House prices falling by c. 2% a month - so falls of 50% over 2 years quite feasible

carolt

Discuss. This occurred to me last night. If monthly falls are approx. 2%, then annualised they're about 25%, and over 2 years, 50%+.

Or am I missing something?

Obviously, there's no guarantee the 2% rate will continue but over the last few months, near enough 2% seems to have become expected. And no signs of it slowing.

So what am I missing? Or are 50% falls on their way by the end of next year?

sympatex

my god you must be fun around the dinner table. Also if house prices fall at 2% for 4years will houses be free?

You're missing a great deal and it's too much to post.

elona

Will I have to pay someone to buy our house?:eek:

sympatex

elona if it fell for 8years, you'd actually owe someone your house value in 2007 to take it off your hands. jeez better sell now.

Imp

If they fell 2% a month for 24 months they would have fallen 38.42% in total. If they to fall at the same rate for a further 24 months they would have fallen by 62.08% in total.

girleight@

I'm not sure your maths is right there. I make it 39%?

WTF?_2

carolt wrote: »

Discuss. This occurred to me last night. If monthly falls are approx. 2%, then annualised they're about 25%, and over 2 years, 50%+.

Or am I missing something?

Obviously, there's no guarantee the 2% rate will continue but over the last few months, near enough 2% seems to have become expected. And no signs of it slowing.

So what am I missing? Or are 50% falls on their way by the end of next year?

They won't continue to fall at this rate indefinitely - though I'd say they'll keep doing so for another year before slowing and hitting bottom in late 2010.

My guess, 35% down in nominal terms (or 2003 prices, whichever works out lower where you are).

Incidentally, Bloomberg are reporting 35% falls as likely:

http://www.bloomberg.com/apps/news?pid=20601102&sid=a3113Z8mJsn4&refer=uk


Sept. 5 (Bloomberg) -- U.K. house prices will drop by as much as 35 percent from their peak last year, leaving as many as 1.3 million households with mortgages worth more than their property, analysts at Sanford C. Bernstein & Co. said.
The amount of properties in so-called negative equity will rise to about 18 percent of U.K. mortgages by value, and may trigger as much as 38 billion pounds ($67 billion) in losses for U.K. banks and customers, Bernstein analysts led by Bruno Paulson said in a note to clients today.

claireabelle_2

carolt wrote: »

Discuss. This occurred to me last night. If monthly falls are approx. 2%, then annualised they're about 25%, and over 2 years, 50%+.

Or am I missing something?

Obviously, there's no guarantee the 2% rate will continue but over the last few months, near enough 2% seems to have become expected. And no signs of it slowing.

So what am I missing? Or are 50% falls on their way by the end of next year?

What I find interesting is that people I talk to about it don't realise the % is a higher number on the way down, too! So a 2% decrease more than compensates a 2% increase because it's now on a bigger amount... on your original post, I don't see much sign of slowing either.

tomstickland

2% per month is really (0.98^24) over 2 years, giving 0.62, which is about 40% drop over 2 years.
2 x 24 giving approx 50% is a perfectly reasonable approximation for this sort of rough and ready analysis.

However, the market will change as the prices fall, so extrapolation is only of limited use.

tro127

I love the way you doom people spin things so you can see your 50% reductions, shame about your maths carolt!

Well done Imp for pointing out the problem!

carolt

Like I said - for discussion. Not quibbling - 40 or 50% - both'll suit me fine.

By the way, the reason I asked about a 2 year period is that obviously I don't see house prices falling to zero or minus figures. Though if sympatex wants to give me his house, I won't say no.....