Interesting? Can it be argued?

Graham_Devon

Ok, so this first picture is a chart / graph / doodle / watercolour type thing.



This second graph, covers house prices from 1975 - 2010. So this thread is NOT discussing the "bubble" in the terms we usually discuss the bubble. It's showing prices over a longer period. So let's make no mistake as to the time period we are talking here.



We can all put our own conclusions on this, along with a myriad of different ways of explaining our conclusions...such as real, nominal, blah blah.

I'll possibly put my own conclusion up later, but, just for pure interest, would like to hear what you think. Maybe cut out the bickering. I've only posted up 2 graphs with no comment at this point in time.

I know you cannot put a timescale on the first image, but it does serve as quite interesting.

Exocet

Some people seem to think that prices can outstrip earnings for ever. "A new paradigm" they all cried as they poured money into InsideTrack. "Hooray for houses" they shouted as the Boe lowered interest rates to their lowest level in 300 (yep that's 300) years.

Mental house prices for mental people - imo. Now both graphs look like a bear trap. But without graphs, just looking at the last several years, surely anyone can see that prices went bonkers? Nothing that 'good' can last forever.

chucky

there isn't anything to argue because the fundamental problem with this chart / graph / doodle / watercolour type thing is that it was created in 2006 after the event of most of the data - all previous data to 2006 wasn't predicted it was drawn to try and predict the Return to Mean line which is completely wrong.

http://people.hofstra.edu/jean-paul_rodrigue/jpr_blogs.html under Bubbles, Manias and Bears, oh my... (01/18/2006)

all that they seem to have got right is the drop from peak everything else going forward seems to have been wrong.

chucky

Exocet wrote: »

usual

shall we pretend it didn't happen?

twirlypinky

I'd like to see another two lines on that second graph, the average wage and the average price of something standard like a pint of milk.

Just to prove to my bloody mother that it was harder for me than it was for her because it's a very boring argument.

Voyager2002

The problem with the second graph is that it shows nominal prices, yet includes a period of very high inflation. We would need to deflate it, perhaps by RPI and / or by average earnings, in order to be able to see whether it resembles the phenomenon shown in the doodle thing.

Graham_Devon

chucky wrote: »

there isn't anything to argue because the fundamental problem with this chart / graph / doodle / watercolour type thing is that it was created in 2006 after the event of most of the data - all previous data to 2006 wasn't predicted it was drawn to try and predict the Return to Mean line which is completely wrong.

http://people.hofstra.edu/jean-paul_rodrigue/jpr_blogs.html under Bubbles, Manias and Bears, oh my... (01/18/2006)

all that they seem to have got right is the drop from peak everything else going forward seems to have been wrong.

It was created in 2006 yes.

So either the creator had a crystal ball. Or the creator was correct for at least the next four years.

Or, it's all just one big canny co-incidence.

We all have our own conclusions. My problem is in the fact that for it to play out, based on the second graph, prices would have to plummet to unthinkable levels.

But then, on the other hand, even though I personally can't see prices going that insanely low, ever....banks collapsing and BOE at 0.5% was also pretty unthinkable. Both of those happened. The dotcom crash was unthinkable and that happened.

If we added inflation on, can see the chance of property prices falling that far though. i.e. 1975 levels + inflation over that period.

System

House prices on their way down to sub 1975 levels then.

No, wait.

Malcolm.

According to this, the bubble 'take off' point is 1980. The return to some sort of predicted normal sometime after 2010.

1) it strikes me that most mortgages are repaid within the 25 years.

2) the mean line has been drawn on by an idiot. House price growth is percentage based (say x% a year), the mean should be represented by an exponential line, not a straight one.

chucky

Graham_Devon wrote: »

It was created in 2006 yes.

So either the creator had a crystal ball. Or the creator was correct for at least the next four years.

Or, it's all just one big canny co-incidence.

it wouldn't be hard to know that if prices fall, they will rise again - that's all he has done. he has predicted nothing else.

Graham_Devon wrote: »

We all have our own conclusions. My problem is in the fact that for it to play out, based on the second graph, prices would have to plummet to unthinkable levels.

it would put prices to 1970 levels if it were correct - how likely is that?

Dopester please don't answer that

also, if it were so accurate how come the Return to Mean line is so very wrong?

Euphoria1z

fastforward 30 years, im 99% confident that the graph from this point onwards will mirror the graph you have put up. i.e a dip, then stagnation, then all the way up to the next time we have major crash/recession/credit crunch part 2.