Demographia 2009: It IS a supply shortage after all.....

the_ash_and_the_oak

and wages!

phil_b_2

HAMISH_MCTAVISH wrote: »

Most of it.

Had the day off today, and a case of Crabbies Ginger Beer to get through.:beer:

Ahhh good choice. Alcohol and ginger beer, 2 of my fave things. Think I'll nip to saino's and load up.

Mr.Brown_4

HAMISH_MCTAVISH wrote: »

I know you understand the difference between correlation and causality.

I don't. But I frequently come across these words in crosswords or the Times wordsearch puzzle. I did look them up once, but I developed a slight migraine and needed a lie down.

You'd probably be really good at them if you tried.

System

Mr.Brown wrote: »

I should have just said "Jesus, I am bored with reading this stuff".

Wow and it only took you 101 posts.

HAMISH_MCTAVISH

Graham_Devon wrote: »

As I say time and time again and get ignored. The demand was helped by the availability of credit.

Credit enabled the conversion of need to effective demand. However demand alone cannot raise prices. If supply rises in parallel with demand, prices will stay flat.

Only an imbalance between supply and demand can cause prices to rise.

It's the shortage of housing that creates that imbalance.

Ah, but wait (I hear you say), surely without credit the demand will reduce and the balance be restored????

No. Because credit merely enabled the conversion of need to effective demand. Remove the credit, and the need will remain. Meaning an increase in household density, which results in an increase in household average income due to more earners per household, and an increase in capacity to pay, and then the inevitable increase in price of rents, which will increase yields and draw back in funding for lending to increase credit, and therefore prices again.

Mr.Brown_4

Joeskeppi wrote: »

Wow and it only took you 101 posts.

I tire easily.

Thrugelmir

HAMISH_MCTAVISH wrote: »

They are not balanced in the UK, as prescriptive planning prevents that, by creating supply shortages.

Which the report clearly states, if you bother to read it.



I expected better from you Thrugelmir, as I know you understand the difference between correlation and causality.

If credit was causal, we would not see the differences in price between areas. Credit growth is equally available throughout a market. Supply shortages differ by locality. As do prices. :rolleyes:

Price has been driven by "credit" in recent years. Price longer term will be determined by credit availability. Loose regulatory control has allowed the UK market to run ahead. Over time the market will slowly fall back to a sustainable level. For some there will little to show for years of paying a mortgage.

Demand will always push the price up to the limits allowed.

If it was a requirement that say a 25% deposit was required to fund a purchase. Prices would fall until equlibrium was restored financially.

phil_b_2

While the availability of cheap and easy credit is obviously the key other factor, I think only by taking away demand would prices drop massively and stay there. Not really gonna happen.

Demand had a party, easy-credit turned up and they got p!ssed. House prices exploded. Easy credit has gone home early leaving demand on his own and things have throttled back to where they'll stay for a long while yet IMO (until easy credit gets past his hangover and we do it all again).

There seems to be more than enough wealth floating around out there to get past the credit issue and keep things ticking.

Graham_Devon

HAMISH_MCTAVISH wrote: »

Credit enabled the conversion of need to effective demand. However demand alone cannot raise prices. If supply rises in parallel with demand, prices will stay flat.

Only an imbalance between supply and demand can cause prices to rise.

It's the shortage of housing that creates that imbalance.

Ah, but wait (I hear you say), surely without credit the demand will reduce and the balance be restored????

No. Because credit merely enabled the conversion of need to effective demand. Remove the credit, and the need will remain. Meaning an increase in household density, which results in an increase in household average income due to more earners per household, and an increase in capacity to pay, and then the inevitable increase in price of rents, which will increase yields and draw back in funding for lending to increase credit, and therefore prices again.

Hang on, so credit turned need into demand.

But without credit, there will still be demand.

More people will move into each other, creating bigger "household income" (regardless of whether these people are a family or want to buy together!!)

With more people living together, we will need more houses, cus more are living in single homes?!

Rents will go up, meaning that those people all living together paying that rent can't save to buy, but this will lead to more demand for people to buy!?

How mny ways do you want it hamish?

You may aswell have saved some time and said "but, they will always go up".

HAMISH_MCTAVISH

Graham_Devon wrote: »

Hang on, so credit turned need into demand.

But without credit, there will still be demand.

More people will move into each other, creating bigger "household income" (regardless of whether these people are a family or want to buy together!!)

With more people living together, we will need more houses, cus more are living in single homes?!

Now you're getting into the third aspect of things. Need, desire, demand.

You need a place to live. You desire to live there alone. You can only convert need and desire into demand when you obtain financing.

Rents will go up, meaning that those people all living together paying that rent can't save to buy, but this will lead to more demand for people to buy!?

No, the shortage of supply will raise the rents. The fact that the shortage of supply will also force people to live together just means they can afford to pay higher rents.

And rent being cheaper than a mortgage is not a universal phenomenan. In many places, it's the same or more expensive. Yet these people manage to save deposits regardless.


You may as well have saved some time and said "but, I don't understand it, so I'll try and slag off Hamish and add to my thanks count from rewired, carol and mewbies latest persona instead.":rolleyes: