House Price Crash 4

tomstickland

If you strip this down to the two choices you state above, your investing equates to playing red/black at roulette and effectively ignoring any previous spins on the wheel - which whilst they don't effect odds, they do effect probablilty.

I think you've chosen a bad analagy there. The probability of a Red or Black in roulette is completely independent of the history.
Get 22 Reds in a row and the probability of the next ball landing on a Red is the same as it ever was. The ball has no memory.

fimonkey

hmm I think with statistics you can prove anything right? Such as the old chestnut of the average person having less than two legs, statistical fact! .........Tom, I'm in EXACTLY the same position as you and am also starting to err on the side of 'not buying' (and also probably about to be sacked for spending too much time on here ;-) ).

It's galling at this particular time, as two years ago, had I had the deposit together then, i'd have bought in my own area no questions! (Bournemouth) Prices have only risen slightly since then, but now I'm seriously expecting a huge downturn and cannot afford to have my fingers burnt. The way I see it is that rent on the kind of property I want to live in is cheaper than a mortgage so I'll stay and rentfor the moment and continue to save. (Or buy out a friend... but that's in a different thread).

It strikes me that the 'house price predictors' in national newspapers lump the whole country together whereas from these boards it appears that some areas are still on the up, some are stagnant and a few are falling. Where's the best place to look to gain an idea of where these areas are? (any good URL's anyone)? Also, if as people are saying, history repeats itself (something I beleive in too), does anyone know of a good website that explains the factors that led to the last house price crashes and also the times when they have stagnated? Almost like an analysis for primary school kids (and dunces like me).


Cheerio

Market_Oracle

Usually Britian moves in step with the USA where house price trends are concerned, given the fall in the USA... you could say that it is a big red danger flashing sign thingy ?

Alan_M_2

tomstickland wrote:

I think you've chosen a bad analagy there. The probability of a Red or Black in roulette is completely independent of the history.
Get 22 Reds in a row and the probability of the next ball landing on a Red is the same as it ever was. The ball has no memory.

Get 22 reds in a row, the odds of the ball landing on red are the same as the previous roll, the probability is now entering millions to 1.

You've confused odds and probability, probability is the chance of an event occuring based on previous results and possible future outcomes, odds are a straight mathematical calculation independant of any previous or future possible outcome.

The ball has no memory, therefore the odds of it landing on a 23rd red are the same as any other roll however the probability of a 23rd consecutive red is 1 in 2 to the power of 23 ignoring the possibility of the ball landing on Zero and you losing half your stake.

My analagy is correct.

Putting it in mathematics only.

The odds of the next roll being a red = even money (50/50 ignoring zero)
The probability of a 23 rd red after a previous 22 reds = 1.1920929 × 10-7

cwcw

Spendless wrote:

Yes this is exactly what I mean. I can only comment on what I can see happening on the house prices I keep on eye on which is my village and the next and also the area of the town where I used to live. I have no idea what is happening in other areas of my town and what I say is happening within 5 miles of my home is clearly not what is happening in the same county where the above poster lives. BTW S. Yorks with an airport, think you'll work it out

That famous town called Doncaster-Sheffield?

Incidentally, do you think that the airport opening could be a major factor in house prices nearby suddenly stagnating/ falling in that area?

tomstickland

The ball has no memory, therefore the odds of it landing on a 23rd red are the same as any other roll however the probability of a 23rd consecutive red is 1 in 2 to the power of 23 ignoring the possibility of the ball landing on Zero and you losing half your stake.

Yes, I agree that there are two things here:
1) The probability of a Red on a spin is 0.5
2) The probability of n consecutive reds is 0.5^n

this is taking a simplified game where there's a 50:50 chance of Red or Black and no zero is on the wheel.

Now the clever thing, is that once (n-1) Reds have happened then the probability getting to that stage is already 2^(n-1). ie: very unlikely.

So, a gambler gets to 22 Reds and thinks "this is very unlikely, the chances of the next ball being Red are so small that it HAS to be black".
However, the probability is still 0.5. Most of the unlikliness has already been used up in getting to that stage.

So I say:
the probability of the next ball being Red is 0.5
the probability of having 23 consecutive reds is 0.5^23.

Alan_M wrote:

You've confused odds and probability, probability is the chance of an event occuring based on previous results and possible future outcomes, odds are a straight mathematical calculation independant of any previous or future possible outcome.

I've never encountered a distinction like that before.
To the best of my knowledge, probability is a number between 0 and 1 that represents the likelihood of an event happening.


I've just had a look on Wikipedia for the definiton of odds:

In probability theory and statistics the odds in favour of an event or a proposition are the quantity p / (1 − p) , where p is the probability of the event or proposition. For example, if you chose a random day of the week, then the odds that you would choose a Sunday would be 1/6, not 1/7. The logarithm of the odds is the logit of the probability.

Odds have long been the standard way of representing probability used by bookmakers, though the method of presenting odds varies by location.

Taking an event with a 1 in 5 probability of occurring (i.e. 0.2 or 20%), then the odds are 0.2 / (1 − 0.2) = 0.2 / 0.8 = 0.25. If you bet 1 at fair odds and the event occurred, you would receive back 4 plus your original 1 stake. This would be presented in fractional odds of 4 to 1 against (written as 4 : 1 or 4/1), in decimal odds as 5.0 to include the returned stake, in craps payout as 5 for 1, and in moneyline odds as +400 representing the gain from a 100 stake.

By contrast, for an event with a 4 in 5 probability of occurring (i.e. 0.8 or 80%), then the odds are 0.8 / (1 − 0.8) = 4. If you bet 4 at fair odds and the event occurred, you would receive back 1 plus your original 4 stake. This would be presented in fractional odds of 4 to 1 on (written as 1 : 4 or 1/4), in decimal odds as 1.25 to include the returned stake, in craps as 5 for 4, and in moneyline odds as −400 representing the stake necessary to gain 100.

The odds are a ratio of probabilities;

Alan_M_2

The probability was taking the event of the 23 spins as a whole, yet the fixed odds of a single spin remain unchanged. Due to the nature of the multiple meaning of both words, you could reverse them in this sentence and it would actually still have the same meaning.

The analagy was comparing the single event (ignoring any historical information) to the 23 events combined (expressed in figures above). In this context the definition of probabilty is correct, bizarrely, the same definition could be applied to the term odds in this context, but it would have been incredibly confusing to use the same word to describe both instances.

Odds are a way of expressing probabilites, so it would also have been correct from to say the joint probability of the 23rd red after the previous 22 is (number quoted above).

Or the mutually exclusive probability of a single red or black occuring are even money.

Now I'm starting to look anal:-)

southernscouser

The probability of me understanding what the hell you are all talking about is 0 to the power of infinity!

ManAtHome

fimonkey wrote:

... the 'house price predictors' in national newspapers

Ah - that's the real key to it all. Around 1986, "the average semi was going to be worth about £150k by the turn of the century". Around 1992 "the average semi was going to be worth around £70k by the turn of century" (neither was accurate, but hey "meeja-amnesia" is all part of the game.

TV/radio was pretty much the same - leapt from heaps of people make big-bucks to heaps of people complaining they'd been sold down the river and the usual vested interests assuring us that this was the "best time to buy/sell".

Morals of this story -
the meeja thrives on boom and bust
there are a lot of sheep/lemmings about
once people start using ^s - time to open another can... (made that one up)

mr.broderick

Take 6 spins..

1,7,15,3,34,29
7,7,7,7,7,7

Which of these combinations if you had to would you put your mortgage on?:rotfl: