Rationalist logic = poor predictions. Why the uber bears will be wrong.

Conrad

Fistly, by uber-bear, I mean those that imagine prices will tumble more than 40%.

Economics, the dismal science, nearly always fails to spot the trend.
I posit that economic predictions tend to be poor because they fail to take account of the Human spirit and imagination.
Economists try and overlay one size fits all models onto a dynamic complex Human landscape.

The current EXTREME downside predictions I argue are far too clumsy, and cumbersome.
Such predictions fail to take account of the following;

1) Incredibly low rates for millions of existing home owners (I've never know people with £100k mortgages paying £60 pm as HSBC and C & G customers are)

2) Relative yields of cash compared to B2L, make property very attractive

3) People aren't nearly as sophisticated as pessimistic types. They just buy for the long term, end of

4) British exports are very much cheaper now

5) The Human spirit and imagination - as some of us wallow in doom, many right now are adapting and planning to take advantage

6) The vast majority of people are fairly safe. There are parents to help. In the end 95%+ will not be repossessed.

7) Bankcruptcy is far easier and carries little stigma.

8) Building new homes has slowed.


Whilst economists wallow in cold detached stats, they take no account of the above items, no account of the Human spirit. They are just blind blunt instruments.

Truth rarely lies in the extremes.
The middle way is bound to be the most likely.

My prediction then is for average falls of around 25%.:T

SGE1

I would tend to agree.

"We need more behavioural economics!!!", as my ancient lecturer used to scream...

Lotus-eater

That is so cool being called a uber bear. What are you? I'm an Uber Bear!


Back to topic, every year that house prices aren't rising, they are falling with inflation. My prediction is for falls of over 30% Thats pretty easy to say tbh, we've had falls of around 20% last year, in truth it was more than that I would guess.
Add on inflation and we're already tapping at the door of 30%

40% average is not much further and I can see its a probability.

Conrad

I've never met met a Man in the street that factors inflation in.
I've found a few newbuilds and the odd repo with falls over 40%. The rest of the market seems to have fallen around 15%.

ad9898_3

Conrad wrote: »

Fistly, by uber-bear, I mean those that imagine prices will tumble more than 40%.

Economics, the dismal science, nearly always fails to spot the trend.
I posit that economic predictions tend to be poor because they fail to take account of the Human spirit and imagination.
Economists try and overlay one size fits all models onto a dynamic complex Human landscape.

The current EXTREME downside predictions I argue are far too clumsy, and cumbersome.
Such predictions fail to take account of the following;

1) Incredibly low rates for millions of existing home owners (I've never know people with £100k mortgages paying £60 pm as HSBC and C & G customers are)

2) Relative yields of cash compared to B2L, make property very attractive

3) People aren't nearly as sophisticated as pessimistic types. They just buy for the long term, end of

4) British exports are very much cheaper now

5) The Human spirit and imagination - as some of us wallow in doom, many right now are adapting and planning to take advantage

6) The vast majority of people are fairly safe. There are parents to help. In the end 95%+ will not be repossessed.

7) Bankcruptcy is far easier and carries little stigma.

8) Building new homes has slowed.


Whilst economists wallow in cold detached stats, they take no account of the above items, no account of the Human spirit. They are just blind blunt instruments.

Truth rarely lies in the extremes.
The middle way is bound to be the most likely.

My prediction then is for average falls of around 25%.:T

I don't think 'uber bearish' is 40%, I think that's conservative. Lets take a look at your points

1. Incredibly low rates for existing borrowers is irrelevant, FTB'ers need low rates, which unless they have 40% deposit, they aren't getting

2. I would sooner keep my money in the bank than buy a BTL, it's way too risky with tenant defaults, voids and your capital investment disappearing at 2% a month.

3. Agree with this, however, this is dumb and the dumb will come unstuck, as they always do.

4. I thought we only exported lager louts, please enlighten me with our export industry.

5. If you are calling 'wallowing in doom' meaning saving for a decent deposit on a decently priced house instead of a over-inflated priced shoebox, then I'm happy to wallow.:D

6. Of course most people are safe, however 'fear' makes a large contribution to the way people think. As for parents helping, some will but not on a scale to make a difference.

7. Bankruptcy is easier for sure but, you could lose your job because of it and also you can forget buying a house for 6 years after, thats not going to help the current situation.

8. Building of new homes has slowed, but who cares, with 21 million homes in the UK, there is no shortage and never has been.

And lastly with 20% already gone, do you seriously think that another 5% is going to be it ???

Another 5% will be gone by April, then we have another 9 months of recession left at least and that's according to Brown.

In my mind 40% is a dead cert, being uber bearish is saying 60-80% down, which I would agree is unlikely.

dopester

All this coming from the man who 6 months ago was speeding towards buying a developers new-build on the strength of an EA saying he could immediately resell it for £10K+ profit. :rotfl:

Obviously it was only because you were "special" that the deal was on the table - but cold feet after it became clear such "bargains" would be available to near all, and nowhere near the bottom yet.

http://forums.moneysavingexpert.com/showthread.html?t=1284761&highlight=lost+deposit

Conrad wrote: »

The developer was selling them at £170 last year, £140 ish now (with scope down to £125 for people with large deposits) and eventually £87000 to me with cash, butttttttttt as an Maynard Keynes said (or was Adam Smith) I change my mind when the facts change.

The change in facts is that I found out today the developer is apparantly now really desperate so muting they will sell to people with a resaonable deposit for £95k (so Im thinking £90k).

In view of this Ive now offered £70k, which I think will be rejected.

I've never hid that fact that I'm at heart a bear in bulls clothing.
Finding very hard to committ, despite what Buffet says, mm:o

Conrad wrote: »

My prediction then is for average falls of around 25%.:T

:rolleyes:

PasturesNew

Conrad wrote: »

1) Incredibly low rates for millions of existing home owners (I've never know people with £100k mortgages paying £60 pm as HSBC and C & G customers are) - but limited ability to get a new mortgage, restricting new players.

2) Relative yields of cash compared to B2L, make property very attractive - until you factor in the amount an average house is losing per month (greater than the income from rent would bring)

3) People aren't nearly as sophisticated as pessimistic types. They just buy for the long term, end of - a few will leap in, others won't be able to due to limited availability of credit, or being over-stretched already

4) British exports are very much cheaper now - but this is a global problem so nobody is out there to buy those goods

5) The Human spirit and imagination - as some of us wallow in doom, many right now are adapting and planning to take advantage - a few can, the majority can't

6) The vast majority of people are fairly safe. There are parents to help. In the end 95%+ will not be repossessed. - it's the parents in trouble, they were all 'doing it for the children'

7) Bankcruptcy is far easier and carries little stigma. - most people don't set out to fail, and they'd be risking what they DO have already.

8) Building new homes has slowed. - there is still a glut on the market and being rented by accidental landlords and being lived in by people who are waiting to put it on the market once things move


...

My prediction then is for average falls of around 25%.:T

Good of you to stick your neck out and put a figure to it. We'll come back in 5 years and see.

carolt

Who can say?

Good attempt to stir up discussion.

Don't think 40% is very 'uber bear' though. As far as I'm aware, it's quite moderate. Lots of banks/EA's/consutancies etc all saying that or not far off it.

And if they think that, who am I - or you - to quibble?

itsallagame_2

Their laying cheese in the traps atm, low interest rates, affordability,

all falling into place to try to get us back to 2007 levels, then what?

I’m not sure peeps are ready to take the bait this quick,

Uber cautious more like.
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Conrad

ad9898 wrote: »

I don't think 'uber bearish' is 40%, I think that's conservative. Lets take a look at your points

1. Incredibly low rates for existing borrowers is irrelevant, FTB'ers need low rates, which unless they have 40% deposit, they aren't getting

2. I would sooner keep my money in the bank than buy a BTL, it's way too risky with tenant defaults, voids and your capital investment disappearing at 2% a month.

3. Agree with this, however, this is dumb and the dumb will come unstuck, as they always do.

4. I thought we only exported lager louts, please enlighten me with our export industry.

5. If you are calling 'wallowing in doom' meaning saving for a decent deposit on a decently priced house instead of a over-inflated priced shoebox, then I'm happy to wallow.:D

6. Of course most people are safe, however 'fear' makes a large contribution to the way people think. As for parents helping, some will but not on a scale to make a difference.

7. Bankruptcy is easier for sure but, you could lose your job because of it and also you can forget buying a house for 6 years after, thats not going to help the current situation.

8. Building of new homes has slowed, but who cares, with 21 million homes in the UK, there is no shortage and never has been.

And lastly with 20% already gone, do you seriously think that another 5% is going to be it ???

Another 5% will be gone by April, then we have another 9 months of recession left at least and that's according to Brown.

In my mind 40% is a dead cert, being uber bearish is saying 60-80% down, which I would agree is unlikely.

1) Low rates for many mortgage holders is relevant as it gives them more spending power, greater ability to reduce debt and assist children. Also more likely to B2L as cash is poor and borrowing cheap.

2) Plenty of people will B2L as opposed to sitting on cash. They have the stomach for it.

4) A classic filtration. We export tons, but much is by way of Brit owned foreign plants. Its the net cashflows you need to look at. Then there's all those less obvious items such as Premier league footie, F1, kids TV, music etc

5) I'm a gloom wallower, and no too proud to admit it. Most around me are not. In fact most seem pretty positive in the main and very secure financially. One is a builder who is expanding. He's a million miles from the Mr Worries of this world.

6) Parental help will be fairly significant.

7) Bankcruptcy - the point is masses of debt will be wiped out thus freeing up spending on rent and goods.

25% as an average.

I have to say where I am in the South East I expect things to calm down quite quickly after we reach bottom shortly.
Most people recognise they are only awake for around 19,564 days (of which early and latter years might not count for much life experience) and they want to 'get on' with life, not forever sit about counting every last penny and fretting over mortgage insterest vs rent.

A lot of people are generally positive and it is this momentum that will take us through gloomy times quicker than the uber bears envisage.

Sir_Humphrey

So according to Conrad's rationalist logic, people making predictions using rationalist logic will be wrong. I see you didn't study philosophy at University!