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Debate House Prices
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Mortgage plan will force house prices down, CML warns
Comments
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des_cartes wrote: »Good. It has always seemed a bit wierd to me that banks are allowed to lend £10 for every £1 they have deposited. If you or I were to do it we'd probably be locked up.
Someway to go on that front. Taking Barclays balance sheet at end of 2009. It was a 73:1 ratio.
According to recent capital ratio disclosures they are one of the best banks in Europe. :eek:0 -
True, so in times of rising prices more are prepared to sell which would enable more to buy. (I class buy as a transaction, not as a wish to transact)
2006.... House price rises lock out half of new buyers:
http://www.guardian.co.uk/business/2006/dec/03/housingmarket.houseprices
Rising house prices do not allow more people to buy....and thats that.
This argument is silly.
The only thing that allows more people to buy is affordability. Affordability is made up of several factors:
1) Wages 2) Credit availability 3) Security 4) Buyers past history 5) Market direction
To state that falling prices enable less to buy is merely ignoring every other factor. The same as saying lower prices enable more to buy if it was said in a time the whole country was seeing wages cut by say 25%.
Falling prices may lock out some of those who have a deposit ready and waiting and suddenly see deposit requirements shoot up, which means they suddenly can't buy when a few months beforehand, their deposit would have been enough to secure a mortgage.
On the other hand, as prices fall, their static deposit makes a higher percentage of the deposit every time prices fall, so their deposit is actually getting bigger.
Once prices have plataued off, their static, or initial deposit, will be a larger percentage than it was before the falls. So they are actually in a better position deposit percentage wise, depending on the credit availiability at the time. Of course, they also will not need as large a mortgage.
It can be argued all ways. One single way is not correct, no matter how many times it's said in response to anything else.
The massive difference today compared to all other times is that this recession is based on a credit crunch. A credit crunch in which high house prices played a huge part of.0 -
Graham_Devon wrote: »The massive difference today compared to all other times is that this recession is based on a credit crunch. A credit crunch in which high house prices played a huge part of.
Correct. Yet I keep hearing "we don`t want house prices to fall, we want more/cheaper credit" !30 Year Challenge : To be 30 years older. Equity : Don't know, don't care much. Savings : That's asking for ridicule.0 -
des_cartes wrote: »Prices could easily be kept down through credit restrictions.
False.
Credit restrictions will only delay HPI, not prevent it.
Eventually, people save bigger deposits.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
HAMISH_MCTAVISH wrote: »False.
Credit restrictions will only delay HPI, not prevent it.
Eventually, people save bigger deposits.
Its all about affordability now even you you have nice deposit. Bank are not going to give out liar loans like they used to and the majority now have to send in bank statements etc to show affordability.0 -
There is a Difference between anecdotal and statistics.
More people buy in a rising market than a stagnant or falling one.
So the fact is a rising market enables more to buy, partly because of lending partly due to being a sheep?
One thing is for sure there is no evidence that falling or fallen prices enable more to buy.
From prices falling to the top of the next peak (1989-2007) transactions never got past 1989 peak even though prices were lower for 9 years (or 12 years in real terms)..:)
But what sort of buyers were there in 1989 at peak? How many were genuine FTB's etc. How many people priced out as the market fell found they could not buy when the bottom was reached?
I can't see too many being too upset at being frozen out in late 89-90 especially if they could buy back before 96 at a cheaper price0 -
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But what sort of buyers were there in 1989 at peak? How many were genuine FTB's etc. How many people priced out as the market fell found they could not buy when the bottom was reached?
I can't see too many being too upset at being frozen out in late 89-90 especially if they could buy back before 96 at a cheaper price
A fair few I should imagine, lots of people lost their jobs.
You are still detracting from the point though, sales in 1989 were around 200K per month. It was never past in the 9-12 years later when prices were lower nominally-real term.
The closest it got in that time was frame was 1993 140K , guess what house prices did that year (but they fell back again and so did transactions). 0 -
A fair few I should imagine, lots of people lost their jobs.
You are still detracting from the point though, sales in 1989 were around 200K per month. It was never past in the 9-12 years later when prices were lower nominally-real term.
The closest it got in that time was frame was 1993 140K , guess what house prices did that year (but they fell back again and so did transactions).
The point was that people were less able to buy. We do not know that. Many people buying in to the housing market buy because prices are rising. When prices fall people tend to stop buying like they did before.0 -
The point was that people were less able to buy. We do not know that. Many people buying in to the housing market buy because prices are rising. When prices fall people tend to stop buying like they did before.
So would you not expect transaction to be higher than the previous peak before they past the top of the previous peak if that was true?
The previous peak would be the height of unaffordability in that time frame so if it (lower prices) did enable more to buy how come it resulted in lower transactions?
It cant be argued it enables more to buy if less people buy before the previous peak is surpassed?
Shockingly more people purchased after the previous peak was surpassed than when prices were lower.
I am not saying this as pro HPI, I am just saying their is no argument to support it enables more to buy.
It is an idea based on price alone and ignores so much and just simply is not supported by any fact
The truth is many are still locked out until the previous peak is surpassed.0
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