it doesn’t say anything useful about real economic activity or prospects for inflation. Even when the Fed buys Treasury debt from the private sector in return for cash, it is only substituting one financial claim on government for another of identical nominal value. This transaction doesn’t change the net financial assets of the private sector – so there is no obvious economic impact. Similarly, the Fed can encourage or even require banks to hold more and more excess reserves, but to what end ? Bank lending is not constrained by a lack of reserves, it is limited by capital ratios and the opportunity set for profitable lending. In this context, reserve growth increases gross balance sheets, but has no economic consequences.

What might be said about quantitative easing (QE), is that the Fed has to bid up bond prices (forcing yields down)in order to acquire Treasuries in the secondary market. At the margin, this has the potential to induce changes in portfolio preferences and push investors into more risky assets. So, QE might have some second order effects on financial assets prices, but still no logical or direct connection to generalized price inflation.

Some potential causes of inflation going forward might include sustained fiscal stimulus of sufficient proportion to more than offset the spontaneous decline in private sector demand that we are witnessing. If this were to use up existing capacity, then the probability for inflation goes up. Furthermore, even before we reach full capacity domestically, some of the growth in aggregate demand will leak overseas. Many of our imports have low elasticities and their prices could rise quickly. The most obvious example is crude oil. This would result in upward pressure on reported inflation even with broader economic growth below trend. In other words, a partial recovery of aggregate demand without energy policy reform could be inflationary.

I would hasten to add that none of this is original thinking and most of it is common sense. I found it odd that so many of the brilliant and successful people that you assembled last week relied on vague notions of “monetarism” or “Keynesianism” to frame their views and reverted to jargon rather than analysis to argue their points.


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Posted in Articles, Daily | 3 Comments »

Swine flu: TO BE AVOIDED

Posted by WARREN MOSLER on 29th April 2009


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Posted in Articles | 1 Comment »

Back from a week off

Posted by WARREN MOSLER on 29th April 2009


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Been away for a week.

First impressions:

Seems world fiscal responses both automatic and more recently proactive have turned the tide.

Looking for a quick return to positive GDP (from very depressed levels) helped by very low inventories in general.

But relatively slow returns to ‘normal’ in many sectors as well.

And central banks doing a lot of foot dragging regarding rate hikes due to large continuing output gaps (high unemployment).

The eurozone lags as it’s passed on proactive fiscal measures and instead is waiting for exports to pick up, and makes these kinds of counterproductive noises:

“The European Union (EU) has officially opened the excessive deficit procedure against Ireland, Greece, Spain and France since their budget deficits shot up beyond the EU’s limit amid the financial crisis.

The decisions, which were taken by EU foreign ministers in Luxembourg on Monday, required the four countries, as well as Britain, which had been under the excessive deficit procedure, to take corrective actions to rein in their deficits by Oct. 27, 2009.

Under the EU’s Stability and Growth Pact, all member states have to keep their budget deficits below 3 percent of their gross domestic product (GDP).”

Q1 Earnings generally better than expected.

This is all very good for US equities.

A few selected somewhat positive headlines from the past week with the most recent on top:

Malaysia Keeps Interest Rate Unchanged as Export Slump Eases
South Korean Current Account Rises, N.Z. Exports Gain
China’s Economy Recovering on Investment Surge, Citic Says
European Retail Sales Decline Least in 11 Months
European Confidence Rises for First Time in 11 Months
ECB’s Wellink Doesn’t See ‘Real Deflation’ in Europe
Tumpel-Gugerell Says ECB Sees No Deflation Risk, Badische Says
Germany’s Economy to Return to Growth Next Year
B0E spots hopeful economic signs
U.K. Has Biggest Budget Deficit Since World War II
U.K. Mortgage Lending Rose 16% in March, CML Says
Industrial Production Index Seen Up For 1st Time In 6 Months
Govt Submits Record Extra Budget For FY09 To Finance Fresh Stimuli
China’s External Demand Showing Signs of Recovery, Sun Says
China to launch more stimulus investment in second quarter
China Central Bank’s Yi Sees Signs of Economy Rebound
WB official: China a ‘bright spot’ in 2009 world economy


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Posted in Articles, Daily | 4 Comments »

2009-04-29 USER

Posted by WARREN MOSLER on 29th April 2009


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MBA Mortgage Applications (Apr 24)

Survey n/a
Actual -18.1%
Prior 5.3%
Revised n/a

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MBA Purchasing Applications (Apr 24)

Survey n/a
Actual 251.60
Prior 253.00
Revised n/a

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MBA Refinancing Applications (Apr 24)

Survey n/a
Actual 5108.20
Prior 6540.70
Revised n/a

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GDP QoQ Annualized (1Q A)

Survey -4.7%
Actual -6.1%
Prior -6.3%
Revised n/a

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GDP YoY Annualized Real (1Q A)

Survey n/a
Actual -2.6%
Prior -0.8%
Revised n/a

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GDP YoY Annualized Nominal (1Q A)

Survey n/a
Actual -0.5%
Prior 1.2%
Revised n/a

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GDP Price Index (1Q)

Survey 1.8%
Actual 2.9%
Prior 0.5%
Revised n/a

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Core PCE QoQ (1Q)

Survey 1.0%
Actual 1.5%
Prior 0.9%
Revised n/a

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Personal Consumption (1Q)

Survey 0.9%
Actual 2.2%
Prior -4.3%
Revised n/a

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FOMC Rate Decision (Apr 29)

Survey 0.25%
Actual 0.25%
Prior 0.25%
Revised n/a


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Posted in Daily | 2 Comments »

2009-04-28 USER

Posted by WARREN MOSLER on 28th April 2009


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ICSC UBS Store Sales YoY (Apr 28)

Survey n/a
Actual -1.7%
Prior -0.1%
Revised n/a

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ICSC UBS Store Sales WoW (Apr 28)

Survey n/a
Actual -0.7%
Prior -0.4%
Revised n/a

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Redbook Store Sales Weekly YoY (Apr 28)

Survey n/a
Actual 0.7%
Prior 0.1%
Revised n/a

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Redbook Store Sales MoM (Apr 28)

Survey n/a
Actual 1.6%
Prior 1.5%
Revised n/a

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ICSC UBS Redbook Comparison TABLE (Apr 28)

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S&P Case Shiller Home Price Index (Feb)

Survey 142.80
Actual 143.17
Prior 146.40
Revised 146.35

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S&P CS Composite 20 YoY (Feb)

Survey -18.70%
Actual -18.63%
Prior -18.97%
Revised -19.00%

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S&P Case Shiller US Home Price Index (Feb)

Survey n/a
Actual 139.14
Prior 150.00
Revised n/a

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S&P Case Shiller US Home Price Index YoY (Feb)

Survey n/a
Actual -18.23%
Prior -16.55%
Revised n/a

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Consumer Confidence (Apr)

Survey 29.7
Actual 39.2
Prior 26.0
Revised 26.9

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Consumer Confidence ALLX 1 (Apr)

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Consumer Confidence ALLX 2 (Apr)

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Richmond Fed Manufacturing Survey (Apr)

Survey -17
Actual -9
Prior -20
Revised n/a

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Richmond Fed Manufacturing Survey ALLX (Apr)


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Posted in Uncategorized | No Comments »

2009-04-27 CREDIT

Posted by WARREN MOSLER on 27th April 2009


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IG On-the-run Spreads (Apr 27)

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IG6 Spreads (Apr 27)

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IG7 Spreads (Apr 27)

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IG8 Spreads (Apr 27)

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IG9 Spreads (Apr 27)


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Posted in Credit | 5 Comments »

2009-04-24 USER

Posted by WARREN MOSLER on 24th April 2009


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Durable Goods Orders (Mar)

Survey -1.5%
Actual -0.8%
Prior 3.4%
Revised 2.1%

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Durable Goods Orders YoY (Mar)

Survey n/a
Actual -23.6%
Prior -29.7%
Revised n/a

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Durables Ex Defense MoM (Mar)

Survey n/a
Actual -0.6%
Prior 0.2%
Revised n/a

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Durables Ex Transportation MoM (Mar)

Survey -1.2
Actual -0.6%
Prior 3.9%
Revised 2.0%

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Durable Goods ALLX (Mar)

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New Home Sales (Mar)

Survey 337K
Actual 356K
Prior 337K
Revised 358K

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New Home Sales Total for Sale (Mar)

Survey n/a
Actual 308.00
Prior 324.00
Revised n/a

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New Home Sales MoM (Mar)

Survey 0.0%
Actual -0.6%
Prior 4.7%
Revised 8.2%

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New Home Sales YoY (Mar)

Survey n/a
Actual -30.6%
Prior -37.4%
Revised n/a

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New Home Sales Median Price (Mar)

Survey n/a
Actual 201.40
Prior 208.70
Revised n/a

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New Home Sales TABLE 1 (Mar)

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New Home Sales TABLE 2 (Mar)


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Posted in Daily | 4 Comments »

2009-04-23 USER

Posted by WARREN MOSLER on 23rd April 2009


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Initial Jobless Claims (Apr 18)

Survey 640K
Actual 640K
Prior 610K
Revised 613K

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Continuing Claims (Apr 11)

Survey 6120K
Actual 6137K
Prior 6022K
Revised 6044K

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Jobless Claims ALLX (Apr 18)

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RPX Composite 28dy YoY (Feb)

Survey n/a
Actual -22.27%
Prior -23.03%
Revised n/a

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RPX Composite 28dy Index (Feb)

Survey n/a
Actual 186.56
Prior 186.39
Revised n/a

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Existing Home Sales (Mar)

Survey 4.65M
Actual 4.57M
Prior 4.72M
Revised 4.71M

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Existing Home Sales MoM (Mar)

Survey -1.5%
Actual -3.0%
Prior 5.1%
Revised 4.9%

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Existing Home Sales YoY (Mar)

Survey n/a
Actual -7.1%
Prior -4.8%
Revised n/a

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Existing Home Sales Inventory (Mar)

Survey n/a
Actual 3.737
Prior 3.798
Revised n/a

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Existing Home Sales ALLX 1 (Mar)

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Existing Home Sales ALLX 2 (Mar)

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Existing Home Sales TABLE 1 (Mar)

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Existing Home Sales TABLE 2 (Mar)


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Posted in Daily | 2 Comments »

2009-04-22 USER

Posted by WARREN MOSLER on 22nd April 2009


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MBA Mortgage Applications (Apr 17)

Survey n/a
Actual 5.3%
Prior -11.0%
Revised n/a

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MBA Purchasing Applications (Apr 17)

Survey n/a
Actual 253.00
Prior 264.10
Revised n/a

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MBA Refinancing Applications (Apr 17)

Survey n/a
Actual 6540.70
Prior 6071.70
Revised n/a

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House Price Index MoM (Feb)

Survey -0.7%
Actual 0.7%
Prior 1.7%
Revised 1.0%

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House Price Index YoY (Feb)

Survey n/a
Actual -6.3%
Prior -8.9%
Revised n/a

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House Price Index ALLX (Feb)


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Posted in Daily | 1 Comment »

Mosler named director

Posted by WARREN MOSLER on 21st April 2009


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Magna Entertainment Corp. announces appointments of Interim Chief Executive Officer and Independent Director

April 7 (Magna Enterntainment Group) — Magna Entertainment Corp. (“MEC” or the “Company”) (NASDAQ: MECA – News; TSX: MEC.A – News) today announced that it has appointed Greg Rayburn as Interim Chief Executive Officer of the Company, subject to the approval of the United States Bankruptcy Court for the District of Delaware. MEC and certain of its subsidiaries are currently subject to bankruptcy proceedings in the United States under Chapter 11 of the United States Bankruptcy Court for the District of Delaware. If approved, Mr. Rayburn will assume the customary responsibilities of the Chief Executive Officer including leading MEC’s Chapter 11 restructuring activities and overseeing the sale of MEC’s assets. He will report directly to MEC’s Board of Directors. The decision to appoint Mr. Rayburn followed an extensive executive search process led by MEC’s lead director, William Menear. Mr. Rayburn is currently a senior managing director and the practice leader of FTI Palladium Partners. He has more than 26 years of experience advising companies and boards of directors in several in-court and out-of-court restructurings and has previously served as CEO or CRO of other troubled companies, including WorldCom, aaiPharma and Muzak Holdings LLC. Frank Stronach, who has resigned his office as Chief Executive Officer of the Company effective immediately, will retain his position as Chairman of the Board of Directors.

In addition, the Board of Directors also appointed Warren Mosler to serve as an independent member of the Board of Directors. Mr. Mosler is the founder and principal of AVM, L.P., a broker/dealer that provides advanced financial services to large institutional accounts. Mr. Mosler is the President and founder of Mosler Automotive which manufactures the MT900 sports car in Riviera Beach, Florida. MEC’s Board of Directors is in the ongoing process of searching for additional, qualified independent directors to strengthen MEC’s Board.


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Posted in Articles | 2 Comments »

2009-04-21 USER

Posted by WARREN MOSLER on 21st April 2009


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ICSC UBS Store Sales YoY (Apr 21)

Survey n/a
Actual -0.1%
Prior -0.4%
Revised n/a

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ICSC UBS Store Sales WoW (Apr 21)

Survey n/a
Actual -0.4%
Prior 0.8%
Revised n/a

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Redbook Store Sales Weekly YoY (Apr 21)

Survey n/a
Actual 0.1%
Prior 0.9%
Revised n/a

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Redbook Store Sales MoM (Apr 21)

Survey n/a
Actual 1.5%
Prior 1.9%
Revised n/a

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ICSC UBS Redbook Comparison TABLE (Apr 21)


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Posted in Daily | No Comments »

Mike Norman TONIGHT on Cavuto!

Posted by WARREN MOSLER on 20th April 2009


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Catch Mike Norman tonight on Cavuto! On the FOX Business Network, 6:40 PM ET!


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Posted in Articles | 15 Comments »

Deficit terrorist #1 David Walker of the Peterson Institute states to host Mike Norman there is no solvency issue!

Posted by WARREN MOSLER on 20th April 2009


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Posted in Articles | 6 Comments »

Ireland’s increased taxes and lowered spending

Posted by WARREN MOSLER on 20th April 2009


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Right, seems the eurozone is toast until the rest of the world recovers and starts importing from them of their deficits get high enough via recession- the ugly way- without the national governments and banks defaulting.

Trying to keep deficits from rising with tax hikes only means the economy goes down more as it seeks the necessary higher level of deficit spending for recovery.

A tall order but not impossible.

Erin Go Broke

by Paul Krugman

Apr 19 (New York Times) — “What,” asked my interlocutor, “is the worst-case outlook for the world economy?” It wasn’t until the next day that I came up with the right answer: America could turn Irish.

What’s so bad about that? Well, the Irish government now predicts that this year G.D.P. will fall more than 10 percent from its peak, crossing the line that is sometimes used to distinguish between a recession and a depression.

But there’s more to it than that: to satisfy nervous lenders, Ireland is being forced to raise taxes and slash government spending in the face of an economic slump — policies that will further deepen the slump.


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Posted in Articles | 3 Comments »

Re: UK House Asking Prices Increased in April

Posted by WARREN MOSLER on 20th April 2009


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Right, Brown’s deficit spending to the rescue, as previously suggested, thanks!

>   
>   On Mon, Apr 20, 2009 at 4:34 AM, Marshall wrote:
>   
>   Further to my other recent comments on the UK. You should start posting this stuff on
>   your site, as the UK is a good test case for the validity of “Mosler economics”1
>   

UK House Asking Prices Increased in April, Rightmove Says

by Jennifer Ryan

Apr 20 (Bloomberg) — U.K. house prices rose for a third month in April after mortgage availability improved, Rightmove Plc said today.

The average asking price rose 1.8 percent from March to 222,077 pounds ($328,000), the operator of the biggest U.K. residential property Web site said today. It fell 3.2 percent in London, the only region of 10 surveyed to show a decline. Home prices are down 7.3 percent from a year earlier.

Mortgage approvals rose 19 percent in February as the Bank of England cut the key interest rate to a record low of 0.5 percent and started buying assets to ease credit strains in the economy. Policy maker Kate Barker said yesterday house prices may rebound as banks ease lending terms.

“It looks like we are now bumping along the bottom of the trough,” Miles Shipside, Rightmove’s commercial director, said in the statement. “For there to be any real sense of optimism that we’re on a sustainable road to recovery, the availability of mortgage finance needs to improve significantly.”

The increase in property prices demanded by sellers was led by East Anglia, where values increased 5.1 percent, and Wales, which showed a 4.8 percent gain.

The decline in London, where the average asking price was 403,505 pounds, was led by a 7.8 percent drop in Ealing. Average values in the capital’s most expensive neighborhood, Kensington & Chelsea, fell 3.3 percent on the month to 1.9 million pounds.

Central bank data show mortgage approvals climbed to 38,000 in February, the most since May. The reading is still down from 71,000 at the start of 2009.

“I expect house prices to move up again,” Barker told the Spectator magazine on April 16. Referring to restrictions on the proportion of a home’s value that banks are willing to finance, she said, “the big slide down to 75-80 percent may be overdone. So I would expect the mortgage market to move.”


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Posted in Housing, UK | No Comments »