Prices to bounce back ... in 2023

Chris2685

!!!!!!? wrote: »

Buying makes sense in the longer term but only if you buy at the right time. I intend to buy in once prices are close to bottom.

Buying in (and borrowing to do it) at bubble prices is madness and very detrimental to your state of mind if not actual financial wellbeing, as people are about to find out for themselves as the recession bites.

It probably does make sense if you're planning on staying somewhere for a long time and selling it when you retire or pass it onto your children, but if prices did rise at inflation then I can't see the point in getting a huge mortgage really, a 25 year mortgage pretty much gurantees you pay back nearly triple in real terms over the length of the mortgage...

I think there are many factors though, and would still say buying is best for the long term for most people (including myself), but as you say - not right now!

Max_Headroom_3

boyse7en wrote: »

In contrast...

David Miles, chief UK economist at Morgan Stanley, said that if mortgage rates stayed at present levels, an educated guess from sophisticated economic estimates was that house prices would fall by another 5 to 10 per cent and wipe a further £17,000 off the value of an average home before the market bottomed out next year

Link to article

So choose which leading academic you listen to with care, they can't all be right.

What you do is you use good old fashioned common sense.

You look at what house prices were least year, the mess the economy is in (largely as a result of this) this year, you make an educated guess as to where house prices should be relative to income, and you make an educated forcast as to what you feel is likely to happen with wages over the next few years.

All of which will steer you toward which is the most likely scenario.

Oh, and it isn't the one that suggests house prices will suddenly stop dropping like stones and miraculously somehow recover next year with no clue as to where the money is likely to come from to allow that to happen.

Realy

carolt wrote: »

Maybe I'm missing your point here, realy? but the article was about nominal figures. Not inflated adjusted.

So anyone owing 100K on an interest only mortgage, as per your example and the article, would still owe 100K.

So better to sell now, if prices are going to fall substantially between now and 2023, if you think you're going to hit problems paying it at some point, or if you go below a certain LTV.

:rotfl: No it was not where does it say nominal values? (I take it you are not a maths or business studies teacher)
"By 2010 the price-to-earnings ratio would be much closer to a sustainable level - very close to the old-style mortgage multiples that lenders used," he said.
However, he also sees greater affordability, with the ratio of average house prices to average earnings declining as property prices fall, assuming that earnings rise at an average nominal rate of 5% a year.
sounds adjusted to me:rolleyes:
A lot of other HPC people have except those as an adjusted guess just not you. :rolleyes:

GDB2222

Realy wrote: »

Ah but a home owner looks as a house in nominal terms not inflation adjusted as inflation does not affect their mortgage.
So they would look for the nominal return of price not inflation adjusted.
If it was adjusted equivalent of 2007 a home owner would see an increase in the value of the house based on the article by 2023.

Say a house is worth £100K in 07
To be same in 2023 it as to be £150K say

Even on an interest only mortgage and no repayment plan the owner still owes £100K and has £50K equity in the house.

I don't think that anyone in their right mind is predicting that prices will return to 2007 levels in real terms. It was a huge bubble and nobody is going to predcit that happening again. It may do so, because of the herd mentality, but nobody would predict it as a likelihood.

StevieJ

What about the increasing rent you would have to pay if you weren't paying the interest.?

carolt

Realy wrote: »

:rotfl: No it was not where does it say nominal values? (I take it you are not a maths or business studies teacher)
"By 2010 the price-to-earnings ratio would be much closer to a sustainable level - very close to the old-style mortgage multiples that lenders used," he said.
However, he also sees greater affordability, with the ratio of average house prices to average earnings declining as property prices fall, assuming that earnings rise at an average nominal rate of 5% a year.
sounds adjusted to me:rolleyes:
A lot of other HPC people have except those as an adjusted guess just not you. :rolleyes:

No, I'm not a maths teacher, but I'm guessing you aren't either.

I can read though, and there is nothing in that article that suggests the falls are real rather than nominal:

"Using futures contracts based on the Halifax house price index, he has calculated that, in 2010, the average will be 40% lower than the peak of £199,600 in August last year - about £120,000. "Worse still, according to these prices, the Halifax index will not recover its August 2007 level until 2023," he said."

How do you get that figure of 120K to be real rather than nominal?

120K is 120K. If he'd just said "fall by 40%", you might have an argument. You clearly don't.

So what do you do, by the way, realy, that makes you such an "expert" in basic maths/economics/reading?

Realy

GDB2222 wrote: »

I don't think that anyone in their right mind is predicting that prices will return to 2007 levels in real terms. It was a huge bubble and nobody is going to predcit that happening again. It may do so, because of the herd mentality, but nobody would predict it as a likelihood.

No you are failing to see the differance now to real terms and adjusted

Basic Example

Say a house was £150K in 2007 say 6x average salary

Adjusted is the same money equivalent in 15 years so say £150K is worth £200k in 2023

But in real terms a house price would be 6X earning again they say what 5% wage inflation per year.
The average wage would be £51K.
So real terms the house would be £306K if 6X earnings

But as you see adjusted the house is £200K earnings is £51k so just under 4X wages.

Realy

carolt wrote: »

No, I'm not a maths teacher, but I'm guessing you aren't either.

I can read though, and there is nothing in that article that suggests the falls are real rather than nominal:

"Using futures contracts based on the Halifax house price index, he has calculated that, in 2010, the average will be 40% lower than the peak of £199,600 in August last year - about £120,000. "Worse still, according to these prices, the Halifax index will not recover its August 2007 level until 2023," he said."

How do you get that figure of 120K to be real rather than nominal?

120K is 120K. If he'd just said "fall by 40%", you might have an argument.
You clearly dn't.

Sorry carol it clearly states it take in to account wage inflation on affordability so the figures are clearly adjusted. The fall is nominal but they are saying by 2023 it will be back to the equivalent of 2007 prices (adjusted)

I hope you are just pretending to be stupid on this as it is in black and white they are adjusting for inflation.


If you did accounts you would know you can not allow for inflation then not use it on the rest of the calculation.;)
No wonder kids dont know about economics anymore.:rolleyes:

carolt

As GDB2222 states, if house prices were allowed to return to real 2007 prices, we'd be facing the same financial Armageddon all over again. The article is clearly claiming there will be a return to nominal 2007 prices by 2023, following a sharp drop.

And who says wages are going to rise at 5% per annum in a recession? Look at today's unemployment figures for a clue.

So what do you do, realy, that makes you such an "expert"? I'd really love to know.

StevieJ

carolt wrote: »

As GDB2222 states, if house prices were allowed to return to real 2007 prices, we'd be facing the same financial Armageddon all over again. The article is clearly claiming there will be a return to nominal 2007 prices by 2023, following a sharp drop.

And who says wages are going to rise at 5% per annum in a recession? Look at today's unemployment figures for a clue.

So what do you do, realy, that makes you such an "expert"? I'd really love to know.

The article says that, you should read it.