Nationwide "Real" House Price Index rose 1.6% in June

Cannon_Fodder

Chucky,

The 70s property crash was before my time, memory-wise. Halifax, Nationwide and LR don't go back far enough.

Most charts that include the 70s seem to be long-term, including the 80s, 90s and 00s, so are scaled in a way that hides the detail of the 70s crash.

Can you link a 70s crash graph that can educate the youngsters among us...?

Thanks.

chucky

Cannon_Fodder wrote: »

Chucky,

The 70s property crash was before my time, memory-wise. Halifax, Nationwide and LR don't go back far enough.

Most charts that include the 70s seem to be long-term, including the 80s, 90s and 00s, so are scaled in a way that hides the detail of the 70s crash.

Can you link a 70s crash graph that can educate the youngsters among us...?

Thanks.

sorry no chart but i have the data
http://www.nationwide.co.uk/hpi/downloads/UK_house_price_since_1952.xls

Q4 1972 42.4% Annual Change - within 2 years the annual change was down to 4.5%.

HousingBear

[QUOTE=chucky;23133963
tut tut you haven't been reading up on the reasons for the mid-1970s recession.
it was due to exactly the same reasons we are having the same problems now with banks being bailed out (on a smaller scale) due to house prices dropping and bad lending... this is why i made the comment previously about just comparing to the 1990s recession
http://en.wikipedia.org/wiki/Secondary_banking_crisis_of_1973%E2%80%931975
[/QUOTE]

An interesting point that you make. But I think the clue is in the title - the SECONDARY banking crisis. This is a PRIMARY banking crisis - there was no high street bank run in the 1970s, no forced mergers of high street names or takeovers of well-known brands by foreign banks.

This time, banks world-wide have received unprecedented injections of public cash to stay afloat and still there are concerns about the stability of the banking sector. I would say that this recession makes the 1970s appear a walk in the park.

(edit) Also, the recovery chart that you point to in your next post seems to list nominal prices and increases. However, in 1974, RPI was 16%, in 1975 it was 24% and in 76 and 77 it was 16% again. RPI Statistics.

However, I would agree that we haven't been without power this time. I can remember sitting in a candle-lit classroom in the 1970s.


As to rates creeping up, I would agree that this is likely to be lenders trying to increase profits. As to savings rates going up, I would have thought that was to try to increase capital inflows now that securitization ain't really happening.

So what is your take on what is likely to happen if the bond markets don't like the QE/money printing shenanighans and yields start to increase? Will base rates sit at 0.5% in that eventuality?

Cannon_Fodder

chucky wrote: »

sorry no chart but i have the data
http://www.nationwide.co.uk/hpi/downloads/UK_house_price_since_1952.xls

Q4 1972 42.4% Annual Change - within 2 years the annual change was down to 4.5%.

Thanks for that.

I don't mean this to be quibbling over the figures. But to be clear, was there monthly -ves, or just gradually smaller monthly +ves, that led to the reduction of YoY +ve to single digits?

That 40% HPI is why many parents are sitting pretty today, though.

Maybe the absence of a YoY -ve (and therefore the lack of a scary headline for the tabloids) in the 70s and early 80s crashes, compared to the 89-93+ and current crashes, are why the former two have not entered the public conciousness in the way the latter two did/are doing?

Or the public just have short memories...which is perhaps harsh, as it was 35 years ago...many oldsters and most youngsters buying today don't remember the 90s crash, let alone anything earlier...

chucky

HousingBear wrote: »

An interesting point that you make. But I think the clue is in the title - the SECONDARY banking crisis. This is a PRIMARY banking crisis - there was no high street bank run in the 1970s, no forced mergers of high street names or takeovers of well-known brands by foreign banks.

i agree about the scale of the banking crisis - today's issues are massive!
i wanted to make the point about just comparing to the 1990s exclusively - many people do it just to suit their point of view and what they want to happen. as you can see you can't just think that way.

HousingBear wrote: »

So what is your take on what is likely to happen if the bond markets don't like the QE/money printing shenanighans and yields start to increase? Will base rates sit at 0.5% in that eventuality?

base rates will have to progress upwards - when i don't know.

the scale of them moving upwards will also be interesting - can you remember when rates were dropped 1.5%? they said that they wanted to drop them more but didn't want to spook the markets.

i can't see rates shooting up by more than 0.5%/0.75% each time and they will do this over a 2/3 year period if not longer for exactly the same reason above. otherwise it would be carnage.

chucky

Cannon_Fodder wrote: »

Thanks for that.

I don't mean this to be quibbling over the figures. But to be clear, was there monthly -ves, or just gradually smaller monthly +ves, that led to the reduction of YoY +ve to single digits?

That 40% HPI is why many parents are sitting pretty today, though

from what i read, it seems that there was never any -ve numbers during the 70s. so the theory about house prices not rising during a recession is not really applicable.

i think the impact would have been a bit like China's economy reducing from 12% to 6% hurting more than the UK going from 0.0% to -4.1% (or whatever it was). that's only an assumption on my part so don't try and beat me for saying that.

Cannon_Fodder wrote: »

That 40% HPI is why many parents are sitting pretty today, though.

i think that happens in whichever recessionary period we choose.

that generation that was fortunate to buy in these periods will always benefit from good amounts of HPI.
i would also say the majority by default rather than planning.

also many investors wait for these periods to happen and jump in to get cheap 'stock' as long term investments.

Cannon_Fodder wrote: »

Maybe the absence of a YoY -ve (and therefore the lack of a scary headline for the tabloids) in the 70s and early 80s crashes, compared to the 89-93+ and current crashes, are why the former two have not entered the public conciousness in the way the latter two did/are doing?

Or the public just have short memories...which is perhaps harsh, as it was 35 years ago...many oldsters and most youngsters buying today don't remember the 90s crash, let alone anything earlier...

it's a combination of both - the media have a lot of input in this recession. more than ever.

i'm saying this without having a dig but it suits most peoples viewpoint and what they want to happen just to compare to the 1990s recession and house prices. you can't just do that.

HousingBear

chucky wrote: »

from what i read, it seems that there was never any -ve numbers during the 70s. so the theory about house prices not rising during a recession is not really applicable.

Nominal prices didn't fall in the 1970s but they certainly did fall in real terms. Take Q1 1975 - prices "rose" by 4.6% annually, but annual RPI was 24.2%, wiping out the nominal gains entirely.

What did happen was that the double-digit inflation from 1973 to 1977 (and associated pay increases - my BIL remembers 25% increases per year at that time) helped to reduce the cost of mortgages taken out in the peak. That situation doesn't apply now, so people with 2007 level mortgages aren't getting that inflationary bailout.

chucky

HousingBear wrote: »

Nominal prices didn't fall in the 1970s but they certainly did fall in real terms. Take Q1 1975 - prices "rose" by 4.6% annually, but annual RPI was 24.2%, wiping out the nominal gains entirely.

What did happen was that the double-digit inflation from 1973 to 1977 (and associated pay increases - my BIL remembers 25% increases per year at that time) helped to reduce the cost of mortgages taken out in the peak. That situation doesn't apply now, so people with 2007 level mortgages aren't getting that inflationary bailout.

so what impact does negative RPI instead of +ve 25% have on house prices?

HousingBear

chucky wrote: »

so what impact does negative RPI instead of +ve 25% have on house prices?

It is the current fall in housing costs that is dragging RPI down. However CPI is still above the target of 2%. Also, CPI replaced RPI as the preferred Govt measure of inflation a while back. I used RPI for the 70s because that was what the govt used then.

In the 70's, both prices and wages were going up very rapidly. This time round, I know of people who have had large wage cuts to keep their jobs. These pay cuts directly affect affordability, so prices are likely to continue to fall (after we get over this small blip).

Cannon_Fodder

chucky wrote: »

i'm saying this without having a dig but it suits most peoples viewpoint and what they want to happen just to compare to the 1990s recession and house prices. you can't just do that.

I agree that on the forum when analysing the nitty gritty we need to consider some wider factors/history etc. Useful to have older stats.

(Although you then risk getting into tiresome debates over what has changed since and whether that matters - scrapping MIRAS has skewed X, does the IR of 1694 have relevance since the Gold standard ended, other obscure stuff, etc etc...)

However, I also think that at times we need to bring it back to the real world.

Most of the rest of the population/market;

- Do not research like we do. (A good thing, they might say)
- Accept headlines without examining the detail.
- Act on impluse.
- Get impatient.
- Get scared.
- Get greedy.
...a dozen other things that lean in either direction...


Those that do research or have a bias, will be influenced by the 90s more than the 80s or 70s. Nothing sinister in that, its just the easist one to do research on, or the one they remember most.

Irrespective of how much a bull or bear might be disappointed if reality doesn't swing in their direction "because that is just so illogical" or "it doesn't match crash X", it will be the average punter that leads, or not, the way out of this crash.

So what they remember/experienced/researched is, only to a small degree perhaps, likely to shape the way they behave and therefore how the crash evolves.

Much as the historians would love the fullest analysis of similar events to educate us so that we learn from past mistakes, the bottom line is that Mr Joe Average will buy a house, or not, next week because they saw a headline or remember HPI/NE.