Just taking stock

StevieJ

The big difference between now and Maggie economic steamroller is that now we have the loosest (is that right?) monetary policy for 300 hundred years, Maggie however was doing the complete opposite in trying to squeeze inflation out of the system. In doing so she destroyed the manufacturing sector.

I still think industry (what is left of it ) still uses marginal costing especially at the moment, but not for everything I hope :eek:

I think we have an acceptance across the board that house prices will not rise for a good while, the only disagreement is how much they will fall if any.

System

StevieJ wrote: »

You mean the rate of increase has declined

Funny when the rate of decrease of house prices declines the dummies get spat and we are reminded it's still a decrease isn't it?

StevieJ

Graham_Devon wrote: »

Again, I would welcome some "bull input" into this thread, as in to actually debate, not just pick up on little errors. That's my last plea, feel free to post how you like.

I'd welcome your thoughts though into discussing in this thread as it's gone quite well so far without people changing goalposts. Thanks

They call that hard faced oooooop north, you have a cheek

mitchaa

House prices down another 5-10%, with lots of months of ups and downs cancelling each other out in my opinion.

Interest rates? Well, a 90% LTV was around 6% this time last year with a 5.5% BOE BR, it's the same 6% just now with a 0.5% BR so they never followed on a linear path on the way down.

Unemployment? Surely the majority of companies have already made their cut backs by now? Unemployment will increase no doubt but i question if the rising numbers will have an effect on the housing market. If we see a further 900k people end up in the dole queue, are they homeowners who will be forced to sell, or are they council tenants on welfare benefits?

Im not buying into any of this doom and gloom stuff, life's too short

2009 in my opinion so far has been very good for house prices, they have fallen by a whopping 0.78% in the 4 months so far....

Dec 2008 = £153,048
April 2009 = £151,861

A fall of £1187 in 4 months or £297pm. If we extrapolate this further, £1187 in 1/3 so £3561 for the whole year then:p (Joking, even i am not the bullish;))

I've put my foot in it now, no doubt Halifax will report a whopping 5% MOM fall next week and all us bulls will go into hiding:rotfl:

Generali

StevieJ wrote: »

The big difference between now and Maggie economic steamroller is that now we have the loosest (is that right?) monetary policy for 300 hundred years, Maggie however was doing the complete opposite in trying to squeeze inflation out of the system. In doing so she destroyed the manufacturing sector.

I still think industry (what is left of it ) still uses marginal costing especially at the moment, but not for everything I hope :eek:

I think we have an acceptance across the board that house prices will not rise for a good while, the only disagreement is how much they will fall if any.

Marginal cost pricing is different from marginal costs. It means that as a monopoly you set your prices at the same level as your marginal cost rather than to maximise profits. It's how nationalised industries were generally told to set their prices and for most it ensured they were loss making.

The theory was you got the efficiencies of monopoly with the pricing of highly competitive industries. The reality was this:



and a 12 month wait to get a phone line put in.

As to how far house prices will fall? I couldn't pick the top and I won't manage to pick the bottom either (unless it's a lucky guess). My guess is that so far you've had the froth plus a little blown off and now we're facing the impact of a good, old fashionned recession on top so probably another 20-30% off current prices, ie average house price down to GBP100k give or take.

Obviously if something crazy happens like the US goes bust, bird 'flu kills millions or the UK repudiates her debt then falls will be a lot steeper. Those are still things that are unlikely to happen.

Graham_Devon

mitchaa wrote: »

House prices down another 5-10%, with lots of months of ups and downs cancelling each other out in my opinion.

Interest rates? Well, a 90% LTV was around 6% this time last year with a 5.5% BOE BR, it's the same 6% just now with a 0.5% BR so they never followed on a linear path on the way down.

Unemployment? Surely the majority of companies have already made their cut backs by now? Unemployment will increase no doubt but i question if the rising numbers will have an effect on the housing market. If we see a further 900k people end up in the dole queue, are they homeowners who will be forced to sell, or are they council tenants on welfare benefits?

Im not buying into any of this doom and gloom stuff, life's too short

2009 in my opinion so far has been very good for house prices, they have fallen by a whopping 0.78% in the 4 months so far....

Dec 2008 = £153,048
April 2009 = £151,861

A fall of £1187 in 4 months or £297pm. If we extrapolate this further, £1187 in 1/3 so £3561 for the whole year then:p (Joking, even i am not the bullish;))

I've put my foot in it now, no doubt Halifax will report a whopping 5% MOM fall next week and all us bulls will go into hiding:rotfl:

Unemployment has been held back due to the fiscal stimulus mentioned on page 1. It's the same with house prices. They have been held up with extreme low interest rates, meaning people can afford their mortgages (at least 40-60% more can anyway).

We've bailed out the banks. We have used QE. We have bailed out the car industry, or at least, nodded towards doing so. We've also got the lowest interest rates on record. We are offering incentives to companies to emply people.

In other words, the fiscal stimulus has manufactured the current employment.

But, what happens when the plug is pulled? What happens when the bailouts stop? Are these companies going to just carry on, business as usual? What happens when the incentives to emply people stop?

What happens when the NI bill goes up and companies have to pay larger sums of NI, on the back of higher interest rates?

Yes, I agree, right now, things are ok. But, right now, we are all bandaged up so that we can function, but what happens when the bandages are taken off?

One of two things will happen. The bandages will have worked, and the economy will be able to continue on it's own steam, or, due to the increase in costs for business's, not only loosing out on the fiscal stimuli, but increased tax and increased loan costs, and increase NI costs, business simply starts to decline again.

I don't know what will happen personally, hence this thread.

Take a family who need to pay their tax, but have no money. Getting a loan will enable them to pay the tax and carry on. But they cannot keep taking loans to survive, at some point, they are going to fall. We are in, what I would class as the "giving the loans to help them survive" stage at the moment. That WILL stop. The question is, and no one can answer....at what point, cus it's a big fall if you get it wrong.

StevieJ

Graham_Devon wrote: »

Unemployment has been held back due to the fiscal stimulus mentioned on page 1. It's the same with house prices. They have been held up with extreme low interest rates, meaning people can afford their mortgages (at least 40-60% more can anyway).
.

And held back by extremly tight credit both will not last for ever.

StevieJ

Generali wrote: »

As to how far house prices will fall? I couldn't pick the top and I won't manage to pick the bottom either (unless it's a lucky guess). My guess is that so far you've had the froth plus a little blown off and now we're facing the impact of a good, old fashionned recession on top so probably another 20-30% off current prices, ie average house price down to GBP100k give or take.
.

Disagree, the -20% has been caused by reduced liqidity, if we did not have reduced liqudity we would not have a recession, I think the CC has pre-emptively created the falls that the recession would have done anyway. I don't actually see why prices have to fall any further than 20%.

Graham_Devon

StevieJ wrote: »

Disagree, the -20% has been caused by reduced liqidity, if we did not have reduced liqudity we would not have a recession, I think the CC has pre-emptively created the falls that the recession would have done anyway. I don't actually see why prices have to fall any further than 20%.

Simply because the average person cannot afford the average house. It's not sustainable.

This disregards the actual credit problem. Even if there was easy credit, an average buyer would not be able to afford an average house without the lender lending too much.

Too much is defined by what caused the boom in the first place, too much credit.

Why do we have reduced liquidity? Because people couldnt afford houses.

I disagree with the "if we did not have reduced liquidity we would not have a recession". The recession and the credit crunch are seperate entities. Sure, they do not help each other, but I do belive we would have a recession even if liquity was not reduced. Too many other factors to say otherwise.

StevieJ

Generali wrote: »

Marginal cost pricing is different from marginal costs. It means that as a monopoly you set your prices at the same level as your marginal cost rather than to maximise profits. It's how nationalised industries were generally told to set their prices and for most it ensured they were loss making.

.

Not quite with you there, are you saying that MCP includes all overheads but priced with no profit as opposed to Variable Costs only i.e. the cost of one extra unit of production which is my understanding? Is that an economic definition as opposed to accounting Or it is still variable cost but the fixed costs are financed by the public through subsidy? Why would you need to do that if you had a monopoly?