House price crash update

Market_Oracle

mystic_trev wrote:

I've read several articles saying that Bush has an agreement with some of the Arab states to increase the amount of barrels produced to help him in the mid term elections, and that the price will start rising again after that!

I'd like to add that I'm not one for conspiracy theories, but I wouldn't be surprised by anything Bush did!

Theres an infinite number of things that could drive prices, but its all in the end reflected in the price on the charts

As there was talk about Arab states CUTTING oil production, but the market by its action does not believe them.

Jags_2

MarketOracle.co.uk wrote:

I'm working on an article that explains why house prices have not fallen, will post it here when finished. But basically its Av earnings X Base Rate X Average House prices. - In those terms, we are nowhere near the highs of the early 1990's in unaffordability terms. Hence why they are stubbonly still rising.

A major newspaper already beat you to it, and they used your overly simplistic terms too. The link is on here somewhere, I think it was the telegraph.

IF you're runnig this calculation, please don't forget to include the effect of percentage rises in interest rates, i.e a jump from 13% IR's - 14% IR's is only an 8% increase in interest rates, but a jump from 3.5% to 4.5% IR is an increase of nearly 30%, so any money borrowed at lower rates and then had a rate increase dramatically affects the amount repayable, whereas if you bvorrow a lower amount at a high rate, the total repayable hardly increases.

Plus you need to factor in the level of wage inflation - if a person is getting payed 10% more every year, the ability to service the debt greatly increases every year, whereas if wage inflation is only around 2% it makes things a lot harder.

For Unaffordability, you are much better looking at % of take home pay that is needed to service a mortgage.

Plasticman

desperadoV2 wrote:

I totally can't believe it. Saw the news that house prices are still on increase.

1. Interest Rates are High and Rising
2. Unemployment is on the rise
3. Houses Prices 5-6 times the average salary
4. First-time buyers can't afford to get onto property ladder

But still house price is still on increase.

Its ridiculous. I can't afford to buy a property and its very depressing

Not sure your points are completely right. I prefer:

1. Interest Rates are LOW and Rising very slowly
2. Unemployment is on the rise but very slowly and employment is up
3. Houses Prices 5-6 times the average salary (worse than that where I am!)
4. First-time buyers can't afford to get onto property ladder in the same way as they did before. Some can't afford it but others just need to save longer, lower their expectations, borrow from Mum & Dad etc)

Market_Oracle

Jags wrote:

A major newspaper already beat you to it, and they used your overly simplistic terms too. The link is on here somewhere, I think it was the telegraph.

IF you're runnig this calculation, please don't forget to include the effect of percentage rises in interest rates, i.e a jump from 13% IR's - 14% IR's is only an 8% increase in interest rates, but a jump from 3.5% to 4.5% IR is an increase of nearly 30%, so any money borrowed at lower rates and then had a rate increase dramatically affects the amount repayable, whereas if you bvorrow a lower amount at a high rate, the total repayable hardly increases.

Plus you need to factor in the level of wage inflation - if a person is getting payed 10% more every year, the ability to service the debt greatly increases every year, whereas if wage inflation is only around 2% it makes things a lot harder.

For Unaffordability, you are much better looking at % of take home pay that is needed to service a mortgage.

LOL

Maybe you should write the article

Zippy2006

House price rises depend on the area you live in - many areas are still playing catch up with traditionally higher valued areas.

One of the biggest contributing factors in the continuing rise in house prices in my area is ..... people snapping up cheaper houses for the buy - to - let market or alternativley to allow thier student son's and daughter's to live comfortably whilst at university.

In my hometown many properties are being snapped up by people from all over the country. House prices here were always cheaper than most places in the past. A high student population means that many flats are also rented out. Investors are snapping up flats with potential to rent out to the students.

The rental market is also being fuelled by migrant workers coming to the area from Eastern Europe. Few of these workers can afford to buy at the moment - but given half the chance thay may also fuel the market once they want to buy.

House prices have rocketed greatly in the last 2 years - an example being the 1 bedroom property i just sold in August.

I paid £34,000 in 1998 and had a valuation of £50,000 in 2004 .... not bad a 32% rise in 6 years.

Better still though as I sold in August for £81,000 (asking price was offers over £65000) which equals 61% rise in 2 years.

The lack of starter / first time homes in the town has pushed this end of the market to bursting point. I sold the property in under 2 weeks after a dozen viewings and numerous offers.

There does not seem to be any slow down yet either, a similar property to my old one went on sale Monday (offers over 69,500) and went to a closing date on Friday.

The knock effect is that people like myself who have outgrown flats and smaller older houses now want nice new build detached houses either out of town or on the periphery. New build developments have had people queueing for days before the plots go on the market. This fuels price rises too as developers know thay can ask a premium price in the knolwedge that they can sell.

Further fuelling of the market is happening when people book plots and sell on the new build once complete without even moving in. Money to be made there too.

Something will have to give in the end - a big burst of the bubble or a gradual flattening of the market. That is the big question????

Market_Oracle

I have yet to see instance of a bubble that deflated gradually.

Zippy2006

have to agree there... ye canny change the laws of physics Captain...

or the laws of economics.

freebo_2

MarketOracle.co.uk wrote:

I have yet to see instance of a bubble that deflated gradually.

MarketOracle I see from your website that you're a chartist, and nice work too, I've subscribed - but how do you read the current trend in housprices, purely from a Techical Analysis perspective?

Thanks,

ReportInvestor

Jags wrote:

A major newspaper already beat you to it, and they used your overly simplistic terms too. The link is on here somewhere, I think it was the telegraph.

Here's the graph they produced

And here's the article

jyonda

I'm not a student of economic form so I can't tell you what happened last time around or provide graphs detailing to the nearest week when 'THE CRASH' will happen but I think i know what the cause will be. And I think you probably do too.

It's not going to be employment or the lack of it, it won't be oversupply or rescinded tax breaks (3.5% stamp duty in Germany on the whole amount of every transaction!). It won't be the price of fuel bills, gold, or Turkey Twizzlers. It won't be foreign asylum seekers/investors/migrant workers, repossessions or bankruptcy.

To some extent it will be all of these things then the unavoidable rises in IR's will happen due to 'global pressures' on the economy and Bang goes the Boom. And we'll probably see it coming a mile off too so there's no need to monitor asking price trends or compare regional markets and digest endless lenders reports (they have a vested interest don't you know). Just stick your feet up and go about our business as normal. There's really nothing you or I can do about it so don't bother fretting and spending every available minute looking for the next 'sure sign'. When the time comes, believe me, you'll know and in the mean time your happiness equity will go through the roof!!!