MSE News: Halifax: House prices up again in August (+0.8%)

Graham_Devon

Yup, agree with everything you said.

You even agree that it fuelled HPI, which is what I have said.

However, it seems some are using the sub prime crisis as the starting point, not the foundations of the sub prime crisis. That, is all I was referring to that's caused all these silly replies.

Were high house prices a trigger for the problems we face today? Well you either have to say yes, they were, which is what I was saying, or, you can ignore that part of the make up of the sub prime crisis, and blame other parts, or ignore everything that made up the crisis completely and just make the starting point the "crisis".

mewbie_2

IveSeenTheLight wrote: »

At the end of the day, house prices are set like any market.
Supply and demand will always dictate the market prices.

You cannot wave a magic wand and say prices should be lower so that more can afford.
That contradicts the supply and demand theory.

Hold up mate. I agree with supply and demand to a point. But then cost comes into it somewhere. We all want a Mercedes (hypothetical example, don't bother arguing it), but we can't all afford one.

And Mr ISTL. Haven't you spent years perfecting the affordability argument?

the_ash_and_the_oak

supply and demand of credit imo

IveSeenTheLight

mewbie wrote: »

Hold up mate. I agree with supply and demand to a point. But then cost comes into it somewhere. We all want a Mercedes (hypothetical example, don't bother arguing it), but we can't all afford one.

And Mr ISTL. Haven't you spent years perfecting the affordability argument?

I think you need to clarify the definition of demand.
For me it is the desire AND the ability to purchase the product.

If you don't have the means, then you are not part of the demand, your just window shopping.

mewbie_2

IveSeenTheLight wrote: »

I think you need to clarify the definition of demand.
For me it is the desire AND the ability to purchase the product.

If you don't have the means, then you are not part of the demand, your just window shopping.

Take a break Graham, have a sandwich, I'll deal with this for a while.

Um.

Actually I don't really have much to say on this... Graham?

Graham_Devon

IveSeenTheLight wrote: »

If you don't have the means, then you are not part of the demand, your just window shopping.

This, is exactly the reason it looks like there will be a crash part 2.

The "means" have now gone for most of the population. I.e., lending.

Will that do mewbie? I added a small predicament

chucky

IveSeenTheLight wrote: »

I think you need to clarify the definition of demand.
For me it is the desire AND the ability to purchase the product.

If you don't have the means, then you are not part of the demand, your just window shopping.

but this window shopping does have a direct correlation to property sales transactions and by default house prices - when and if this window shopping slows down then we can expect a slow down in property prices again...

mewbie_2

Graham_Devon wrote: »

This, is exactly the reason it looks like there will be a crash part 2.

The "means" have now gone for most of the population. I.e., lending.

Will that do mewbie? I added a small predicament

Super stuff Graham.

I also think in addition to the "means", the "ends" have gone. At least for BTL fuelled by rampant HPI. The BTL dream now surely consists of buy property and rent it out. The bit missing from the dream? Instant riches.

baileysbattlebus

Graham_Devon wrote: »

I totally agree.

My point was, why did sub prime ever exist?

Was it because:

- well, it just did
- or house prices were getting too high for a large section of the population, and these mortgages, now called sub prime, were issued as a way of those people being able to buy a home as prices rose out of their "normal" reach...but it was unlikely they could ever pay the loans back.

This is all I was saying god knows how many pages ago.

Why does sub prime that caused so many problems exist?

Would the sub prime problem exist is people could afford to pay the high loans?

If it's nothing to do with houses becoming too expensive for a section of society, then fine, I will agree I am wrong to say high house prices were a trigger. But you have just explained to me that basically, it was, looser standards etc, allowing higher loans for higher house prices.

I'm just going one step further backwards. You are starting out with sub prime as the issue and looking no further back. I'm simply, and always have been, looking at what caused sub prime.

As I said 2 or 3 pages ago, when this whole thing started...never said anything about UK house prices, it said, what caused the sub prime crisis, high house prices. The sub prime crisis is largely US based, so I didn't think I would have to explicitly state high US house prices, as I regard you as an intelligent poster. Everything else since then has been totally skewed out of all proportion.

Thanks for the post.

The US gov't wanted lending to be available to minorities and the disadvantaged and they thought the banks that served the communities should lend those communities money to buy houses etc.

I can't remember who first started the ball rolling - it might have been Clinton. Or Jimmy Carter. I think Carter actually started it with the Community Reinvesment Act or CRA - it was regulated and the banks that did the lending were depository banks regulated by the Fed. You had to have a deposit etc, too. This was in the late 1970's. The act was passed to allow people who couldn't normally get mortgages/credit to be able to. It wasn't high house prices - but as you know some people could never get a mortgage - could be because they are low earners or in the US it could even have been because of your colour. So it was to help the likes of those people.

The difference then as opposed to now was regulation - after 2003 the main lenders for subprime weren't banks regulated by the Fed or other institutions that monitored compliance with CRA. They were aligned to the likes of Bear Sterns and Lehman Brothers, institutions which compliance with CRA didn't/doesn't apply. Thats when you started to get the zero money down - can you breath - can you sign your name types of loan.


So I suppose that's how subprime started - with the best intentions. And up until 2003 it worked a treat.

I read about a community in a New York outer borough where in 27 years and over 3,500 mortgages only 10 have defaulted - all poor or disadvantaged in some way.

I don't think lending money to poor people or minorities in particulary risky, just because you're poor doesn't mean you can't or won't pay.

You don't get poor by lending to poor people per se - you get poor by lending poorly - if you get my drift.

mewbie_2

baileysbattlebus wrote: »

You don't get poor by lending to poor people per se - you get poor by lending poorly - if you get my drift.

It doesn't help if these loans are then sold on (and on and on) as AAA rated.