The Great 2003-2005 Crash in Britain’s Housing Market

PasturesNew

Degenerate wrote: »

Follow his advice and you'd have lost out big time.

With prices in many areas back to the prices they were then, somebody who had taken his advice would have knuckled down to work/save and now would be free (having rented) to choose the right house now, backed by 5 years of savings.

Without a house of their own, in the meantime, they'd have not spent money hand over first, potentially MEWing, to improve the house they bought ... so more money banked.

kennyboy66_2

StevieJ wrote: »

The bottom line, he was wrong :rolleyes:

The point some people will never understand is that even a stopped clock is right twice a day.

There is a fairly well established housing cycle in the UK with pretty extreme peaks and troughs - I've been seen 3 cycles. The cycles seem to last about 18 years. This guy was out by about 5 years.

I've always thought for every one STR out there, there must be another 10 who sold way to early.
I'm sure its a great comfort to them that they were "right", but got the timing wrong.

Oh well, prices fall another 25% and this guy is in the money. I'd have to wonder whether living in a rented house for 7 years is worth it though.

kennyboy66_2

PasturesNew wrote: »

With prices in many areas back to the prices they were then, somebody who had taken his advice would have knuckled down to work/save and now would be free (having rented) to choose the right house now, backed by 5 years of savings.

Without a house of their own, in the meantime, they'd have not spent money hand over first, potentially MEWing, to improve the house they bought ... so more money banked.

I refer you to Mr Mumbles post the other day.

http://forums.moneysavingexpert.com/showthread.html?t=1755405&highlight=

" those renting properties were just as likely to reduce their saving when house prices were booming as home owners were."

StevieJ

Graham_Devon wrote: »

....on the date.

Sorry, just trying to help you finish your sentence, I'm feeling charitable, and you obviously had problems finishing it yourself.

It is a good job you are not a bookmaker on the race track, you would be well out of pocket, paying out on all the losers

Graham_Devon

1echidna wrote: »

It is not proven that he was right apart from the date. We have yet to see. Structural changes in the market, change in the norm level of debt, a contribution from inflation and a delay in things taking effect could confound his predictions.

Structural changes in the market = removal of 125% and 100% mortgages.

Change in the normal level of debt = well known more and more people are paying off their debts instead of spending.

Contribution from inflation = You think that hasn't already happened? Rates went from approx 4% up to about 5.75% in a few months just before the crash to combat rising inflation which was approaching 5%. We then reversed them down to 0.5% from fear of deflation.

1echidna

Graham_Devon wrote: »

Structural changes in the market = removal of 125% and 100% mortgages.

Change in the normal level of debt = well known more and more people are paying off their debts instead of spending.

Contribution from inflation = You think that hasn't already happened? Rates went from approx 4% up to about 5.75% in a few months just before the crash to combat rising inflation which was approaching 5%. We then reversed them down to 0.5% from fear of deflation.

Structural changes: I was talking about a shift to only the better off being able to buy property due to restricted supply.

Should have said change in the historic level of debt. Debt can be rolled over, it doesn't have to decrease at a rate which is catastrophic to the economy

A moderate level of inflation combined with low interest rates diminishes the real value of debt. Also a higher level of inflation (including wage inflation) combined with moderate interest rates does not necessarily depress the economy although it robs savers. I guess politicians will tear up the rule books on interest rates being set to fight inflation if it means a disastrous fall in house prices (and banks assets) is avoided

matbe

PasturesNew wrote: »

With prices in many areas back to the prices they were then, somebody who had taken his advice would have knuckled down to work/save and now would be free (having rented) to choose the right house now, backed by 5 years of savings.

Without a house of their own, in the meantime, they'd have not spent money hand over first, potentially MEWing, to improve the house they bought ... so more money banked.

Is renting free in your area?

To rent the same house as i am buying would probably cost double what i am paying on my mortgage.

Just because you are not buying a house doesn't mean its free, renting has associated costs as well.

Degenerate

PasturesNew wrote: »

With prices in many areas back to the prices they were then,

Halifax UK averages (seasonally adjusted):
2002 Q4: £121,138
2009 Q1: £160,678

somebody who had taken his advice would have knuckled down to work/save and now would be free (having rented) to choose the right house now, backed by 5 years of savings.

It's closer to 7 years, but I take your point. They also have had 7 years of paying rent, so those savings are not likely to be that much higher than if they'd bought and made mortgage payments. On the other hand, the mortgage payer is 7 years along with their repayments.

Without a house of their own, in the meantime, they'd have not spent money hand over first, potentially MEWing, to improve the house they bought ... so more money banked.

This isn't part of the equation at all, buy the same house 7 years later and you'll still have to spend that money to get it how you want.

If you STR in late 2006 or early 2007, you would indeed be laughing. STR in 2005 or early 2006 and it would be a close run thing where the dead money on rent could easily cancel out the gain. Prices have not fallen nearly far enough to make STR in 2002 a wise move in retrospect, and it doesn't look like they will now.

When did you STR?

Paddy2eyes

If Professor Oswald sold his house and put it all into the stock market, I expect that he is now both homeless and penniless.

tommy75

StevieJ wrote: »

The bottom line, he was wrong :rolleyes:

Simply because of a spend spend Labour government destined to ruin the UK economy. Remember what happened in 2007? He made a good call and maybe if the bubble burst at the end of 2003 after the ridiculous house price rises of that year and the previous, we wouldn't be bailing out every tom !!!!!! and harry with even higher taxes to come. The pain has not even begun yet..