My perspective as a "bear"...

quantic

Loughton_Monkey wrote: »

I find the whole argument a little bit tedious and tiresome.

Currently, I am looking at a 'candlestick' 5-minute chart of FTSE. If I look at the last hour, I find it has fallen from about 5820 to 5796. If, however, I look at it's 8:00-ish value of 5710, then I find, lo and behold, it has gone up significantly.

But on 5th November, it peaked at nearly 5900, so it's down! Whoops. At the end of August it was barely above 5100, so it has definitely gone up!

You get the idea.

Now the FTSE is a very fast moving index. Prices change every second or so. Up, down. Any valid discussion of price movements must therefore consider the timescale in which you are operating. A scalp trader will be interested only in minute/hour movements. An Investor worries about months/years. So tell an investor that prices went down 0.3% in the last hour and he will yawn.

Now property, by definition, has a much longer timescale. The equivalent of a FTSE 'scalp trader' would be a property developer hoping to buy this month, renovate, and sell next month. But 99% of people are only really interested in the long term. So why are we all fixated with piddling movements month on month? Why are we so interested in the plethora of pundit comment who seem to be doing the equivalent of looking with a microscope at the last 10 minutes of FTSE price changes, and trying to inform a fund manager how to invest his £900 million UK Smaller Company Pension Fund?

History shows that house prices trend upward. Always have done. Occasionally, there is a temporary downwards adjustment. If this upward trend does not continue of the next 5, 10, 15 years, then I can only suggest that the price of our houses will be the least of our problems.

Perhaps because your typical investor is more savvy then your typical home owner?

Eric1

Blacklight wrote: »

You want prices to come down because you're adverse to borrowing and you'd rather have the money to spend on other luxuries. To me that smacks of greed.

On the other hand, not being adverse to borrowing what one cannot afford to pay back smacks of greed too

doire_2

Blacklight wrote: »

...people taking out new mortgages will have to pay far more.

Not if they did the sensible thing and saved for a deposit.

The days of banks lending willy nilly are long gone. They got burnt and wont make that mistake again in a hurry

doire_2

Blacklight wrote: »

As I said... make it up as you go along.

OK i admit it. I made up that article using Photoshop

Generali

tomterm8 wrote: »

Where do you think will real (inflation adjusted) house prices be in 10 years time?

No idea.

Please note that I reserve the right to be wrong. I've been wrong before and I most certainly will be again. I have a theory and it will be proved or disproved over the next 10 years or so. It's more the mechanism than the price level that I am interested in.

ukcarper

doire wrote: »

Not if they did the sensible thing and saved for a deposit.

The days of banks lending willy nilly are long gone. They got burnt and wont make that mistake again in a hurry

Can you explain to me why if you had a bigger deposit when interest rates rise you don’t have to pay back more.

StevieJ

doire wrote: »

http://www.dailymail.co.uk/news/article-1328620/One-homeowners-struggling-pay-mortgage.html

IR can only go one way and when they do...............

Interesting illustrative photo used there middle class, middle aged couple, I thought they were the hated baby boomers who have been stealing from the young, in any case I doubt those two would be struggling on their tiny mortgage and 1% tracker.

tomterm8

Generali wrote: »

No idea.

Please note that I reserve the right to be wrong. I've been wrong before and I most certainly will be again. I have a theory and it will be proved or disproved over the next 10 years or so. It's more the mechanism than the price level that I am interested in.

Hey, that answer is not so different from your answer as to what price levels will be in one months time after all:D

It's not a bad answer as such, but it is hardly going to make anyone any money now, is it?:p

Personally, I think house prices over a very long period will tend to simply increase in line with earnings... as people can afford to pay more money for house prices, they will. Of course, desirability of particular houses depends on demographics, and you can have short term bubbles and busts depending on credit cycles, but in the long term the aggregate level of house prices is simply linked to earnings.

Generali

tomterm8 wrote: »

Hey, that answer is not so different from your answer as to what price levels will be in one months time after all:D

It's not a bad answer as such, but it is hardly going to make anyone any money now, is it?:p

I've never really been a trader type. Busting in and out of positions isn't really my thing except on Betfair during the test match. I'm more the wealth accumulator. That's not going so well right now but it's better than it was so we go onwards and upwards!

tomterm8 wrote: »

Personally, I think house prices over a very long period will tend to simply increase in line with earnings... as people can afford to pay more money for house prices, they will. Of course, desirability of particular houses depends on demographics, and you can have short term bubbles and busts depending on credit cycles, but in the long term the aggregate level of house prices is simply linked to earnings.

On average I understand that you have been right. According to a thing on Wake up to Money (no link) a while back, house prices over the past 50 years rose on average by 0.09% more than wages each year.

My opinion is that is likely to be a repricing due to demographics rather than an eternal trend. Admittedly 50 years should be considered long term, unless you're a young JM Keynes of course.

My belief is 'this time it's different'. Always a dodgy position to take.

Do you disagree? You seem to. I'd be interested in your take on my theory as you are a poster I particularly respect.

Basically I joined MSE and fool.co.uk in order to come up with a theory on house prices and once I did I hung around for the arguments because I like a good row.

tomterm8

Generali wrote: »

My opinion is that is likely to be a repricing due to demographics rather than an eternal trend. Admittedly 50 years should be considered long term, unless you're a young JM Keynes of course..

You'll have to give me more detail on what demographic factors you think will effect really long term house prices.

As a general rule, I tend to think demographics has an effect on house prices in the medium term... up to around 30 years. I think many people may disagree with me on that, and I've often been wrong. My reasoning is fairly mundane: if people get demographic forecasts wrong, there can be an over supply or under supply of the right kind of housing. This can depress the house prices. Under our system, it can take quite a while to correct these imbalances... particularly with oversupply. However, over a thirty to fifty year period, simply not building more of the houses we don't need or building more of those we do need will tend to correct house prices towards the earnings level.

However, this doesn't mean as much as you might think, because demographic changes themselves can change the trend growth in earnings.