# What currently constitutes a "soft landing"?



## StoppedClock (8 Aug 2006)

Currently there is a lot of talk of the impending "soft landing".

What do posters here think currently constitutes a soft landing?

Note: Bears not looking for dismissal of the soft landing theory just want to know what people understand it to be.


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## whizzbang (8 Aug 2006)

The general impression I got was that it was price growth reducing to rise in line with inflation.

But I have heard a few other sceanarios that are being dubbed "soft landing"
I think the vagueness of the term is excellent for those who use it as anything short of a total crash can be have said to have been the predicted "soft landing"


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## Guest107 (8 Aug 2006)

anything less than a systematic 10% drop (such as a 5% drop) is a soft landing.


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## room305 (8 Aug 2006)

I took it to mean that prices might increase in nominal terms but in real terms they would remain static (growing in line with inflation).

It sounds much nicer than "stagnation" which is what such feeble growth used to be called.


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## CelloPoint (8 Aug 2006)

I was at pensions presentation recently and the guy was talking in very general terms about the various long-term investment options. He said, over the long term, bonds generally increase at inflation + 2%, property at inflation + 3-4%, with equities at inflation + 5%.

So I would say a "soft landing" is when house prices level off to inflation + 3%. I accept that we've jumped to a new plateau, but feel that this was back in 2001/2002. Therefore there has to be an equalisation back to growth of inflation + 3% since 2001/2002 which can only come about with a market correction. The sooner this happens, the softer the landing imho. It'll still be bumpy though.


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## StoppedClock (8 Aug 2006)

Thank you all.  

Does ths mean therefore that "stagnation" is the best that even the VI's are hoping for or is there another more wildly optimistic soft landing?  

If it is the best then IMO this would be the worst possible scenrario for EA's as why would anyone buy or sell when prices aren't going to do anything.


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## Persius (8 Aug 2006)

If you're talking just about property, then I think many people mean that house prices will remain more or less constant in nominal terms - i.e. platteauing out. Some people (conveniently) forgetting that this means prices actually decreasing in real terms.

However i think the term is, or should be, applied with regard to the entire economy. Then it would also mean no significant rise in unemployment IMHO (which also probably implies modest reduction in consumer spending coupled with constant business investment/spending).


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## room305 (8 Aug 2006)

StoppedClock said:
			
		

> ... this would be the worst possible scenrario for EA's as why would anyone buy or sell when prices aren't going to do anything.



Yup, they will be back working for their supper.


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## StoppedClock (8 Aug 2006)

CelloPoint said:
			
		

> Therefore there has to be an equalisation back to growth of inflation + 3% since 2001/2002 which can only come about with a market correction.


Anyone know official figures for :

inflation + 3% since 2001/2002 ?  

HPI since 2001/2002 ?


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## liteweight (8 Aug 2006)

My impression of the soft landing is that houses will no longer increase in price in leaps and bounds but become more in line with inflation. This is not stagnation per se, just not what we're used to.

Estate Agents will still be ok. There are always people wanting to trade up/down, get on the ladder. They just won't be receiving their record breaking commissions any longer, or at least not as many of them. Same probably holds true for Mortgage Brokers, Insurance Companies. The new car industry will suffer, small builders, the list goes on.


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## StoppedClock (8 Aug 2006)

room305 said:
			
		

> Yup, they will be back working for their supper.


 
So why would they be pushing it?  Surely a bit of bearish scaremongering to get the units moving would be more lucrative and its not like EA's are such respected people in our society that such a volte face would damage their standing too much.


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## Duplex (8 Aug 2006)

The velocity of our landing will be dependent on two factors.


1. The sustainability of the American economy and its current debt binge.

2. The Willingness of the Japanese, Chinese and Saudi’s to continue to pay for the same.



If the dollar falls the US enters recession and the American consumer stashes the plastic then it will be one of those landings where the stewardess advices you to place your head between your legs and kiss your ass goodbye.


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## Duplex (8 Aug 2006)

I tend to agree with this opinion. 




> “We have an inverted yield curve, a negative savings rate, six-year-high industry operating rate, multiyear-high commodity prices, cycle-high profit margins, uncomfortably high unsold inventories of both homes and autos, and a peaking-out in housing starts — all classic late-cycle developments...Be wary of the pundits telling you how great soft landings are. They hardly ever happen. The odds of a soft landing after a Fed tightening cycle inverted the entire yield curve are slim.”
> *-Merrill Lynch's David Rosenberg*


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## room305 (8 Aug 2006)

StoppedClock said:
			
		

> So why would they be pushing it?  Surely a bit of bearish scaremongering to get the units moving would be more lucrative and its not like EA's are such respected people in our society that such a volte face would damage their standing too much.



Same reason they do anything. To sell more houses. They won't buck the bullish sentiment while it still abounds so they are telling people what they want to hear. Buy now, the worst that can happen is a slow down in house price growth. Best get on the ladder now before interest rate rises get so high you can't afford to buy etc.

When the market tanks they'll change their tune.


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## StoppedClock (8 Aug 2006)

room305 said:
			
		

> When the market tanks they'll change their tune.


 
Anyone care to speculate on what that tune might sound like?


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## room305 (8 Aug 2006)

StoppedClock said:
			
		

> Anyone care to speculate on what that tune might sound like?



I'm going for the old reliables of "temporary correction", "solid fundamentals" and "fantastic buying opportunity" ...

At the moment if you are selling property you play on the buyer's fear of not getting "a foot on the ladder" to talk up the price. When it tanks they'll change tack and talk down the price, playing on the seller's fear of not getting shut of a property that is tying up capital and hurting him financially.

It won't be as lucrative of course but comments on this forum alone suggest there are people out there who think that when house prices drop it will be a great opportunity to buy a cheap house ... so at least they'll be able to eat for the next few years.


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## StoppedClock (8 Aug 2006)

StoppedClock said:
			
		

> Anyone know official figures for :
> 
> inflation + 3% since 2001/2002 ?
> 
> HPI since 2001/2002 ?


 
Does the lack of response on this mean that these figures are not generally available or is everyone hoping someone else will do the legwork?  If someone points to a site I'll extract the data and post it back?  

Also is there an Irish equivalent of the graph on HousePriceCrash home page?


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## Guest107 (8 Aug 2006)

all on www.cso.ie in the principal stats

1. housing inflation by year
2. CPI inflation by year


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## Duplex (8 Aug 2006)

PTSB/ersi index from 1997-2006.  I've never seen this data in graph form?



[broken link removed]


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## bearishbull (8 Aug 2006)

The inflation rate for last  5 years can be got here www.cso.ie
The house growth rates can be gotten at www.finfacts.com 
i think your looking at around houses being 50% higher now than late 2001 in nominal terms if growth of inflation +3% was held to.


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