Why are prices rising so much and so fast?

DaddyBear

ZIRP
QE
Mortgage payment scheme
Currency devaluation


How many of those will continue into the next year??? ...... well the top three wont.

The housing market is on life support and is being flogged as hard as possible, unfortunatley this cannot continue.

Such a shame the government didn't put all its effort into rescuing the economy. Instead it chose to prop up asest prices, a decision we will all come to regret.

Thrugelmir

DaddyBear wrote: »

ZIRP
QE
Mortgage payment scheme
Currency devaluation


How many of those will continue into the next year??? ...... well the top three wont.

The housing market is on life support and is being flogged as hard as possible, unfortunatley this cannot continue.

Such a shame the government didn't put all its effort into rescuing the economy. Instead it chose to prop up asest prices, a decision we will all come to regret.

The Government didn't choose to prop up asset prices its a by product of stopping the banking system collapsing.

The only regret people will have is by not making sensible long term decisions now.

michaels

I actually figured out the answer to this one earlier - it is house price sold indicies that are rising not average house prices.

Anyone argue that falling prices result in less activity and rising prices more?

Now consider country x made up of two equally sized towns Crashville and Aberdeen (or city centre flatsville and family homesville). In 2007 prices were rising at 10% pa in both towns and there were 50k transactions in each town - looking at sold house prices shows house prices rising at 10% in the previous year.

Fast forward to Feb 2009 and prices in both towns have fallen by 15% and the volume of transactions have halved to 25k in each town and the house price index shows a decline of 15% in the previous year.

Now fast forward again to Feb 2010. In Crashville prices have fallen by another 10% and transaction volumes remain subdued at 25k. Whereas in Aberdeen prices are up 10% and volumes have increased to 50k pa again. What does our house price index say - zero percent? The average change in all house values? No - For sold houses 25k have dropped 10% but 50k have risen 10% giving an average price rise of 3.5%.

Conclusion, if activity levels depend on price changes and the market has areas with rising and falling prices then the rising prices will impact more on the house price index.

CloudCuckooLand

And the same can apply to property types/price bands having differing patterns of activity? i.e detached houses lifting the average.

Partially is it the old percentages problem;

100 - 10% = 90.
90 + 10% = 99.

Frothers see the +10% and think 'recovery', but in reality its still short of the start point.

House price peak was say £180k - 20% crash = £144k trough

£144k +10% 'recovery' = £158.4k, still 14% short...not 10% short.

Asheron

I'm waiting to buy a 4 bedroom house with 700 Oz of Silver

stueyhants

CloudCuckooLand wrote: »

And the same can apply to property types/price bands having differing patterns of activity? i.e detached houses lifting the average.

The Haliwide indices should take these factors in to account using 'mix adjusted' factors. The only problem is they do not publish how they calcuate the factors and how they are applied for independent scrutiny.

baileysbattlebus

stueyhants wrote: »

The Haliwide indices should take these factors in to account using 'mix adjusted' factors. The only problem is they do not publish how they calcuate the factors and how they are applied for independent scrutiny.

Here is how they do it - housing characteristics, geographic region etc

If you use the link you need to go to Technical Details and it's all there. Under the heading Latest House Price Index - the last line

http://www.lloydsbankinggroup.com/media1/research/halifax_hpi.asp

I suppose like the Nationwide, it's not perfect - but consistant

stueyhants

baileysbattlebus wrote: »

Here is how they do it - housing characteristics, geographic region etc

If you use the link you need to go to Technical Details and it's all there. Under the heading Latest House Price Index - the last line

http://www.lloydsbankinggroup.com/media1/research/halifax_hpi.asp

I suppose like the Nationwide, it's not perfect - but consistant

I stand corrected. Thanks

gjchester

Personally I think it relates back to the selling of council houses under buy to let. Nothing wrong with the people who bought the houses, but everything to do with the Goverment at the time (and sucessive ones) who didn't invest that income in social housing. Result is the long council waiting lists.
Then when the credit crunch came along and prices dropped the off plan people and buy to letters stopped buying, and most of the builders effectivly stopped work, (the site near us has so little activity it's only barely ticking over). Due to the price crash a lot of sellers chose to rent out a house rather then selling when they moved house. Forward to today and it all means there is a lot of people on waiting lists, and not enough houses, so creating a bouyant rental and sale market.

The upshot is there is so little housing stock that supply and demand is out of kilter and there is more demand than supply, and prices rise. It's no use complaining about first time buyers who can't get on the ladder, and people who take on silly multiples, thats a symptom of the problem, it's all because the conservative goverment started a quick cash scheme by the right to buy scheme and never put the mony back in to housing stock, starting a drop in availalbe housing stock we've not recovered from. For every potential buyer who can't get a mortgage or raise a large enough deposit, there are plenty who can. If that were to stop we'd see a price drop, but I doubt it any time soon. Too many people want to own their home and not enough houses to go round.

Cleaver

Asheron wrote: »

I'm waiting to buy a 4 bedroom house with 700 Oz of Silver

Are you planning to buy this house from a pirate? Chuck in a parrot and a map with a big 'X' on it and see if he'll include the white goods with the sale.