Why is HPI seen as a good thing by the media and homeowners ?

ad9898_3

Firstly, I know there are homeowners on here who don't think its a good idea, I'm just talking generally. I'm trying to look at this question objectively, I have owned 3 properties in the past, a 2 bed semi, 2 bed detached bungalow and a 4 bed detached house, and at no time whilst I owned those houses did I feel richer, or that HPI was a good thing, in fact I would say the opposite is true, lets look at the factors.

Climbing the property ladder .

If you own, climbing the ladder is going to cost you, the more HPI accelerates, the worse it is for you as in percentage terms the higher value house is going away from you. Also unless you have a windfall of cash or some inheritence, the debt you will owe on your mortgage will rise.

Verdict . Bad for homeowners.

Legacy.

Some may say, that a over inflated house price is good, as there will be plenty of cash to give to your children, however I would argue that your children would/could have bought into the bubble, meaning any extra cash coming from probate is just likely to service your offspring's higher debt levels, so has no benefit.

Verdict. Bad for homeowners.

Emigrating.

Ok, now HPI would be useful if you were emigrating, but how many people as a percentage of the population actually do it ?, not many. And in any case I doubt anyone buys a house thinking they will make money on it before they emigrate in a few years time.

Verdict. Good for homeowners, but who does it ?

Downsizing.

Ok, this is the one that should be good, but who in their 20's and 30's thinks about buying a huge house, and service a mountain of debt just so they can downsize when they retire ?, I for one know, planning 30 or 40 years ahead is utterly futile. And a hell of lot of homeowners don't do it, hence the 'asset rich, cash poor' generation of pensioners.

Verdict. Good for homeowners, but life as a habit of kicking you at some point, so I can't believe someone buying a large house thinks of this 20, 30years + into the future.

The Economy.

The economy is struggling at the moment, one reason is people are tightening their belts because they have huge mortgages to pay due to massive HPI, most people will pay their mortgage first, then if any money is left over, they may spend it in the economy, the problem with this is, the 'homeowner' also needs a job, and if people aren't buying 'stuff', the 'homeowner' is at risk of losing his job and possibly his house. Massive HPI reduces the amount of money in the economy, due to servicing of debt.

Verdict. HPI is not good for the economy and therefore no good for the homeowner.

HPI needs to be controlled, 'booms' are bad for FTB'rs, 'busts' are bad for homeowners in general, especially those close to the wire.

So the question WHY, is HPI that bares no relationship to wages seen as a good, because as a homeowner and a non-homeowner, I can't think of a single thing.

StevieJ

So the question WHY, is HPI that bares no relationship to wages seen as a good, because as a homeowner and a non-homeowner, I can't think of a single thing.

Where shall we look first - Ah you -So you have sold your house and now hope to buy a cheaper one :cool: Thus the heavy reverse ramping
Dare I suggest that HPI was good to you :beer:

ad9898_3

StevieJ wrote: »

So the question WHY, is HPI that bares no relationship to wages seen as a good, because as a homeowner and a non-homeowner, I can't think of a single thing.

Where shall we look first - Ah you -So you have sold your house and now hope to buy a cheaper one :cool: Thus the heavy reverse ramping
Dare I suggest that HPI was good to you :beer:

It might be so for the STR brigade Steve, but that wasn't the case for me, I was a victim of circumstance rather than an active player, and because of that, personally, HPI has done nothing for me.

The OP, was not to be about reverse ramping, it was purely to ask the question, what good is it, the 'bulls' viewpoint is what I'm after to be honest, as the FTB/STR/bear view, is going to be fairly obvious.

StevieJ

House prices are merely a function of affordabilty plus supply and demand like everything else.

needahome_2

fatpig wrote: »

Greed and vanity. Alot of people like to think they're alot richer than they actually are.

it's called the Mrs Bucket syndrome, I see it everyday with the muppets who earn less than £20k a year who think they are "middle class" because they wear a suit at work and watch the apprentice on a night time.

they dont realise that because we now live in a service economy that they are still at the bottom of the food chain just like their parents were when they were working down the pit.

ad9898_3

fatpig wrote: »

Greed and vanity. Alot of people like to think they're alot richer than they actually are.

You know, I'm sure there is quite a bit of truth in that, people struggle like hell to get on the property escalator because it's going too fast, then once they got on by the tips of their fingernails, they want it to go faster.

purch

House prices are merely a function of affordabilty plus supply and demand like everything else

If only................!!!!

StevieJ

purch wrote: »

If only................!!!!

Put it this way, if you look at the average person in the 1940's and 50's and compare them with todays first time buyers who would find it easier to buy and afford a house Answers on a postcard

ad9898_3

StevieJ wrote: »

Put it this way, if you look at the average person in the 1940's and 50's and compare them with todays first time buyers who would find it easier to buy and afford a house Answers on a postcard

The answer is easy, the average person from the fifties, why ? in the fifties my mum and dad bought a nice 2 bed semi-detached bungalow in the countryside, it was on a corner plot with enough land to extend it to a make a 4 bed (which he did), still loads of garden left for their children of the future to play in. What did they do for a living ?, my mum was a housewife and never did paid work again after she married my dad, my dad was a lorry driver, that's it.

Today, for that same home, I would guess you would have to have a couple of lawyers/Dr's etc.. to be able to afford that now.

tomterm8

Um, well houses are bought with debt. House price inflation is good for homeowners as it reduces the value of the debt. House price deflation is bad for homeowners as it increases the value of the debt.

chucky

StevieJ wrote: »

House prices are merely a function of affordabilty plus supply and demand like everything else.

excess cash in the economy needs to be used, in the last ten years it was used to buy property - HPI is the result.

now that lending is 'restricted' the volume of house sales has fallen.

shockingly Fatpig has actually posted something sensible - there is much truth in what he (Napoleon, Downey etc...) says

fatpig wrote: »

Greed and vanity. Alot of people like to think they're alot richer than they actually are.