House Price (Non) Crash 1

Woby_Tide

meanmachine wrote:

So you didn't write post #26 then?

If not, who did?

It was a copy of post 10, that was quoted directly above it, to highlight where it had come from.

Anyway this spoon feeding is detracting from house prices falling

sm9ai

Hereward wrote:

I do not draw the same conclusion that today's prices are unaffordable, as your figures quite clearly show that the average person, with the average mortgage and salary, still has 40% of their take home pay to spend on other things. To demonstrate unaffordability we need to know what percentage of the average take home wage is spent on other essential items and when this is included, does this exceed 100%? Of course this all assumes that the average household only has one income, so households with more that one income can afford slightly more.

That is a very good point.

What are the other costs like, we all now that council tax and fuel bills are going through the roof but I presume food prices and phone bills are less than 1989? I would also think that although it not strictly essential, there are now more things that people class as essential. Broadband etc.

Is there a direct comparison for bills anywhere on the net?

mrsS_2

why does average household only have one income?

almost everyone I know has 2 incomes in their household-admittedly the ones with kids only work part time

mind you we live in the south east so have mortgages that make you wince!

does anyone know the proportion of single earners to dual income households who are buying houses?

talksalot81

Woby_Tide wrote:

prices will fall, then they will rise again, then they will fall, then they wil rise again, then they will fall, then they will rise again

I'm not quite sure you're grasping the concept in between all the blustering and bile, but one day, prices will fall, then a while later, they will rise again, some time further in the future, they will fall...It's almost like it is a cycle

I am more than aware of that but it is not what I am concerned with. What my discussions are entirely concerned with is that a considerable short term correction is necessary. Most people do not agree with this and they are entirely unable to explain.

wiggly

I wish they'd do something so I can even consider looking at the property mail each week *sigh*

SusanCarter

Alan_M wrote:

The problem is with increased leverage (larger mortgage/income mulitples) it requires smaller movements in rates to create the same havoc, after all, the sums of money are vastly increased.

If rates did actually hit 9% there would be catastrophe:-

There's a thread on here where a couple are cited buying a £300K property on a joint income of £75K with a 100% mortgage.

At 5.5% repayments would be in the region of £1850 a month over 25 years, not unreasonable on a net income of around £4000.

The same loan at 8%

Payments £2,300

Again at 9%

Payments £2,500

10%

Payments £2,700

Could they make the payments? Quite probably, but with all other household bills they'd not be able to have any standard of living at all without a substantial wage increase.

Also any correction in prices could lock them into the property until the next cycle.

According to my calculations, after tax the couple would have an annual income of about £51k. Monthly payments of £2700 would therefore leave them with almost £19k for everything else. As a person on the "average wage of £25k/year would have nearly £21k before rent or mortgage, I would conclude that the couple in question would still be able to have a fairly high standard of living.

mrsS wrote:

why does average household only have one income?

almost everyone I know has 2 incomes in their household-admittedly the ones with kids only work part time

mind you we live in the south east so have mortgages that make you wince!

does anyone know the proportion of single earners to dual income households who are buying houses?

Probably proportionally fewer single income households are buying houses because they are priced out of the market by all these dual income households. How many households only have a dual income because it's the only way they could see of affording a mortgage? How many parents both work because the mortgage prevents them from going down to a single income?

sarah_elton

meanmachine wrote:

According to this report the ave mortgage is now 142K.

http://www.dailymail.co.uk/pages/live/articles/news/news.html?in_article_id=426519&in_page_id=1770

At IRs of just 5% that's £839 a month, which is approx 60% of the take home of the average wage.

Saying that, you are making the assumption that the person on the average salary has the average sized mortgage. A lot of people on low salaries don't have a mortgage.

I agree it's a percentage figure worth looking at, but in reality just taking the mean values for each is a statistic as chopped down as the average house price nation-wide.

Alan_M_2

SusanCarter wrote:

According to my calculations, after tax the couple would have an annual income of about £51k. Monthly payments of £2700 would therefore leave them with almost £19k for everything else. As a person on the "average wage of £25k/year would have nearly £21k before rent or mortgage, I would conclude that the couple in question would still be able to have a fairly high standard of living.

I make that closer to £16K a year net for everything else, so that' somewhere between £1,300 and £1,600 a month for two people to cover the following bills:-

council tax
electricity
Gas
household insurances
Personal insurances
commuting into the city X2 (how much are season tickets now?)
Groceries

And all this is before you buy and run a vehicle. Have any social life, holidays, home improvements, home repairs, purchase of contents for the home.

I'd suggest at this level they'd be struggling to make all payments with zero social life, zero savings, zero improvements etc...so I disagree that this figure will be comfortable.

sm9ai

In Addition. Lets not forget student loan payments. Where as this doesn't effect house buyers with the average age being 30 something it won't be too long before the majority house buyers have them.

Therefore between a couple earning 60k per annum I would imagine loan repayments of nearly £200 a month or so. Which could see a sudden drop in affordability.

albacore1854

A number of sources suggest two rate rises in 2007, making base rate 5.5%. Doubt that will have a terrific impact.

But what about all the other rising costs, council taxes, energy, fuel, food etc. All increasing way above inflation.

Gotta pop hasn't it?