Affordability index

StevieJ

Apologies if this has been linked previously, but it is quite an ineresting excel spreadsheet. so worth the risk of a duplication
My area NW is down to 3.8, and below Q3 2004 (4.49), the first moment I actually thought the market had peaked.

http://www.lloydsbankinggroup.com/media/excel/01_05_09Affordability.xls

ad9898_3

Same area as me, interestingly it's still 1 above what it was in Q4 '96 (2.81) when I bought my first house, I bought a nice 2 bed semi with drive, garage, front and back gardens in a nice area then, on much less than the average wage at that time. That was pretty much the bottom of the last crash, this crash is likely to be much worse than that one, as in '96 all the bad economic news was behind us, this time it's still unfolding in front of us.

It will be interesting to see when we reach 2.81 this time, and if it will drop much further than that, more importantly, I wonder what percentage drop in prices from now we would have to have to hit that earnings ratio ?

StevieJ

ad9898 wrote: »

It will be interesting to see when we reach 2.81 this time, and if it will drop much further than that, more importantly, I wonder what percentage drop in prices from now we would have to have to hit that earnings ratio ?

Don't think we will see that, once reasonable mortgage credit returns the buyers will follow.

mbga9pgf

StevieJ wrote: »

Don't think we will see that, once reasonable mortgage credit returns the buyers will follow.

Where is this mysterious credit coming from steve? Or are you confused as to why the credit crunch happened?

How are you supposing people can afford expensive mortgages once IRs go through the roof, the incumbent government increase tax by 10p in the £, not to mention the vast numbers of unbemployed we can expect?

Keep dreaming.... :rotfl:

StevieJ

mbga9pgf wrote: »

Where is this mysterious credit coming from steve? Or are you confused as to why the credit crunch happened?

How are you supposing people can afford expensive mortgages once IRs go through the roof, the incumbent government increase tax by 10p in the £, not to mention the vast numbers of unbemployed we can expect?

Keep dreaming.... :rotfl:

Nostradamus is back Don't mistake a recession for the end of the world, an easy mistake I know.

StevieJ

ad9898 wrote: »

It will be interesting to see when we reach 2.81 this time, and if it will drop much further than that, more importantly, I wonder what percentage drop in prices from now we would have to have to hit that earnings ratio ?

When you bought your first house interest rates were 5.94 heading for 7.5%, will aknowledge that interest rates are falsely low at the moment, so I would suggest the current interest rates should normalise at 4% to 6%, well you can see see where I am going with this one.

mewbie_2

The stock market appears to have got hold of the idea of a crash, worked with it, plummeted, and bounced. Maybe not over yet. Point is, the stock market works these things through a lot quicker than house prices. If indeed the stock market recovers we will point to March as the time it was oversold. Your Barclays shares for example.

Now compare to house prices, currently heading down towards more normal affordability. I don't think it will stop there, but will continue deep into oversold.

At some point people will start to buy again in sufficient quantities to start the game over.

I don't think it goes Bubble, Return to Mean, Bubble, Return to Mean. It's more Bubble, Crash below Mean, Bubble, Crash below Mean.

I'll stop now.

Generali

It's interesting to see that only the SE region is substantially below it's long term average with base rates at 0.5%. Given that the economy isn't at its best, I'd expect affordability to be below average not above. Mortgage payments as a proportion of income is above average in most places too - 20% higher in the UK as a whole. That's amazing in the current circumstances IMO, truly incredible.

There's a long way for this to go yet I think.

StevieJ

Generali wrote: »

It's interesting to see that only the SE region is substantially below it's long term average with base rates at 0.5%. Given that the economy isn't at its best, I'd expect affordability to be below average not above. Mortgage payments as a proportion of income is above average in most places too - 20% higher in the UK as a whole. That's amazing in the current circumstances IMO, truly incredible.

There's a long way for this to go yet I think.

If that was true I would be amazed as well I know my mortgage rate is 1.45%, same for many on trackers, Halifax standard rate is 3.5% and the people coming off fixed can fix on a five year Fixed rate for 5.19% LTV 90-95% (actually that looks pretty good :j). Add the fact that income multiples are approaching long term averages, how can mortgage payments as a % of income be 20% higher than average, when average interest rates were nearer 8% . It could only be the result of some financial alchemy

http://www.halifax.co.uk/mortgages/existing-customer-fixed-95ltv.asp

dopester

ad9898 wrote: »

It will be interesting to see when we reach 2.81 this time, and if it will drop much further than that, more importantly, I wonder what percentage drop in prices from now we would have to have to hit that earnings ratio ?

Drops in what ad9898? Property values or in wages? Both I reckon will make it so.

StevieJ

Generali wrote: »

It's interesting to see that only the SE region is substantially below it's long term average with base rates at 0.5%. Given that the economy isn't at its best, I'd expect affordability to be below average not above. Mortgage payments as a proportion of income is above average in most places too - 20% higher in the UK as a whole. That's amazing in the current circumstances IMO, truly incredible.

There's a long way for this to go yet I think.

I have just had a look for affordability, and found this, yes it would have incredible - if true.

Below the 25 year average
Mortgage payments, relative to earnings, are now below the long-term average of 37% recorded over
the past 25 years and stand at 31%.

http://www.lloydsbankinggroup.com/media/pdfs/halifax/280409FTBAffordabilityReview2009Q1Final.pdf