Myth-Busting. Proving Bears Wrong, again.

tomstickland

If I put "FACT!" after a sentence it makes it true. FACT!

PasturesNew

Myth: People care enough to read long postings.
Myth Busted: No.

HAMISH_MCTAVISH

michaels wrote: »

Household formation - notoriously difficult to forecast (hence always been wrong in the past) - with jobs much harder to come by I suspect net migration at the moment is not what has been extrapolated in the 'forecast'. However I agree that supply has been hit with newbuilds down and sellers putting off due to uncertainty - this is what is driving the current increases in my opinion.

I agree it is difficult to forecast, but when Nationwide, the ONS, and the UN all come up with similar forecast rises using different methodology, I'd have to say it is likelier than not.

Agree about affordability rather than multiples in fact I have argued frequently about income elasticity of demand (the richer you are the larger proportion of your income you are willing to commit to housing) however I think interest rate changes will impact affordability as the excessive govt borrowing will continue to push up the long end of the yield curve leading to higher fixed rates and I suspect the short end may follow either because the govt has to raise rates to attract lenders and/or commodity price inflation feeds in again - starting from a low base only small changes in the rate can hit affordability.

Possibly, and yet there is ample precedent for excessive government debt not driving higher rates. Japan has been hovering around 200% of GDP on debt for the last decade plus, and yet rates there are extremely low.

The other side of affordability is incomes - with gdp down 6% these will also fall (or be it more slowly than for example profits) but will eventually feed through for example via less overtime, smaller bonuses and even unemployment.

Agreed, overall income averages may well decline, but with the forecasts for household formation versus building being as they are, only the top earning 40% of households need to be able to afford a house in order to see HPI.

One point you don't mention is the lack of mortgage finance which as Generali would say turns desire in to demand. I posted yesterday about the possibility of a virtous circle of rising prices increasing bank capital and thus allowing more lending and hence higher prices but as yet conditions remain tighter especially for those without equity and for btl purchases.

I agree with your virtuous circle post yesterday, very insightful. Conditions will remain tight in the meantime, but if the bulls are right about supply and formation, then the underlying shortage means that only the top earning 40% of households need to be approved for mortgages or be able to fund house purchases.

Very much agree with you about not trying to extrapolate from the past - efficient markets hypothesis says this is a mugs game.

Agreed

Disagree that there needs to be any correlation between transactions and prices.

Depends on the underlying supply/demand situation. Reminds me of the velocity of money argument. But with restricted effective supply and stable demand, prices are rising currently. I actually think that it's HIPS, not sentiment, that is restricting supply, but thats a whole other argument.

Not sure what the impact of negative equity is - obviously kills demand from some who can not move but potentially also kills supply. This seems to be a biggie based on the Lloyds numbers.

I'd be inclined to think it's a supply killer. Be it actual NE or the close-to-NE crowd that can't move and keep their pre-crash mortgage (on very favorable terms compared to todays deals), either way something is restricting supply, and I can't see a more logical reason.

And thanks for the post by the way, good to see reasoned debate on this board.

tomstickland

Hamish McAvity. FACT!

HAMISH_MCTAVISH

nearlynew wrote: »

Yes, but savings is real money. House price rises are not.
Higher house prices translate into higher debt. And debt is not wealth.
.

Ah, but you're wrong.

Higher house prices do not translate into higher debt for those that already locked in a lower price that they paid on a house.

Buyers lock in a price. Higher future prices are a gain without additional debt.

And for 15 years of every 20, prices rise faster than most people can save.

ad9898_3

PasturesNew wrote: »

Myth: People care enough to read long postings.
Myth Busted: No.

This so true, my limit is normally no more than 14 lines, if it's more than that..... forget it.:D

Really2

ad9898 wrote: »

This so true, my limit is normally no more than 14 lines, if it's more than that..... forget it.:D

Matt Stevens said a similar thing.:D

treliac

ad9898 wrote: »

One thing that isn't a myth is the money no longer exists Hamish, and without money, transactions will be low. Even now, at the top of your new 'boom' transactions are half of what they were at the lowest point of the last crash.:D

Sorry to burst your mythical bubble, tee hee.

Very true. On top of the money no longer existing, we have to get the vast amount of debt incurred, like no previous point in time, out of the way.

Brown & Co have been desperately holding back the tide by pumping more nonexistent money into the economy.

Do you really believe, Hamish, that all the sh*t we've got ourselves into is just going to mystically disappear, leaving a wealth of people out there with good secure, substantial salaries and the confidence to buy properties.

In dreams only, I'm afraid!! Payback time proper hasn't even begun yet. It's simply not possible to live on dreams. I've tried and it doesn't work. :rolleyes:

We can discuss/argue all we want. In the end, time alone will tell.

ad9898_3

Really2 wrote: »

Matt Stevens said a similar thing.:D

Does he still have a nose ?

nearlynew

HAMISH_MCTAVISH wrote: »

............................
And for 15 years of every 20, prices rise faster than most people can save.

But not as fast as they can spend, if recent trends are anything to go by.

Equity is not the same as money McTittish.
The only way to get at it is to borrow more against the perceived value of your house.

Which is why you find that most HPI cheerleaders are, in fact, debt -junkies.
With no other way of funding their lifestyle other than through rising prices and more debt.

Debt is not wealth.