House prices need to drop 40% to be affordable discussion

ukcarper

Graham_Devon wrote: »

Sorry, was just relating back to the OP.

3.7x is just slightly below the long run average. So 40% slightly over does it if we want to hit the long term average.

On page 2 of this PDF from the CML, there is a long running average prices to average wage graph:
http://docs.google.com/viewer?a=v&q=cache:DEZg051PL5oJ:www.cml.org.uk/cml/filegrab/012010Affordabilityandfirsttimebuyers.pdf%3Fref%3D7059+long+run+average+house+price+earnings&hl=en&gl=uk&pid=bl&srcid=ADGEESjFNPPZpYv6zgGQPKlt8My58EBNwEPG-U35lQ30N4CeWbvu1xTzD7z_V1Lhc0kwQtujU9IfrkwAs0eckgsyT5bo2-sSPaGNgy046josHVy0S8Bj-xOw0dvH9M7T8WtOHNLvzTmk&sig=AHIEtbTCOznvSss2P5v2hWe66_1ty-tqMA

Worth looking at while everyone throws around their preferred statistics.

proves Nembot spot on in fairness.

Average salary in 1999 was £17.7k; average house price was £80k. That’s 4.5x and that was when houses were at there cheapest since the war apart from a short period in the mid 90s.

So that long term average doesn’t use the average earnings of everybody that you quoted.

Graham_Devon

ukcarper wrote: »

Average salary in 1999 was £17.7k; average house price was £80k. That’s 4.5x and that was when houses were at there cheapest since the war apart from a short period in the mid 90s.

So that long term average doesn’t use the average earnings of everybody that you quoted.

Huh?

Are you suggesting that the CML are wrong, and you are proven right by using median salaries?

Jimmy_31

IveSeenTheLight wrote: »

So the losers are those presumably those that become unemployed and are forced to sell.

I'm not convinced that Jimmy31 and his mates will be the winners as I would expect property to be bought before the 40% nominal drop was achieved, especially as rents are rising and the Rental Yield improves.

Nothing is selling around here, the local population is made up of a very high number of benefit scroungers plus those rightfully entitled to benefits and the rest work and quite a large proportion of them work in the construction industry in some form or another.

As the construction industry is dying on its !!!! it has put a high number of local people out of work, so the only ones who i know will be buying will be the ones who decided to start saving quite some time ago.

There are 2 bed terraces around here starting at 30k, im moving a bit further up the road so will have to pay probably twice that. These houses have been sat on the market and nobody is interested in them any more.

Yes its a rough area.

ukcarper

Graham_Devon wrote: »

Huh?

Are you suggesting that the CML are wrong, and you are proven right by using median salaries?

If you look at that graph you will see that in the ratio has very rarely if ever dropped below 4x so how you can say 4x is the average I don’t know.

A graph with a peak of over 8x and a minimum of 4x must have an average of a lot more than 4x.

wotsthat

Graham_Devon wrote: »

Sorry, was just relating back to the OP.

3.7x is just slightly below the long run average. So 40% slightly over does it if we want to hit the long term average.

On page 2 of this PDF from the CML, there is a long running average prices to average wage graph:
http://docs.google.com/viewer?a=v&q=cache:DEZg051PL5oJ:www.cml.org.uk/cml/filegrab/012010Affordabilityandfirsttimebuyers.pdf%3Fref%3D7059+long+run+average+house+price+earnings&hl=en&gl=uk&pid=bl&srcid=ADGEESjFNPPZpYv6zgGQPKlt8My58EBNwEPG-U35lQ30N4CeWbvu1xTzD7z_V1Lhc0kwQtujU9IfrkwAs0eckgsyT5bo2-sSPaGNgy046josHVy0S8Bj-xOw0dvH9M7T8WtOHNLvzTmk&sig=AHIEtbTCOznvSss2P5v2hWe66_1ty-tqMA

Worth looking at while everyone throws around their preferred statistics.

proves Nembot spot on in fairness.

I'm looking at that graph it doesn't show anything of the sort.

You are confusing averages with trends. 3.7x isn't the long term average at all. 3.7x is where the 1970-2009 trend line intersects in 1970.

Graham_Devon

ukcarper wrote: »

If you look at that graph you will see that in the ratio has very rarely if ever dropped below 4x so how you can say 4x is the average I don’t know.

Have a look at the graph and tell me when prices haven't dropped back to that point after increasing?

Obviously the bullish will see the graph differently, and I guess this is to be expected! I don't really want an argument about it. No one can agree on anything, whether it's graphs, which average to use, which house price measure to use!

As for wotsthat's usual excitement, I never said 3.7x was the long term trend, and it seems I'm always having to point out to you what I didn't say.

wotsthat

Graham_Devon wrote: »

Have a look at the graph and tell me when prices haven't dropped back to that point after increasing?

Obviously the bullish will see the graph differently, and I guess this is to be expected! I don't really want an argument about it. No one can agree on anything, whether it's graphs, which average to use, which house price measure to use!

No it's nothing to do with seeing it differently. You've misinterpreted the data.

ukcarper

Graham_Devon wrote: »

Have a look at the graph and tell me when prices haven't dropped back to that point after increasing?

Obviously the bullish will see the graph differently, and I guess this is to be expected! I don't really want an argument about it. No one can agree on anything, whether it's graphs, which average to use, which house price measure to use!

As for wotsthat's usual excitement, I never said 3.7x was the long term trend, and it seems I'm always having to point out to you what I didn't say.

Graham the graph is what it is, it shows that property is around 7x what ever figure they use for average earnings a drop of 40% would take the figure back to 4.2 which is pretty much the lowest they have ever been not the long term average.

Graham_Devon

wotsthat wrote: »

No it's nothing to do with seeing it differently. You've misinterpreted the data.

Oh for the love of....

Have a look at Nationwides then!!

Page 3:
http://www.nationwide.co.uk/hpi/historical/Sep_2011.pdf

Then tell me I'm misinterpretating stuff, or again, suggest I'm saying soething I never said, as it's your usual tactic.

wotsthat

Graham_Devon wrote: »

As for wotsthat's usual excitement, I never said 3.7x was the long term trend, and it seems I'm always having to point out to you what I didn't say.

You said it was the long term average. As the ratio has never been below 3.7 can you explain how it could be an average?

EDIT: There's a Nobel prize if you can do it.