HousePrices double every X no of years- so last X years went up 300% correction?

Generali

chucky wrote: »

mmmm - when people start to think that the base rate is the rate that people pay on their mortgage that's when you know they haven't got a clue... well done :beer:

Correct IMO although clearly there is a relationship there as banks can enter into repos to finance themselves at the base rate. That is even more so now as the sorts of assets the BoE will consider ok as collateral for a repo are pretty risky compared to those considered acceptable historically.

Graham_Devon

chucky wrote: »

mmmm - when people start to think that the base rate is the rate that people pay on their mortgage that's when you know they haven't got a clue... well done :beer:

So there is no relationship between the two? Rates wouldn't have been up around 10% mortgage wise in the 90's?

Many thanks chucky.

Chrysalis

HAMISH_MCTAVISH wrote: »

House prices only double every 10 years or so in nominal terms. When you look at real, inflation adjusted figures, the results are somewhat less spectacular. Still solid, but not nearly as dramatic.

This is the inflation adjusted, real terms, house price history for the last few decades....




House prices actually rose from around 67K to around 170K in the course of 32 years, when you look at it in todays money, ie, removing inflation.

People that say they double every 7 to 10 years or so are including inflation.

The mean long term average is inflation plus 2.9%.

Shown above as the red line.

We are almost on (a smidgeon above, actually) the mean long term average today, and in fact were slightly below it back in february. No significant further falls are required to take us to the mean long term average though.

yeah I have seen that graph we have a problem tho that hasn't applied historically.

During the past decade wage increases have been low and have fallen behind, and usually during corrections house prices fall below the mean long term rather than matching it.

chucky

Graham_Devon wrote: »

So there is no relationship between the two? Rates wouldn't have been up around 10% mortgage wise in the 90's?

Many thanks chucky.

no. you missed the point again - you're saying that people are paying their mortgage at 0.5% and there is a direct correlation between BOE and mortgage rates. that's complete nonsense.
it's been explained to you so many times but you still don't get it.

there was more of a relationship in the 1990s
there is little if no relationship in todays economic climate

chucky

Generali wrote: »

Correct IMO although clearly there is a relationship there as banks can enter into repos to finance themselves at the base rate. That is even more so now as the sorts of assets the BoE will consider ok as collateral for a repo are pretty risky compared to those considered acceptable historically.

but repos will only be up to one years funding as would Libor so there would be much more to it when you start to look at fixes.

the funding market has changed and will change so much that it is crazy.
i spoke to a guy at RBS the other day who said that they were looking to incorporate corporate bonds in their repo trading, so incorporating these to their gilts treasury trading. there must be money in it for them to be looking at this option.

Generali

chucky wrote: »

the funding market has changed and will change so much that it is crazy.

My guess it's looking a lot more like it used to these days. I mean would you invest in a securitised mortgage fund?

You can imagine the conversation:

"You know all that money we saved up"
"Yes darling"
"Well I invested it in a fund"
"Hmmm.?"
"Yeah, in a load of those CDO thingies. You know, the ones whose falling value sent pretty much every bank in the UK and US insolvent. Ouch, that hurts!"

chucky wrote: »

i spoke to a guy at RBS the other day who said that they were looking to incorporate corporate bonds in their repo trading, so incorporating these to their gilts treasury trading. there must be money in it for them to be looking at this option.

I guess it makes sense from a practical pov as you can now use either (I think) as collateral for a repo at the BoE, also as you say there'll be money in it somewhere. Facilitating shorting by hedge funds perhaps?

chucky

Generali wrote: »

I guess it makes sense from a practical pov as you can now use either (I think) as collateral for a repo at the BoE, also as you say there'll be money in it somewhere. Facilitating shorting by hedge funds perhaps?

i'd never thought of that angle - it would make sense.

RDB

SilverStandard wrote: »

Its a good point Brit has made.

Surely if you argue that house prices will always go up 2.9% above inflation then eventually price will be way above 3x earnings and no one will ever be able to get a mortgage. Wait a min........

Yes I am trying to get my head round this one.

How can anything keep on going up say 3% above inflation? In the long term there has to be a correction.

CLAPTON

RDB wrote: »

Yes I am trying to get my head round this one.

How can anything keep on going up say 3% above inflation? In the long term there has to be a correction.

In general earnings increase about 2-3% above inflation so on that basis alone its possible for the price of a specific item (like housing) to increase above inflation for an indefinite period.

In addition, as people get richer, the basic essentials..food, clothing etc become a smaller proprtion of their income and so they are willing to use the 'surplus income' for housing.

so yes house prices can continue to rise above inflation for as long as earnings continue to rise above inflation too.

RDB

CLAPTON wrote: »

In general earnings increase about 2-3% above inflation so on that basis alone its possible for the price of a specific item (like housing) to increase above inflation for an indefinite period.

In addition, as people get richer, the basic essentials..food, clothing etc become a smaller proprtion of their income and so they are willing to use the 'surplus income' for housing.

so yes house prices can continue to rise above inflation for as long as earnings continue to rise above inflation too.

Any proof that earnings go up 3% ABOVE inflation?

I have my doubts this can be right.

So what shopping our parents generation could buy with a months earnings say 50 years ago will be 150% less than we can buy?

3% a year above inflation this can no way be sustainable.

Eventually you could buy a weeks worth of food with 1 hours wage:rotfl: