Interesting article on falling house prices and the 'wealth effect'

moanymoany

Pobby wrote: »

Really those ads should have gone down the lines of `ere mate, done alright on ya `ouse price ain`t cha. Fancy a new motor, no probs. `ave 20 big ones and get wot ya fancy. Can always have ya `ouse off ya if it all goes belly up. lubberly, jubberly.

I often said to my wife regarding the amount of new cars around and how much that had to be down to mewing. My wife called `` riding around in your equity``. At the time I was drawing from my business about £50k a year and was driving an eight year old car.

I used to work for a wealthy guy, retired airline pilot and I managed a business for him. He always drove old bangers saying that cars are a waste of money.

My eighteen year old nephew borrowed, with interest £24k for a car. Tells me a lot about lenders.

Dh brought me a book back from USA called 'The Millionnaire Next Door' well worth getting from the Library for a read.

The typical millionnaire in the States lives in a modest house, drives a modest second hand car or buys a 'solid' car and drives it for years, buy clothes on sales and generally live frugally.

Those who appear to live millionnaire lives are very often up to their ears in debt.

'Rich Dad, Poor Dad' says houses are not wealth gathering investments! Interesting.....

ps I know MEW means taking the equity out of your house by means of a loan, but what do the letters stand for please?

lynzpower

mortgage equity withdrawal

You also forget the people ( anecdotally I know of 2) who MEWed thier marriage.

ME & OH were encouraged to "stick the wedding on the mortgage" I said no chance Im selling before the crash, cue groom who practically laughed in my face and poured me another glass of champers. I expect that his wedding cost about 30k ( given where it was, price per head honeymoon etc) and they only have a 2 bed place in reading which I personally believed was overramped but there you are. that 30k is probably about 1/4 of thier homes worth :eek:

neverdespairgirl

£30k on a wedding?!

lynzpower

Easily done NDG- if you go for

Ascot Wedding Package

DRINKS

• Choice of 2 arrival drinks consisting of either Rosé Champagne ,Dressed Pimms or Kir Royale, Canapés (4 per person),
• A glass of Vintage Champagne with speeches

DINING

• Five course wedding breakfast served with coffee and petit fours<
• Half bottle of wine per adult chosen by the Bride and Groom from the sommeliers list
• Half bottle of Hildon mineral water per person (still or sparkling)
• Dinner for two in Strok’s restaurant to sample the menu and wines
• Dinner for two in Strok’s restaurant and complimentary 1 night stay to celebrate your first anniversary
• Evening buffet with coffee and petit fours for your daytime guests

SUPPORT

• Wedding breakfast room hire
• Full support of our dedicated wedding team to assist with all arrangements
• Wedding night accommodation for the Bride and Groom in one of the hotel suites with bottle of House Champagne in room
• Fresh flowers for each table including bridal bouquet and grooms buttonhole
• Red carpet, silver cake stand and knife
• Complimentary gift for Bride and Groom to commemorate your day
• Choice of complimentary stationery and wedding favours
• Evening function room hire and use of In-house DJ
• White chair covers with choice of organza bows
• The full services of a qualified toastmaster, throughout the proceedings

£185.00- per person
£29.50 - per child under 12
This package is available throughout the year. During Saturdays between April to October and during December, a minimum of 65 guests are required on either the Ascot or Wren’s Wedding Packages.Children under 5 are free of charge. Soft drinks included with children’s meal. Please note when booking your registrar the latest sit-down time is 5pm for your wedding breakfast.

You have 100 guests Add in the clothing/ cars/ rings/ flowers/ brides dress was a few K/ honeymoon/ hair * makeup/ bridesmaid dresses/ favours/present for brides mum and all that jazz etc etc . Also dont suppose this figure includes VAT, or the extra wine thats undoubtably needed. Im staggered to see corkage alone costing in some venues ( weve discarded them dont worry at 18 quid a cork, I mean COME ON!!)

Some people believe "well ill only do it once" even tho groom in question had spent an inordinate amount of money on his 1st wedding which was WAY plusher :eek:

lostinrates

lynzpower wrote: »

Easily done NDG- if you go for

You have 100 guests Add in the clothing/ cars/ rings/ flowers/ brides dress was a few K/ honeymoon/ hair * makeup/ bridesmaid dresses/ favours/present for brides mum and all that jazz etc etc . Also dont suppose this figure includes VAT, or the extra wine thats undoubtably needed. Im staggered to see corkage alone costing in some venues ( weve discarded them dont worry at 18 quid a cork, I mean COME ON!!)

Some people believe "well ill only do it once" even tho groom in question had spent an inordinate amount of money on his 1st wedding which was WAY plusher :eek:

Yep.....very easily done. Our families were planning a huge wedding-disgustingly huge-....and it was meaning my father was blaming his postponing retirement on our wedding. In laws first guest list had over 250 people on it ...(DH sent it right back..he barely knew most of the people on it, but it caused lots of grumblings) Not fair on him, too much pressure, lots of other reasons, we got married for less than £100 with no family there and paid for it our selves. Really special day.

neverdespairgirl

lynzpower wrote: »

Easily done NDG- if you go for

It just seems ridiculous to me.

WTF?_2

Generali wrote: »

The Wealth Effect isn't really about MEWing though (although it is a related phenomenon). It's about people spending a larger proportion of their income than they otherwise would because they feel rich.

For instance, imagine a 55 year old man. He has a private pension plan and a small house paid off in full. Normally he puts aside 10% of his income each month for his retirement. That year he gets his pension statement and sees that his pension pot has shot up in value. Instead of putting 10% aside he spends the cash on a new cat litter tray and a weekend away with the Missus at the Luton Travelodge.

It's a bit of a controversial theory because instictively it just doesn't sound right and it's pretty hard to prove empirically. Asset values tend to go up when times are good so is it a booming economy or rising asset values that cause the extra spending.

I'm inclined to think that the booming economy causes rising asset values and also extra spending. I suppose this time around you could argue that MEW has meant that people could (and indeed have) get at the increased wealth they have in a way they couldn't before. I suspect that it's more a function of the very long boom we've had that people felt super secure and so super inclined to spend. Banks were more than happy to help with the whole process.

Don't forget that the article isn't meant to be a balanced piece on the WE but a review of a particular scientific (ok ok, this is economics, pseudo-scientific) paper. The most interesting bit for me is the last paragraph (from a publication that has been very skeptical about rising house prices for many years):

I think people generally tend to fall into the categories of "Spend it" or "Save it".

What 'Mortgage Equity Withdrawal' (and lax credit generally) did was to allow many of the "Spend it" folks to spend money they didn't actually have.

Dithering_Dad

!!!!!!? wrote: »

What 'Mortgage Equity Withdrawal' (and lax credit generally) did was to allow many of the "Spend it" folks to spend money they didn't actually have.

Idiots, they should have taken the money and used it to pay down their mortgages! A few MEW sessions and they'd be mortgage free.

One born every minute! :rolleyes:

WTF?_2

moanymoany wrote: »

Dh brought me a book back from USA called 'The Millionnaire Next Door' well worth getting from the Library for a read.

The typical millionnaire in the States lives in a modest house, drives a modest second hand car or buys a 'solid' car and drives it for years, buy clothes on sales and generally live frugally.

Those who appear to live millionnaire lives are very often up to their ears in debt.

'Rich Dad, Poor Dad' says houses are not wealth gathering investments! Interesting.....

Well, assuming they didn't inherit or win the money then a person with enough smarts and determination to have a million 'cash in the bank' almost certainly isn't going to be the sort to blow it on useless fripperies.

It's nearly always the flashiest, richest-looking people who are funding their lifestyles on debt. Seems to be a need to be seen as successful (and conspicuous wealth denotes success to them) and it's part and parcel of our society's awful 'cult of celebrity' I reckon.

Pobby

Sorry brodders, forgot you were in the motor trade. Seriously, how are you finding sales at the moment. Most of my customers are really struggling right now. Hmmm, long gone are the days of £50k a year. Goodness knows what it will be this year. Glad Mrs. P is working right now.

Lynz, interested in what your thoughts are about Reading prices. Born and bred in Berkshire here and when i go to Reading I am gob smacked at the prices. Areas that you really would have thoght twice about 25 years ago are ferching stupid amounts of money. It`s violent, chavvy, congested, certainly not the place of my youth.