A question for the optimists

Graham_Devon

Cleaver wrote: »

I've said this before and been shot down, but I'll say it again. If this is the average price and average salary then I guess we should look at average kinda age for the average house (maybe early thirties to buy an 'average' house?).

It's the average price in my (probably wrong) mathmatics (don't think I can even spell that word proper....mathmatics, mathamatics, mathematics........sod, it maths).

But it's not the average wage, it's just the wage the person / couple would need to buy that 160k house with a 10% deposit, based on a 4x mortgage.

Understand it just so happens to be the average wage on a couple of index's though, which is probably confusing!

Cleaver

mewbie wrote: »

I may have an argument to deal with this. Bear with me.

IF your average salary business holds true, and IF houses are affordable to people then HOW COME the recent biggest housing bubble ever only managed to move prices 20% above what they should be anyway?

I don't buy it Cleaver, even from you, you silver tongued clever person.

I'm not saying houses are cheap. And I reckon they should be cheaper than they are. And, just as an aside, I think Dan: and Hamish confidently stating all over that other thread that Feb 09 is the bottom, and houses go one way from here could look a bit silly in a year or two. Only 'could' mind, there is a good chance we hit the bottom then. But in this climate who knows what might happen But anyway, I digress.

Yes, houses and stuff. Right. Averages tell you a lot and nothing really don't they? Oop north where I am, you can buy houses, right now, that are affordable. And I chose that word carefully, meaning that if people save a deposit and are willing to give up a good chunk of their salary each month, a house is available (and therefore affordable) to them. They are still probably expensive, probably overpriced, could fall further... but your average joes don't care. A house, up north, is within most people's reach. Which I think will mean people will buy them. People love buying houses - to have their own home, to make money (anyone that thinks the British public have been put off bricks and mortar as a long term financial investment are kidding themselves) and because 'we' just love property. And if they are affordable, people will buy them, bubble or no bubble.

Down south then. I have no idea how anyone affords a house. No idea. Kent, Surrey, London, the whole of the South West; I have no clue how young people get a place in most of the towns and cities. Maybe that's just the impression I get, but it looks mental down there. So I don't really understand how anyone buys a house south of Oxford.

So if you ask me to look at the average, it looks reasonable. Surely it does to you too? So to answer the question: is the average house affordable to the average couple? Yes. It is.

I've just re-read my post and have no idea what points I was trying to make. You have any ideas Mewbs?

Cleaver

Graham_Devon wrote: »

It's the average price in my (probably wrong) mathmatics (don't think I can even spell that word proper....mathmatics, mathamatics, mathematics........sod, it maths).

But it's not the average wage, it's just the wage the person / couple would need to buy that 160k house with a 10% deposit, based on a 4x mortgage.

Shall we have an average wage debate again?!

It's somewhere around 25k. Doesn't matter what anyone says, it's around that. So an average couple, buying your average house for £160k would earn about £40k to £50k between them I guess.

So...

Our £50k join earners get about £3200 a month after PAYE, decide they want an average house, make a sensible budget for themselves and save around a 1/3 of their salaries for two years to get themselves a rough £25k deposit.

Fees would be about £4k on a £160k house wouldn't they? So the deposit would be around £21k (or about 13%?) and all is well.

Isn't it?

Anyway, off for a pint with my old man. Laters all.

mewbie_2

Cleaver wrote: »

I've just re-read my post and have no idea what points I was trying to make. You have any ideas Mewbs?

I think you are too intelligent and considering of facts to make a decent full on bull. I am able to do the full on bear thing, even though secretly I allow some doubt in my mind. Neither of us are extremists, I am probably just a bit more miserable than you.

I've lost it too. Prefer arguing with Dan.

wymondham

Heyman wrote: »

I'd agree with that - probably the most informed, 'tell it like it is' poster on here tbh.

I'd second (or third?) this .... one of the few reasons I return to MSE on occasions!!

baileysbattlebus

Graham_Devon wrote: »

Hi Guys,

Just wanted to ask this question and start a new thread on it, so we get proper responses from the start. Hopefully thought out opinions too!

So, the premise of the question is: How do you feel that current rises / stagnation now will be supported by the populace?

We have risen back up to £160k or whatever for a property on average. On a 4x salary with a 10% deposit that will require:

- A salary of £36,000, likely with no debts, either joint or singular.
- £16,000 deposit
- £2-10k for fees (dependant on purchases obviously).

So in other words, £20k in the bank is needed really, for the slim chance of getting a 10% deposit mortgage. I recall the average amount of savinsg per person in the country being around £800.

Now, we crashed because basically, the banks & we, could no longer carry on this level of indebtness. So, if house prices did bottom in February, and it's rises and small falls from here.....how is it different this time? I.e. what's so different between now and 18 months ago, which means suddenly we can afford this debt, when we couldn't 18 months ago?

Whats changed? And I mean what's changed that will stay that way. I don't mean obvious interest rates which fluctuate.

Would be interested in your thoughts.

I thought the housing crash was caused by the freezing of the credit markets and the lack of funds available to borrowers because of this- that and the forecast armageddon, perhaps have made many people, not only the lenders, very cautious about taking on mortgages and long term commitments. Not the levels of debt directly.

Banks make money from lending to people - lots of money. I would think, in reality they would want to lend money to squeaky clean, virtually risk free borrowers - and it looks as if that is what they are doing. And banks will have short memories - eventually when the credit situation eases it will be business as usual. They are there for one reason only - to make money.

On the lending side I would think it is sustainable - the government have done some arm twisting on the lending front with some of the lenders, I think. And tbh, the housing market and the wealth held there is such an intrinsic part of the UK economy that I don't think a Conservative gov't would want to or try to change that (I don't think they could).

Some of the populace are already buying - so I guess it depends on which part of the populace you mean. If you already have a house you probably aren't too bothered, if you were waiting to buy a house - you're probably p*ssed off - if you just bought - you're probably happy and think you got a bargain.

House price wise - who knows in the short term - housing has been volatile for years and there is no reason to think that will change - infact I would go as far as to say it won't change until some things in the housing market change - like the number of houses built, there are far too few.

There have been thousands of flats built in the last few years - one day planners and developers will realise that the majority of people actually want to live in a house with a bit of a garden - so we have a large over supply of flats - mainly city centre flats. And how many more city centre flst developments have been put on hold - I wonder if they can get the planning changed? I would imagine it isn't only buyers of the flats who have their fingers burnt - developers must have too.

Last year and this year I think have seen the lowest number of new build houses ever, a trend that may continue for the next few years until the ecomony is sorted out. If the extemely low numbers of new builds continues we are storing up trouble for the future - as another boom is as an inevitable as the sun rising in the morning. I don't know if the gov'ts plan to build 3 million homes by 2020 has gone totally out of the window - I would imagine it has - it was always optimistic. But those houses were and are needed.

The only way we will have long term stability in the market is to have enough housing that people want to live in - either to rent, not on AST, but long term secure tenancies or to buy - as long we don't we will continue to have housing booms and busts.

And I personally wouldn't like a situation where it could be only the "haves" who are able to afford to buy, those who have very well paid jobs, those who have parents or grandparents who are to help fund the purchase, those who have money.

Sorry for the long post.

Cannon_Fodder

HAMISH_MCTAVISH wrote: »

No, thats not right. Only those that bought in the last few years will have no equity.

If someone bought ten years ago on I/O they'll still have significant equity.

Not my best moment! Ok, I concede I got that wrong. IO does not preclude equity. Obviously the 2006 onwards IOs are in negative equity.

HAMISH_MCTAVISH wrote: »

Correct. It's nowhere near right.

http://www.creditaction.org.uk/august-2009.html Mortgage debt, £1.227Bn. Unsecured Debt £231Bn.

"Average outstanding mortgage for the 11.1m households who currently have mortgages now stands at ~ £110,550."

"Average household debt in the UK is ~ £9,240 (excluding mortgages)."

So, average debt in households with a mortgage = £119,790...better?

HAMISH_MCTAVISH wrote: »

It was overplayed. And the two crashes prior to that it took only a year or two to reach bottom, with only a year at bottom, before substantial rises lasting for many years.

Totally untrue. 90s crash was 89-95/6 depending on the index...try reading your own long list again, I think you might have number-blindness...

Although, that list should have started a couple of years earlier...maybe that explains why you think it only lasted half the time it really did...?

Halifax has older data if it helps a bit, June 1989 peak to July 1995 bottom...; http://www.lloydsbankinggroup.com/media1/research/halifax_hpi.asp

MonthYearIndexMonthly % ChangeStd Price
May1989227.41.170,247
Jun1989226.9-0.270,095
Jul1989225.8-0.469,780
Aug1989225.1-0.369,560
Sep1989223.7-0.669,113
Oct1989222.6-0.568,778
Nov1989222.1-0.268,625
Dec1989221.6-0.268,484
Jan1990224.11.169,240
Feb1990224.0-0.169,201
Mar1990223.3-0.368,992
Apr1990224.00.369,218
May1990222.6-0.668,787
Jun1990222.60.068,781
Jul1990222.1-0.268,623
Aug1990221.6-0.268,465
Sep1990222.80.668,841
Oct1990222.2-0.368,645
Nov1990222.90.368,860
Dec1990223.40.269,030
Jan1991223.60.169,098
Feb1991222.6-0.568,768
Mar1991222.50.068,740
Apr1991221.4-0.568,413
May1991221.90.268,572
Jun1991221.5-0.268,432
Jul1991219.9-0.767,959
Aug1991219.6-0.167,858
Sep1991218.3-0.667,446
Oct1991218.70.267,585
Nov1991217.3-0.667,145
Dec1991215.6-0.866,623
Jan1992214.9-0.366,392
Feb1992213.0-0.965,825
Mar1992211.3-0.865,293
Apr1992208.8-1.264,509
May1992208.5-0.164,413
Jun1992208.60.164,460
Jul1992208.0-0.364,265
Aug1992207.4-0.364,072
Sep1992201.1-3.062,130
Oct1992200.1-0.561,820
Nov1992200.40.261,934
Dec1992199.6-0.461,672
Jan1993199.0-0.361,476
Feb1993197.9-0.661,132
Mar1993200.51.361,942
Apr1993204.82.263,292
May1993201.5-1.762,246
Jun1993198.9-1.361,448
Jul1993200.50.861,963
Aug1993202.00.762,420
Sep1993203.20.662,794
Oct1993203.60.262,898
Nov1993203.50.062,882
Dec1993202.6-0.562,591
Jan1994201.2-0.762,155
Feb1994204.81.863,269
Mar1994205.00.163,355
Apr1994204.3-0.463,115
May1994201.9-1.262,378
Jun1994202.10.162,450
Jul1994203.20.562,776
Aug1994201.9-0.662,371
Sep1994201.90.062,398
Oct1994201.8-0.162,350
Nov1994201.5-0.162,266
Dec1994202.20.362,470
Jan1995201.9-0.262,374
Feb1995201.2-0.362,179
Mar1995200.9-0.262,068
Apr1995200.1-0.461,811
May1995198.5-0.861,345
Jun1995198.90.261,440
Jul1995197.3-0.860,965
Aug1995197.50.161,022
Sep1995198.20.461,242
Oct1995198.20.061,251

JonnyBravo

Cannon_Fodder wrote: »

Not my best moment! Ok, I concede I got that wrong. IO does not preclude equity. Obviously the 2006 onwards IOs are in negative equity.

Obviously. :rolleyes:

Oh hang on, that's complete rubbish too.

We remortgaged in '08, moving from a repayment to an I/O mortgage. No, we didn't increase our loan, or the length of the loan, it was simply a better offer. We continue to pay on it as if it was repayment. I'm sure we're not alone.

Next.

Cannon_Fodder

HAMISH_MCTAVISH wrote: »

Only those that bought in the last few years will have no equity.

I'm trying to learn from the new master...when I take his teachings onboard, I'm still wrong...?

HAMISH_MCTAVISH

Cannon_Fodder wrote: »

Totally untrue. 90s crash was 89-95/6 depending on the index...try reading your own long list again, I think you might have number-blindness...

Yes, I was referring to the two crashes before the 90's crash.

Both of which were far shorter than the 90's crash.