WEBVTT - Bloomberg Daybreak Weekend: Jackson Hole, China, Debate 0:00:02.200 --> 0:00:04.680 This is Bloomberg Date Break Weekend, our global look at 0:00:04.720 --> 0:00:07.120 the top stories in the coming week from our Daybreak 0:00:07.160 --> 0:00:09.840 anchors all around the world, and straight ahead on the program, 0:00:09.840 --> 0:00:13.600 a look at the Federal Reserves Annual meeting in Jackson Hole, Wyoming. 0:00:13.800 --> 0:00:15.280 I'm Tom Busby in New York. 0:00:15.320 --> 0:00:17.360 I'm Stephen Carolin London, where we're looking ahead to the 0:00:17.400 --> 0:00:20.480 latest house priced data in the UK as the sector 0:00:20.560 --> 0:00:24.200 breaks is for further price falls as interest rates move higher. 0:00:24.280 --> 0:00:26.880 I'm Brian Curtis in Hong Kong. We look inside the 0:00:26.920 --> 0:00:28.520 black box that is China. 0:00:28.800 --> 0:00:31.400 I'm Killie Lines in Washington, where we have our eyes 0:00:31.440 --> 0:00:35.160 on Milwaukee ahead of the first Republican presidential primary date. 0:00:35.800 --> 0:00:39.800 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:39.840 --> 0:00:43.320 Eleve them free on New York, bloombergon ninety nine to one, Washington, 0:00:43.400 --> 0:00:47.080 d C, Bloomberg one O six one, Boston, Bloomberg nine sixty, 0:00:47.200 --> 0:00:51.760 San Francisco, DAV Digital Radio, London, Sirius XM one nineteen 0:00:51.960 --> 0:00:54.720 and around the world on Bloomberg Radio dot Com and 0:00:54.800 --> 0:00:56.279 via the Bloomberg Business App. 0:01:00.120 --> 0:01:02.320 Day to You, I'm Tom Busby, and we begin today's 0:01:02.320 --> 0:01:04.920 program with what to expect at the Kansas City Fed's 0:01:04.920 --> 0:01:09.520 annual Jackson Hole Economic Policy Symposium, a three day event 0:01:09.680 --> 0:01:13.640 that officially starts this coming Thursday with a highly anticipated 0:01:13.640 --> 0:01:16.920 address from FED chair Jerome Powell. Friday morning about ten am, 0:01:16.959 --> 0:01:21.080 Wall Street Time, Bloomberg Surveillance co host Lisa Abramowitz, who 0:01:21.080 --> 0:01:23.479 will be in Jackson Hole this week, joins us now 0:01:23.520 --> 0:01:26.200 with some insight. Lisa, thank you so much for being. 0:01:26.040 --> 0:01:27.800 Here, Tom, thank you so much for having me. 0:01:28.040 --> 0:01:31.000 Well, the theme of this year's symposium is structural shifts 0:01:31.040 --> 0:01:33.200 in the global economy, but for most of us, it's 0:01:33.280 --> 0:01:36.160 all about what Jay Powell will say in those remarks 0:01:36.480 --> 0:01:39.440 and any hints he may offer about what the FED 0:01:39.600 --> 0:01:43.560 is thinking going into the September FOMC meeting now just 0:01:43.600 --> 0:01:46.959 a few weeks away. So what do you think we 0:01:47.040 --> 0:01:49.760 can expect to hear from Chairman Powell? Lisa, Well, I 0:01:49.800 --> 0:01:50.120 think the. 0:01:50.040 --> 0:01:54.000 Whole idea of structural shifts raises a question about whether j. 0:01:54.200 --> 0:01:58.200 Powell is willing to come out and say inflation is 0:01:58.280 --> 0:02:01.920 structurally going to be high in the years to come, 0:02:02.120 --> 0:02:04.680 and whether the rate that the FED sets has to 0:02:04.800 --> 0:02:07.120 also be higher in the years to come, and if 0:02:07.160 --> 0:02:10.560 he says that what that does to sort of underpin 0:02:10.800 --> 0:02:12.520 some of the moves we've seen in the bond market, 0:02:12.560 --> 0:02:15.360 in other words, bond selling off, yields going up in 0:02:15.440 --> 0:02:18.400 response to this expectation of higher rates for longer. 0:02:18.520 --> 0:02:20.640 Well, it was a year ago at Jackson Hole that 0:02:20.720 --> 0:02:24.760 Jpal warned of the pain that rising interest rates would 0:02:24.760 --> 0:02:28.000 cause the economy and consumers. Now there's been some pain 0:02:28.200 --> 0:02:30.760 benchmark lending rates at a twenty year high, but we've 0:02:30.800 --> 0:02:34.160 seen surprisingly strong job growth since then. We've seen a 0:02:34.160 --> 0:02:39.079 resilient economy, steady consistent growth, consumer spending, housing market a 0:02:39.080 --> 0:02:42.200 little uneven, but is it better than when he projected 0:02:42.240 --> 0:02:42.880 just a year ago. 0:02:43.040 --> 0:02:45.560 So when he was talking about pain, he was talking 0:02:45.639 --> 0:02:49.080 about the unemployment rate coming up. There was a belief 0:02:49.120 --> 0:02:52.200 that there was no way to get inflation lower unless 0:02:52.280 --> 0:02:56.560 you had unemployment tick up. People lose their jobs, and 0:02:56.600 --> 0:02:59.320 this was the pain that they talked about that was 0:02:59.400 --> 0:03:03.000 necessary to avoid further pain down the line in terms 0:03:03.080 --> 0:03:06.560 of higher inflation, sort of taxing the profits, taxing the 0:03:06.600 --> 0:03:10.320 incomes of the average American. We are still at about 0:03:10.320 --> 0:03:13.080 three and a half percent unemployment rate about a year later. 0:03:14.040 --> 0:03:18.079 In the employment market, that pain is not apparent. Nobody 0:03:18.200 --> 0:03:21.760 would say that this is a difficult labor market. Quite 0:03:21.760 --> 0:03:24.880 the opposite, and there are indications that while it is 0:03:24.960 --> 0:03:28.080 loosening a touch, it still is relatively easy to get 0:03:28.120 --> 0:03:31.280 a job, and wage increases are still above what they 0:03:31.320 --> 0:03:35.600 had been pre pandemic. So as we look to this speech, 0:03:35.800 --> 0:03:38.680 there is a real question about whether Jerome Powell will 0:03:38.680 --> 0:03:42.240 come out and say we were wrong, we didn't need 0:03:42.280 --> 0:03:45.520 the pain, and actually inflation is coming down just fine 0:03:45.680 --> 0:03:48.920 because post pandemic there were normalization effects that had not 0:03:49.000 --> 0:03:51.600 yet taken hold, And whether he's going to come out 0:03:51.640 --> 0:03:54.600 and say, we believe in a soft landing and we 0:03:54.680 --> 0:03:56.920 are going to be patient and hold rates where they 0:03:56.960 --> 0:04:00.200 are for longer to gauge whether or not we are. 0:04:00.800 --> 0:04:03.400 If we're wrong, we can raise rates further, but otherwise, 0:04:03.960 --> 0:04:06.520 let's lean into this. That's kind of what we've heard 0:04:06.520 --> 0:04:09.360 from other Fed officials as they've talked, let's lean in 0:04:09.520 --> 0:04:12.440 a little bit to this idea that maybe we're getting, 0:04:12.880 --> 0:04:15.320 you know, this mythical beast that is the soft landing 0:04:15.400 --> 0:04:18.480 or the no landing and inflation coming in. You know, 0:04:19.000 --> 0:04:22.200 this will be something that I hope he does address 0:04:22.520 --> 0:04:25.120 because it was a pretty dark speech last year. 0:04:25.279 --> 0:04:27.880 Yeah, the markets took a tumble, right, correct. 0:04:27.560 --> 0:04:30.800 It was sending a very clear message. The Fed came 0:04:30.920 --> 0:04:33.840 through on what they were saying. They raised rates at 0:04:33.839 --> 0:04:38.320 the fastest pace in modern economic history. So at what 0:04:38.600 --> 0:04:42.320 point do they have to revamp their idea of what 0:04:42.400 --> 0:04:45.240 restrictive means of how high rates have to go to 0:04:45.240 --> 0:04:47.800 bring inflation back down to two percent? Or are they 0:04:47.800 --> 0:04:49.720 going to say we don't need to get it down 0:04:49.760 --> 0:04:51.640 to two percent so quickly, which is so some of 0:04:51.640 --> 0:04:54.800 them are hinting, And you know, if that's the case, 0:04:55.960 --> 0:04:58.599 we can be patient and we can watch and we 0:04:58.640 --> 0:04:59.839 can maybe avoid that. 0:05:00.400 --> 0:05:03.360 Well, then that year, CPI went from about nine percent 0:05:03.440 --> 0:05:06.080 in July of twenty twenty two to last month's reading 0:05:06.160 --> 0:05:09.599 of three point two percent. So whatever they're doing seems 0:05:09.600 --> 0:05:10.159 to be working. 0:05:10.480 --> 0:05:14.760 Some people would argue that the decline in inflation, which 0:05:14.880 --> 0:05:18.400 just means prices are rising at a slower clip, is 0:05:18.480 --> 0:05:21.160 just simply because year over year comparison numbers are too 0:05:21.160 --> 0:05:24.839 difficult to really achieve that sort of equal nine percent level, 0:05:25.279 --> 0:05:29.320 right that. In other words, inflation rose at a tremendous 0:05:29.600 --> 0:05:33.560 pace mid year last year, very difficult year over year 0:05:33.960 --> 0:05:37.760 to supersede that as such a great clip. Some people 0:05:37.880 --> 0:05:41.120 are saying that that is fading and that you're going 0:05:41.160 --> 0:05:44.200 to see a reacceleration in inflation NEIL data among those 0:05:44.720 --> 0:05:47.799 other people saying that this isn't it even Fed policied 0:05:47.839 --> 0:05:51.680 have taking effect. This is just simply a normalization a 0:05:51.680 --> 0:05:54.520 lot of questions that they, you know, would be interesting 0:05:54.560 --> 0:05:55.440 for them to weigh in on. 0:05:55.600 --> 0:05:58.000 Now, the FED meets again in September, and before then 0:05:58.080 --> 0:06:00.520 we're going to get some big data point. We have 0:06:00.640 --> 0:06:03.920 jobs data, housing data. So what will you be looking for? 0:06:04.200 --> 0:06:07.760 So you're asking, probably I don't want to say the 0:06:07.800 --> 0:06:11.640 wrong person, but I will give you the traditional answer, 0:06:11.760 --> 0:06:13.680 and then I will give you my answer. The traditional 0:06:13.760 --> 0:06:17.320 answer is CPI is really important to see how much 0:06:17.360 --> 0:06:20.680 inflation's coming in, and of course the job's number is 0:06:20.680 --> 0:06:23.960 also really important to get a sense of just how 0:06:24.080 --> 0:06:27.520 much the economy is cooling or how much the labor 0:06:27.520 --> 0:06:32.400 market is showing signs of loosening. I would argue part 0:06:32.400 --> 0:06:35.799 of the problem with this whole concept of data dependency 0:06:35.960 --> 0:06:37.760 is that which data are you looking at and what 0:06:37.920 --> 0:06:40.159 narrative are you trying to paint. Are you looking at 0:06:40.240 --> 0:06:44.080 leading in economic indicators? Are you looking at data over 0:06:44.160 --> 0:06:47.560 a couple of months, how many months? What's enough to 0:06:47.600 --> 0:06:51.000 give you conviction that you've actually killed the inflation beast right? 0:06:51.320 --> 0:06:54.240 And the reason why I ask this is because this 0:06:54.400 --> 0:06:57.760 is supposedly a newly data dependent fed. What do they 0:06:57.880 --> 0:07:01.039 do if inflation gets back down to three percent on 0:07:01.080 --> 0:07:04.760 a rolling three month basis? Do they say victory? Do 0:07:04.800 --> 0:07:07.279 they say we have enough data to have conviction that's 0:07:07.320 --> 0:07:09.640 going down to two percent? Or do they say, wait 0:07:09.640 --> 0:07:12.160 a second, we're also looking at the data that's over 0:07:12.200 --> 0:07:14.960 there with what cars cost and oh yeah, over here 0:07:15.000 --> 0:07:17.160 with how people are feeling in the University of Michigan 0:07:17.240 --> 0:07:20.120 Consumer Sentiment Survey. It is a moving target to get 0:07:20.120 --> 0:07:22.480 a sense of what the economic model is at a 0:07:22.520 --> 0:07:25.480 time of incredible change, and that I think is what 0:07:25.520 --> 0:07:28.760 people are trying to understand. What data are they looking at, 0:07:28.800 --> 0:07:31.800 what's their framework for making these assessments at a time 0:07:31.840 --> 0:07:34.640 where that itself is of great debate. 0:07:34.720 --> 0:07:38.080 Now some of that data, particularly housing, which we all 0:07:38.120 --> 0:07:41.480 look at closely. It's tough affordability at a forty year low, 0:07:41.520 --> 0:07:43.960 because interest rates are at a twenty two year high 0:07:43.960 --> 0:07:47.960 and the price is just unbelievable. That's got to impact everything. 0:07:48.440 --> 0:07:52.680 Yes, and it's surprising that, given affordability is so low, 0:07:53.080 --> 0:07:56.000 housing prices having come down more. And this goes to 0:07:56.000 --> 0:07:59.200 the heart of the conundrum for the Federal Reserve. Three 0:07:59.280 --> 0:08:02.040 years ago, if you would have pulled anybody off the 0:08:02.040 --> 0:08:03.920 street and said, hey, the Fed's going to go from 0:08:04.000 --> 0:08:06.640 zero percent to five percent in terms of the overnight rate, 0:08:06.880 --> 0:08:09.200 mortgage rates are going to be north of seven percent. 0:08:09.600 --> 0:08:11.280 Where do you think housing prices are going to be? 0:08:11.280 --> 0:08:13.360 Everyone would say, oh, my goodness, they would absolutely tank. 0:08:13.440 --> 0:08:16.160 There's no way they can continue to chug hargher. And 0:08:16.240 --> 0:08:18.680 yet here we are. And part of it is that 0:08:18.920 --> 0:08:22.200 because of the higher rates, people aren't selling and there's 0:08:22.240 --> 0:08:24.160 no supply. I mean, this is one of the most 0:08:24.680 --> 0:08:27.880 counterintuitive economies in the way that it is sort of 0:08:27.920 --> 0:08:30.520 developed that a lot of people have seen, and it 0:08:30.640 --> 0:08:34.400 keeps up ending economist projections. So housing will be interesting. 0:08:34.840 --> 0:08:37.480 The tea leaves that it's sending, though again as much 0:08:37.600 --> 0:08:40.600 mystery as they are anything else, because of the ways 0:08:40.640 --> 0:08:44.160 people adapt to higher rates and finding workarounds. 0:08:44.400 --> 0:08:46.559 So tell me why we wait to see which J. 0:08:46.840 --> 0:08:50.280 Powell We're going to get a Dubvish or hawkish. What's 0:08:50.360 --> 0:08:52.880 it like at Jackson Hole. What's it like being there? 0:08:53.440 --> 0:08:56.160 Well, truth be told, we're up at four am local 0:08:56.200 --> 0:08:58.520 time or three am local times, so it's usually pretty 0:08:58.559 --> 0:09:01.200 dark and cold, and it's very cold, you know, up 0:09:01.200 --> 0:09:03.640 in the mountains, but it's gorgeous as the sun comes 0:09:03.720 --> 0:09:05.920 up over all of the mountains. And then there are 0:09:05.960 --> 0:09:08.959 those on the fed and the academics who join, who 0:09:09.080 --> 0:09:11.920 go hiking and canoeing and fishing, and they are those 0:09:11.960 --> 0:09:16.560 who stay in the lodge and have discussions. It's really 0:09:16.679 --> 0:09:20.319 neat to have so many thinkers together trying to hash 0:09:20.400 --> 0:09:22.160 things out to understand. 0:09:21.760 --> 0:09:22.440 Where we are. 0:09:22.480 --> 0:09:28.240 And it's a retreat in the traditional American kind of sense. 0:09:28.520 --> 0:09:31.120 Do you think that kind of atmosphere loosens these people 0:09:31.200 --> 0:09:33.280 up the way we normally see them as so stern, 0:09:33.520 --> 0:09:36.120 so buttoned up. Is it a little different in Wyoming? 0:09:36.559 --> 0:09:37.160 Yes and no. 0:09:38.280 --> 0:09:42.480 They are stayed because they have a tall task, they 0:09:42.520 --> 0:09:44.680 have a difficult one, and they have a big job 0:09:44.720 --> 0:09:48.280 to do. And I feel that, you know, I feel 0:09:48.280 --> 0:09:49.720 that energy from them. 0:09:50.240 --> 0:09:50.440 You know. 0:09:50.520 --> 0:09:53.559 Sure, people a little bit looser, sure, but it isn't 0:09:53.720 --> 0:09:56.080 party mode. It's not as though people you know, do 0:09:56.240 --> 0:09:59.320 junkets where they're throwing axes and getting hammered. It's like, 0:09:59.440 --> 0:10:04.080 you know, definitely a feeling of gravitas for the moment. 0:10:04.440 --> 0:10:07.720 And I think that that's, you know, that's what the 0:10:07.800 --> 0:10:10.160 atmosphere feels like. And to be fair, I mean we 0:10:10.240 --> 0:10:12.960 are fairly isolated, about forty five minutes away from the 0:10:12.960 --> 0:10:16.560 actual town of Jackson Hole, and you're surrounded by little 0:10:16.559 --> 0:10:20.520 cabins or nothing and mountains. So it's not exactly a 0:10:20.640 --> 0:10:25.839 party atmosphere conducive to you know, you know, some kind 0:10:25.880 --> 0:10:29.640 of you know, incredible partying. This is you know, the 0:10:29.760 --> 0:10:32.280 levity that people have going for a hike or you know, 0:10:32.400 --> 0:10:34.360 going fishing. It's more of that nature. 0:10:34.559 --> 0:10:38.280 Thank you, Lisa. Bloomberg Surveillance co host Lisa Abramowitz will 0:10:38.320 --> 0:10:41.040 have live special coverage from Jackson Hole of all the 0:10:41.080 --> 0:10:43.640 key events. Plus we'll bring all the news being made 0:10:43.679 --> 0:10:45.760 on the sidelines to you as well right here on 0:10:45.800 --> 0:10:49.560 Bloomberg Radio. Coming up on Bloomberg day Break Weekend is 0:10:49.600 --> 0:10:53.160 the real estate market in the UK in trouble. I'm 0:10:53.200 --> 0:11:06.600 Tom Busby and this is Bloomberg. This is Bloomberg day 0:11:06.600 --> 0:11:09.040 Break Weekend, our global look ahead at the top stories 0:11:09.080 --> 0:11:11.839 for investors in the coming week. I'm Tom Busby in 0:11:11.880 --> 0:11:15.000 New York. Up later in our program, Troubles mount for 0:11:15.080 --> 0:11:18.680 the Chinese economy as the slow down deepens. We'll bring 0:11:18.720 --> 0:11:22.040 you details, but first Britain's real estate market will be 0:11:22.040 --> 0:11:25.000 in focused in the coming days. Home prices under pressure 0:11:25.040 --> 0:11:29.000 from higher rates, and Bloomberg Economics is forecasting further declines 0:11:29.400 --> 0:11:32.760 as the effects of the most recent hikes feed slowly 0:11:32.880 --> 0:11:35.520 into the market. Any hopes of a pause from the 0:11:35.520 --> 0:11:38.960 Bank of England have been dashed by recent hotter inflation 0:11:39.480 --> 0:11:42.280 and wage growth data. For more, Let's head to London 0:11:42.320 --> 0:11:46.319 and bring in Bloomberg Daybreak Europe Banker Stephen Carroll Tom like. 0:11:46.280 --> 0:11:49.840 The weather, house prices are a topic of national conversation 0:11:50.120 --> 0:11:53.480 in Britain. After more than a decade of steady growth, 0:11:53.520 --> 0:11:56.959 prices are starting to come down, falling around five percent 0:11:57.360 --> 0:12:01.280 from their peak last August. Bloomberg reckons they have another 0:12:01.360 --> 0:12:04.120 five percent or so to fall, and we'll get fresh 0:12:04.240 --> 0:12:07.640 data from the property website right Move in the coming days. 0:12:08.160 --> 0:12:11.840 The Bank of England's fourteen consecutive interest rate hikes are 0:12:11.880 --> 0:12:14.080 still feeding into the market because of the way that 0:12:14.280 --> 0:12:18.000 UK mortgage rates are usually fixed for just two to 0:12:18.200 --> 0:12:22.040 five years. The recent stronger than expected wage growth and 0:12:22.160 --> 0:12:25.560 inflation data means markets now expect BOE rates to peak 0:12:25.640 --> 0:12:29.120 around six percent, So there's still plenty of pain ahead 0:12:29.160 --> 0:12:32.480 for the housing market. We've been discussing this with Damian Shephard, 0:12:32.520 --> 0:12:35.800 our residential real estate reporter, and John Steppek, who writes 0:12:35.840 --> 0:12:37.800 Bloomberg's Money Distilled newsletter. 0:12:38.200 --> 0:12:40.800 Well, the market expectation though is that rates will peak 0:12:40.800 --> 0:12:44.559 are in about six percent in March. And obviously, I 0:12:44.640 --> 0:12:47.320 mean market expectations have changed an awful lot that she 0:12:47.360 --> 0:12:50.840 hadn't bounced up and down. The more important, I'll say, 0:12:51.679 --> 0:12:54.520 the BOEV is an important fact on mortgages, but it's 0:12:54.559 --> 0:12:56.960 not the kind of most important, and it's not, you know, 0:12:57.040 --> 0:12:59.600 the key. A lot of it depends on how keen 0:12:59.720 --> 0:13:03.480 by are to lend as well. So on the one hand, 0:13:03.720 --> 0:13:05.760 rates have gone up a lot. On the other hand, 0:13:06.080 --> 0:13:08.560 banks are quite keen they right loans because they're not 0:13:08.640 --> 0:13:11.200 doing a lot of business to the business they can do. 0:13:11.520 --> 0:13:15.120 You know, they want to do it, but you know, 0:13:15.440 --> 0:13:17.320 at the end of the day, the kind of base 0:13:17.360 --> 0:13:19.720 rate is the base rate. So you're talking about interest 0:13:19.760 --> 0:13:22.160 rates have gone from about say two percent in the 0:13:22.200 --> 0:13:25.440 mortgage about you know, eighteen months ago and now you're 0:13:25.480 --> 0:13:27.640 going to be paying what a five and a half percent? 0:13:27.920 --> 0:13:31.000 I think the two year average fix is about five 0:13:31.040 --> 0:13:33.480 point eight at the moment, so it's gone up an 0:13:33.520 --> 0:13:35.640 awful lot and the things I don't think that we've 0:13:35.679 --> 0:13:39.840 seen that feed through all the way to prices yet. 0:13:40.480 --> 0:13:41.960 I want to ask your advice from whether you're looking 0:13:41.960 --> 0:13:43.600 at two year ago for five year But we'll leave 0:13:43.640 --> 0:13:45.400 that for maybe the end of the conversation. Let's bringing 0:13:45.480 --> 0:13:50.880 Dimian at this point. Dimian when it comes to volumes, 0:13:51.240 --> 0:13:54.679 because there's been some element resilience in terms of the 0:13:54.760 --> 0:13:58.839 housing market. What's what's happening with with volumes given this 0:13:58.920 --> 0:13:59.760 higher rates environment. 0:14:00.080 --> 0:14:02.280 Yes, I think you know the doomsday predictions of big 0:14:02.320 --> 0:14:05.280 house price falls. I think it's playing out relatively slowly. 0:14:05.400 --> 0:14:08.480 But in transactions, you're seeing them a lot lower than 0:14:08.480 --> 0:14:11.319 they were this time last year. One of John's recent 0:14:11.360 --> 0:14:14.520 newsletters pointed me to the Ricks survey where you see 0:14:14.559 --> 0:14:17.120 the view of estate agents and surveyors and they're pretty 0:14:17.160 --> 0:14:17.560 down beat. 0:14:17.559 --> 0:14:18.280 It's pretty brutal. 0:14:18.320 --> 0:14:21.600 For real, it's pretty brutal, and that normally points to 0:14:21.720 --> 0:14:25.120 dip in transactions because they're not getting their commission. So 0:14:25.200 --> 0:14:27.440 I think transactions are down. And what's interesting is that's 0:14:27.480 --> 0:14:30.000 even happening at the top end of the market. In 0:14:30.080 --> 0:14:33.640 Prime London, we're down about twenty five percent transaction wise 0:14:33.640 --> 0:14:35.960 in July compared to the same month a year ago. 0:14:36.360 --> 0:14:38.200 And when you see that sort of distress happening at 0:14:38.200 --> 0:14:39.720 the top end of the market, it makes you think, 0:14:39.760 --> 0:14:42.200 what's happening a bit lower down? 0:14:42.200 --> 0:14:44.880 Bloomberg Economics expect it a peach to traft move of 0:14:44.960 --> 0:14:49.080 ten percent in house prices. I mean, how far does 0:14:49.120 --> 0:14:51.240 it look like we're into that and should people be 0:14:51.320 --> 0:14:53.320 holding on for this help that prices are going to 0:14:53.360 --> 0:14:54.000 drop much further? 0:14:54.840 --> 0:14:57.160 Well, I mean, okay, more so far we're doing four 0:14:57.160 --> 0:15:02.480 percent a contination weed from August twenty twenty to. The 0:15:02.560 --> 0:15:04.160 first thing I would say there is look, if you're 0:15:04.160 --> 0:15:06.360 buying a house, forget about trying to time the market, 0:15:06.520 --> 0:15:11.480 because it really is a waste of your energy. There 0:15:11.480 --> 0:15:14.200 are so many other factors that matter for buying a house, 0:15:14.240 --> 0:15:17.280 and it's mostly your personal circumstances. And if you're an 0:15:17.280 --> 0:15:20.840 investor that's a slightly different issue. But you know you 0:15:20.920 --> 0:15:23.240 need somewhere to live, and if you've decided this is 0:15:23.320 --> 0:15:25.000 right for you. The thing you focus on is making 0:15:25.000 --> 0:15:28.040 sure you've got somewhere that a you can afford if 0:15:28.080 --> 0:15:30.400 things go a bit pair shaped with the interest rates, 0:15:31.160 --> 0:15:33.680 and be that you are happy to live in for 0:15:33.720 --> 0:15:37.000 a prolonged period of time in case, you know, something 0:15:37.080 --> 0:15:39.360 happens and you end up stuck there. 0:15:40.120 --> 0:15:40.320 You know. 0:15:40.400 --> 0:15:42.280 So that's that's basically what you should be thinking about, 0:15:42.320 --> 0:15:44.640 rather than worrying about whether prices are going to go 0:15:44.640 --> 0:15:47.760 down by another five percent from here or not. That said, 0:15:48.200 --> 0:15:52.920 you know, I struggle to see how prices won't fall 0:15:53.000 --> 0:15:56.600 further because you know, obviously there is that massive issue, 0:15:56.640 --> 0:15:59.000 which is the interest rates have gone up so much 0:15:59.600 --> 0:16:02.600 that people can no longer borrow I mean, and then 0:16:03.160 --> 0:16:09.720 and interest rates go up, buyers cannot borrow as much money, 0:16:10.000 --> 0:16:13.640 and therefore they cannot afford the prices that sellers wanted 0:16:13.920 --> 0:16:16.880 a year ago or six months ago. So the sellers 0:16:16.920 --> 0:16:18.720 have to give way or they have to sit in 0:16:18.760 --> 0:16:21.600 their houses, which is, as Damien said, one reason why 0:16:21.640 --> 0:16:24.680 transactions have kind of fallen off at Cliff because you know, 0:16:24.720 --> 0:16:28.000 does a stalemate going on. But the longer that continues, 0:16:28.240 --> 0:16:30.080 the longer that you know, the more I think that 0:16:30.120 --> 0:16:32.840 would have to resolve in favor of the buyers rather 0:16:32.880 --> 0:16:35.440 than the sellers, because you know, if you want to 0:16:35.440 --> 0:16:36.920 move then at some point you're going to have to 0:16:36.960 --> 0:16:38.920 accept that. Well, people just don't have to buy in 0:16:38.920 --> 0:16:39.640 put it anymore. 0:16:40.520 --> 0:16:43.280 What is happening diamon on the mortgage market then just 0:16:43.320 --> 0:16:44.680 splash that out for us, we saw a lot of 0:16:44.680 --> 0:16:47.880 big banks pulling deals recently that that grabbed a lot 0:16:47.880 --> 0:16:49.880 of headlines because rates were just going up, markets were 0:16:49.920 --> 0:16:53.040 repricing on higher rates from the boa is. That started 0:16:53.040 --> 0:16:54.800 to settle a little bit. What are you looking at 0:16:54.800 --> 0:16:56.720 in terms of kind of two year, five year I 0:16:56.720 --> 0:16:59.320 mean John touched on this, but but unpacking a little 0:16:59.360 --> 0:16:59.880 bit more for us. 0:17:00.160 --> 0:17:02.000 Yeah, So we've seen some headlines in the last couple 0:17:02.040 --> 0:17:05.440 of weeks of lenders sort of slowly putting rates down again. 0:17:05.680 --> 0:17:08.880 And when I say Dan, we're still essentially touching fifteen 0:17:08.920 --> 0:17:11.080 year highs when it comes to the two year and 0:17:11.119 --> 0:17:14.600 five year fixed. Now there's tens of thousands of remortgages 0:17:14.680 --> 0:17:18.000 waiting to happen in September. Now those people have been 0:17:18.000 --> 0:17:20.719 able to secure those new deals for the last six months, 0:17:21.400 --> 0:17:23.960 but it sort of spells a period of pain coming 0:17:24.040 --> 0:17:25.639 up at the end of the year when people are 0:17:25.680 --> 0:17:28.400 coming off those fixed deals which would have been locked 0:17:28.400 --> 0:17:31.439 in at much lower rates, and are now sort of 0:17:32.080 --> 0:17:35.880 looking at mortgage rates of up to almost six percent 0:17:36.400 --> 0:17:38.439 in terms of the average. So there's going to be 0:17:38.600 --> 0:17:40.560 a lot of pain to happen towards the end of 0:17:40.560 --> 0:17:42.720 this year. And despite the fact that lenders are slowly 0:17:42.760 --> 0:17:45.800 cutting rates, we're still so much higher than we saw 0:17:45.920 --> 0:17:48.239 during that era of cheap money. So there's a lot 0:17:48.240 --> 0:17:49.800 of pain to come for these remortgages. 0:17:50.160 --> 0:17:53.640 And the bitter let mortgages are a particular pinch point 0:17:53.680 --> 0:17:55.560 that we've seen, and that's come out in some of 0:17:55.600 --> 0:17:58.800 the recent data as well of how many landlords are 0:17:58.800 --> 0:18:01.040 being forced to sell up because they can't afford the 0:18:01.040 --> 0:18:03.680 increase in interest rates as well. What's the impact on 0:18:03.720 --> 0:18:05.400 the rental markets. 0:18:05.480 --> 0:18:07.960 Well, I mean, renters are at the sharp end of 0:18:07.560 --> 0:18:09.960 the problems in the property market at the moment. There's 0:18:09.960 --> 0:18:12.040 a lot of pressure on landlord finances. A lot of 0:18:12.080 --> 0:18:15.000 them are on interest only mortgages, or the majority are, 0:18:15.800 --> 0:18:18.680 which means that every time there's a BOE hike, they're 0:18:18.720 --> 0:18:20.639 going to feel the pain more than those sort of 0:18:20.720 --> 0:18:24.080 standard mortgage holders who are on fixed deals and the 0:18:24.119 --> 0:18:28.600 only option really is to hike renters monthly bills or 0:18:28.680 --> 0:18:31.760 sell up. We've seen an uptick in landlords selling their 0:18:31.800 --> 0:18:35.880 properties over the last six months, and that's quite probably 0:18:35.880 --> 0:18:38.080 in response to these high mortgage rates and the fact 0:18:38.119 --> 0:18:41.480 that you know, they see those BOE hikes quite intensely 0:18:42.080 --> 0:18:45.520 when they happen. But for renters, you know, they're seeing 0:18:45.560 --> 0:18:47.479 their monthly bills go up a lot. And these are 0:18:47.480 --> 0:18:49.320 the people that want to get on the housing ladder. 0:18:50.119 --> 0:18:53.080 I'm a rent myself and due for a rent hike 0:18:53.119 --> 0:18:55.280 at the end of this month. So when you start 0:18:55.320 --> 0:18:57.919 to consider how much that takes the opportunity of getting 0:18:57.960 --> 0:19:01.000 onto the housing ladder away from you, it's a pretty 0:19:01.040 --> 0:19:03.280 stark reality for those renters. Yeah. 0:19:03.320 --> 0:19:06.159 Indeed, John on by to let is buy to let 0:19:06.240 --> 0:19:07.160 still a good investment? 0:19:07.640 --> 0:19:10.639 No, I mean, if you're thinking this that no, No, 0:19:11.960 --> 0:19:14.720 I mean, I imagine what's happening and this is purely conjectured, 0:19:14.760 --> 0:19:17.160 but imagine what's happening with these buy to let landlords 0:19:17.160 --> 0:19:19.560 who have been forced to sail up, as the one 0:19:19.600 --> 0:19:21.920 of the problems is that they'll not then sail into 0:19:21.960 --> 0:19:25.440 FoST tame buyers. They had actually twice sealing other cash rich, 0:19:25.640 --> 0:19:27.080 more professional landlords. 0:19:27.200 --> 0:19:30.800 That was Bloomberg's John Steppeck, author of the Money Distilled newsletter, 0:19:30.840 --> 0:19:34.440 and Damian Shepard are residential real estate reporter. The one 0:19:34.440 --> 0:19:36.159 sector of the market we didn't get a chance to 0:19:36.160 --> 0:19:38.920 discuss with them was luxury homes. Damien has been reporting 0:19:39.119 --> 0:19:41.760 about the discounts that sellers are having to offer on 0:19:41.840 --> 0:19:45.479 houses worth millions of pounds as they try to attract buyers. 0:19:45.520 --> 0:19:48.439 So perhaps an opportunity in London's market for those with 0:19:48.520 --> 0:19:51.480 a few million to spare. I'm Stephen Carroll in London. 0:19:51.520 --> 0:19:53.920 You can catch us every weekday morning here for Bloomberg 0:19:54.000 --> 0:19:56.879 Daybreak Europe, beginning at six am in London and at 0:19:56.960 --> 0:19:58.280 one am on Wall Street. 0:19:58.520 --> 0:20:01.119 Tom. Thank you, Stephen, and coming up on Bloomberg day 0:20:01.119 --> 0:20:04.080 Break weekend to look at what's happening in China's economy. 0:20:04.400 --> 0:20:06.440 I'm Tom Busby and this is. 0:20:06.400 --> 0:20:20.760