House prices could fall another 40% from here.

ad9898_3

Macaque, is this you in disguise ?:D, on a serious note this guy has made some good predictions in the past, so it's worth a read.

There have been stirrings of excitement in the property market recently. Data on activity, such as home loan approvals, has been picking up ever so slightly. And I've seen it at first hand too.
I was a member of the panel at an investors' seminar hosted by PFP Group in Harrogate last week. Two investors came up to me at separate times and said they were trying to buy properties but the market had got very tight and the estate agents they were talking to had never been busier. Did I think we'd already seen the bottom?

I had to disappoint them. I don't think we've seen the bottom - in fact, I don't think we're anywhere close. Here's why......

http://www.moneyweek.com/investments/property/house-prices-could-fall-another-40pc-from-here-14923.aspx

StevieJ

So have house prices hit the bottom?

On the same basis, today, the ratio, based on an assumed average household income of £31,200 and an average HBOS house price of £160,869 is still a very high 5.16 times. To give you an idea of just how high that is, it's still above the 1989 peak ratio of 5.02 times.


That is interesting considering Bank rate was 14.875% in 1989 and 0.5% now Although to be fair I think we should use a rate of 5% for comparison purposes.
Wow it must have tested family finances in 1989, what was that phrase Macmillan used it would be quite apt today.

carolt

Lovely article.

If it looks lke a duck, walks like a duck...it's satill amazing how many people will insist it's actually a goose that lays golden eggs.

Thrugelmir

Very interesting. A good post and read.

According to HBOS, house prices peaked out in August 2007 at £201,000. Average weekly gross earnings in the UK in 2007 were £376 (£19,552 a year). Multiplying that by about 1.5 brings single person earned income up to (earned and non-earned, usually two-person) household income of around £29,900. The house price to income ratio would therefore have been around 6.72 times at its peak, using the HBOS measure.
On the same basis, today, the ratio, based on an assumed average household income of £31,200

inspector_monkfish

carolt wrote: »

Lovely article.

If it looks lke a duck, walks like a duck...it's satill amazing how many people will insist it's actually a goose that lays golden eggs.

what ????????

kennyboy66_2

Well I never, Moneyweek in a "house prices to crash" article.

"HBOS, presumably a bit concerned by just how unaffordable its data was making UK houses look, stopped publishing its house price to earnings ratio in early 2006. This is just one of the problems with data on housing: it all comes from less-than-neutral sources such as estate agents and lenders. Still we can do a rough update by using HBOS house prices and weekly earnings from the government's ASHE (Annual Survey of Hours and Earnings).
According to HBOS, house prices peaked out in August 2007 at £201,000. Average weekly gross earnings in the UK in 2007 were £376 (£19,552 a year). Multiplying that by about 1.5 brings single person earned income up to (earned and non-earned, usually two-person) household income of around £29,900. The house price to income ratio would therefore have been around 6.72 times at its peak, using the HBOS measure"


Now, I don't know if Halifax suspended publication of this index, but I do know that it took me 3 mins to find the latest one using google.


Now the Halifax index appears always to have used Male fulltime mean earnings. You can argue about the validity of this but we might as well be consistent.
The index peaked at July 2007 at 5.84, it is now (April 09) 4.26.


I'd say its got a little way to fall in nominal, more in real terms and plenty of stagnation ahead.


However, even the Bears must think that this "journalist" is being a tiny bit lazy and biased.


Vested interests anyone ?

chucky

StevieJ wrote: »

So have house prices hit the bottom?

On the same basis, today, the ratio, based on an assumed average household income of £31,200 and an average HBOS house price of £160,869 is still a very high 5.16 times. To give you an idea of just how high that is, it's still above the 1989 peak ratio of 5.02 times.


That is interesting considering Bank rate was 14.875% in 1989 and 0.5% now Although to be fair I think we should use a rate of 5% for comparison purposes.
Wow it must have tested family finances in 1989, what was that phrase Macmillan used it would be quite apt today.

stop it Steve - the HPC nutters like stuff that's detached from reality

carolt

StevieJ wrote: »

So have house prices hit the bottom?

On the same basis, today, the ratio, based on an assumed average household income of £31,200 and an average HBOS house price of £160,869 is still a very high 5.16 times. To give you an idea of just how high that is, it's still above the 1989 peak ratio of 5.02 times.


That is interesting considering Bank rate was 14.875% in 1989 and 0.5% now Although to be fair I think we should use a rate of 5% for comparison purposes.
Wow it must have tested family finances in 1989, what was that phrase Macmillan used it would be quite apt today.

Yes, but it only hit those rates for a very short time - couple of months I think. Plus wage inflation was far higher, so the rates quickly became bearable. I recall lots of people working second jobs at the time. Obviously, those who couldn't get a second job fed into the repossession statistics.

Pobby

With business slow, that income would be about what we have pre tax. Even if I was just starting out, I would find it gut wrenching to pay 5.16 times income. Surely interest rates will rise to at least 5%.

kennyboy66_2

ad9898 wrote: »

on a serious note this guy has made some good predictions in the past, so it's worth a read.

Like this one;

Shares are good value.
October 16th 2007

FTSE 100 down 25% since then.

Dont miss out on the UK bull market
Sep 14 2006

FTSE 100 down 15% since then.

Revival for the Land of the Rising Sun

Mar 06, 2007

Still waiting James.


And perhaps the Daddy of them all.

US housing: it's not a bubble

By James Ferguson Dec 12, 2005



http://www.moneyweek.com/investments/property/us-housing-its-not-a-bubble.aspx


I don't usually do smiles but that really deserves one:rotfl:

System

kennyboy66 wrote: »

I don't usually do smiles but that really deserves one:rotfl:

A nice chuckle at the screen before I leave for the day, cheers for that! :beer: