Bad news: house prices are rising

penguine

From The Guardian:

The recent falls have simply restored house prices in Britain to the levels seen in 2004/05. They have not restored a bloated market even close to sanity. Buyers today will still have to saddle themselves with giant mortgages to pay homage to the only god that Britain still worships, high house prices.

We are all fond of comparing the current economic crash to the 1930s, but the lessons of the early 1990s are fresher and perhaps more relevant. House prices started declining in 1989 and didn't start to move up again until 1994. Why does anyone think this cycle will be more benign? By 1994 the average price paid by a first-time buyer had fallen to 2.2 times income. Today, we are a long, long way off that level, which implies a pretty staggering fall in prices from current levels is still to come.

Graham_Devon

That's actually quite a sensible article from the Guardian.

No VI. No spin. No trying to polish a turd. Just an anecdotal look at whats happening.

System

House prices started declining in 1989 and didn't start to move up again until 1994. Why does anyone think this cycle will be more benign?

I'd like to know, on the flipside, why does it have to be the exact same pattern as last time? The news that debt is being paid off at record levels shows to me that lessons have been learnt from the last cycle.

Really2

One thing I don't get is why 2.2X income will have to be hit?

Was the average wage £25K+ in 1994 that is around the same some on here are stating as the current average.

Graham_Devon

Really2 wrote: »

One thing I don't get is why 2.2X income will have to be hit?

Was the average wage £25K+ in 1994 that is around the same some on here are stating as the current average.

I dunno really.

But you know what, if house prices did hit 2.2x income and stayed there for the next 20 years or so, or even for good, life would be so much nicer.

Just imagine, you'd actually be able to enjoy life with your wages!

Dan:_4

but the lessons of the early 1990s are fresher and perhaps more relevant. House prices started declining in 1989 and didn't start to move up again until 1994. Why does anyone think this cycle will be more benign

Well, the first two years (Q1 '89 - Q1 '90) only saw around 8% down from peak. The first two years of this crash has already seen 20% down.

The 1990s crash took longer to bottom out then this one will, but the overall 'fall' figure will be about the same. Also, I think we will stay at the bottom for longer

chucknorris

I think the Guardian is wrong when they say:

By 1994 the average price paid by a first-time buyer had fallen to 2.2 times income. Today, we are a long, long way off that level, which implies a pretty staggering fall in prices from current levels is still to come.

Because they are either conveniently or perhaps more correctly foolishly ignoring the difference between interest rates of then and now, which was something like 12% compared to 5.5% (ignoring the temporary 0.5% current rates which are unlikley to last for longer than a year or two).

Really2

Graham_Devon wrote: »

Just imagine, you'd actually be able to enjoy life with your wages!

I do but I never over streched myself;)

But I know what you mean.

4Chickens

I have just had 2 people within the last hour, tell me that house prices are starting to rise. One was an EA and one was a muppet. Do you think they are both right or both wrong?:cool:

Dan:_4

The whole artical is rubbish. Even the headline "House Prices are rising" is complete bullsh!t.

Really2

cindiedunkley wrote: »

. One was an EA and one was a muppet. Do you think they are both right or both wrong?:cool:

Wow was it Gonzo.

Staisticaly on todays figures yes they have this month. but the feeling is they will be going down for the rest of the year.

But that does not mean if the bottow was next year you could not negotiate a buy at the bottom price today.