Fool: Who Can You Trust On House Prices?

dudleyboy

Here's an interesting article from Fool.co.uk :

Who Can You Trust On House Prices?

http://www.fool.co.uk/news/property-home/2008/09/11/who-can-you-trust-on-house-prices.aspx

I’ve long been of the opinion that you should treat the findings of all the various house price indices with the utmost caution. As has been highlighted on our property discussion boards recently, there is now quite a wide divergence between the figures they are showing for annual falls.

Those from the Halifax and Nationwide, the country’s two biggest mortgage lenders, are showing the largest falls of over 10% but others are showing only a small decline or are basically flat.
...
Part of the reason for the difference could be the biases inherent in the indices. The Nationwide and Halifax indices take information from their own mortgage approvals and now that the Halifax in particular is being more careful about its lending and taking a smaller percentage of the market than usual, this could be distorting its figures. Additionally, all the other indices include transactions which don’t involve mortgages, which normally represent somewhere between a quarter and a fifth of all deals.
...
In time these differences should iron themselves out and in a few months we’ll be able to compare the indices based on completions with the current leading indicators to get a better idea of what’s happening. Of course, if you’re looking to buy or sell at the moment that’s not much comfort. Personally, I suspect it’s the Halifax and, to a lesser extent, the Nationwide indices that are ones out of kilter but that’s little more than a barely educated guess.

What do you guys think?

JanCee

You just use the information that best supports your own point of view and then insist vigorously that all the other statistics are fundamentally flawed. Well thats what the majority of posters on here do anyway.

Pobby

I just look at what is actually happening in the market.

Cannon_Fodder

Which index do valuers use?

Presumably mortgage companies considering a re-valuation for Mortgage Equity Withdrawal purposes, in the past, would have taken figures based on the most accurate index?

It can't be that all the MEWing has been done on inaccurate figures, surely?

:rolleyes:


Didn't participate in forum pre-HPC, so did the indices get ripped apart by HPCers, trying to talk the market down? If so, that didn't work, coz there was 5 years of crash predictions, while it still went up.

Its annoying that HPC-deniers try to use inaccuracies in the indices to talk the market up. That probably won't work either! - the market will go where it has to.

If the indices are inaccurate, then they've probably always been inaccurate, what was good enough for the way up, should be accepted on the way down.

Dithering_Dad

Cannon_Fodder wrote: »

Which index do valuers use?

Presumably mortgage companies considering a re-valuation for Mortgage Equity Withdrawal purposes, in the past, would have taken figures based on the most accurate index?

It can't be that all the MEWing has been done on inaccurate figures, surely?

There seems to be a lot of people on this forum that go on about the 'huge levels of MEWing' and start slavering at the thought of all those 'idiots funding a lifestyle they can't afford' getting into negative equity, but is there really any way to calculate how much of this type of MEWing has occured?

I ask because the only person in my chain of friends and work colleague that I know has MEWed money out of his house is me! I did it to fund a ground floor extension. We worked out that the cost of moving (stamp duty, estate agents, solicitors, removal costs, redecorating new house to our taste, etc. etc.) would go a long way towards the cost of building an extension. Plus the extension added to the value of the house so the net effect was a higher mortgage but a higher house value, so the proportion owned by me and the bank remained about the same.

Is this another case of a small group of people of like minded people in a small financial forum talking each other into believing something that isn't strictly true? Certainly if anyone pushes an alternate viewpoint they're at best ignored because 'they're biased' or at worst they're pilloried and hounded off the forum - thus decreasing the number of alternate views and obviously increasing the number of like-minded people.

In a way it's comparable with Hitler in WWII, where as he got increasingly paranoid about other people's motives, his group of advisors declined to the point that only the sycophants remained, agreeing with everything he said. In the absence of alternate opinions he started believing in his own propaganda. Forexample, by the end of the war he had convinced himself that allies were going to join with Germany and fight the USSR.

sarkin

Dithering Dad dont want to burst your bubble but your friends are not telling the truth, I have a job that lets me know exactly what people earn and spend. Everyone is at it they just dont tell the Jones.

Also to back this up in the last 10 years debt level has risen to 1.4 billion from 500 million the money has gone somewhere.

Dithering_Dad

sarkin wrote: »

Dithering Dad dont want to burst your bubble but your friends are not telling the truth, I have a job that lets me know exactly what people earn and spend. Everyone is at it they just dont tell the Jones.

Also to back this up in the last 10 years debt level has risen to 1.4 billion from 500 million the money has gone somewhere.

I didn't realise you knew my friends to be able to state categorically that they're liars. The thing is that I know generally what my mates are earning and none of them seems to be living beyond his/her income. If anything they tend to be quite frugal and are investing/saving heavily. 'Birds of a feather flock together' I suppose. Perhaps if I was a spendthrift and interested in 'image' then I guess I'd have friends who were of a similar mind?

You have a job where all you see are people coming in to arrange mortgages, so perhaps your viewpoint would be skewed? If you were a financial advisor maybe you'd see more of a cross section, including people who are investing/saving money as well as those borrowing it? Might it give you a wider picture?

I remember someone on here posted statistics on home ownership and I was amazed by the large percentage of people who own their own home outright. I'd imagine that a lot of debt is in the hands of a small proportion of people. I regularly see people on the DFW with more than 100k of secured and unsecured debt.

Cannon_Fodder

sarkin - I think you meant 1.4 trillion, from 500 billion...

DD - fair point. Didn't mean this to be a dig AT MEW'ers. More concerned that Banks&BSocs haven't done their maths in handing out the money...using the wrong index could showup now prices are dropping. Better maths might have put less MEWers in to negative equity so quickly.

re MEW stats, found the links below;

http://www.bankofengland.co.uk/statistics/mew/2005.htm

http://www.bankofengland.co.uk/statistics/mew/current/index.htm

http://www.bankofengland.co.uk/statistics/hew/current/index.htm


MEW in 2005 around £36 billion.
MEW in 2006 around £49 billion.
HEW (presumably named change to confuse the innocent) around £42 billion.

A good chunk of the move to above a trillion...

GDB2222

My former secretary used to MEW every year. This wasn't to fund extensions or anything, just to fund her lifestyle.

ad44downey

sarkin wrote: »

Dithering Dad dont want to burst your bubble but your friends are not telling the truth, I have a job that lets me know exactly what people earn and spend. Everyone is at it they just dont tell the Jones.

.

Very true. It's a dark secret to which people are ashamed to admit. i.e. they can't afford to fund their lifestyle and have to go cap in hand to the bank begging for more money.

sarkin

Do you remeber the Northern Rock queues not many under 55 from what I could see, but not wanting to fallout with you I except that all your friends are frugal and save regularly.