House prices need to drop 40% to be affordable discussion

Graham_Devon

ukcarper wrote: »

The average on the Nationwide is not the average on the CML they are using a different average earnings can you not see that,

Both graphs say the same thing a drop of 40% would put prices back to the cheapest they have been since the before 1970.

Oh is that what we are arguing about? Again, I never said they did. I was looking at the trends. When the CML graph was rejected, I linked up to the nationwide one which also shows my point.

I have never stated that the CML and Nationwide are showing the same thing using the same data.

I'm out. This argument is pointless as all this is is a few people wanting to firmly bury their heads in the sand and reject any data which doesn't match their viewpoint of affordability.

Stick to Halifax

JonnyBravo

From the article here are a few reasons why the "trend", "long term average", "low point" or whatever you've decided it should be called might not go as low as it has done before.



There are a number of reasons why the secular trend may be strongly upwards. Over
the years, the supply-demand balance has tightened as a result of strong demographics
and limited new-build activity. Meanwhile, a growing proportion of households has
benefitted from having dual incomes, and this is likely to have meant a growing
proportion of discretionary household income available for housing costs. The demand
for housing tends to grow with rising living standards and we have also seen a
qualitative improvement in houses over the longer-term.

crash123

We bought in 1993 in the last correction. I went to The YBS, Nationwide and the Yorkshire bank to see how much we could lend.
YBS 3x the man`s wages, 1x the women`s or 2.5x joint income if over £16500. This was what they had always lent. No deposit required but had to pay a MIG.
Nationwide as above but we used to lend 4x the man`s and 1x the women`s. So had changed their criteria. No deposit required but had to pay a MIG.
Yorkshire would not lend until they had seen the house and had it accessed.
We could have bought in 1987 etc but we realised that houses were over valued just as they are now. We saved until 1993 had a big deposit but in the end only put 5% down (my money) as my partner had the chance to buy commercial

ukcarper

Graham_Devon wrote: »

Nope.

40% fall would not equal 3.12x average income.

You've just subtracted 40% from 5.2

What do you think a 40% fall would be then.

This is about why 40% the trend has nothing to do with it, prices might well fall to the lows of the 90s they might fall even further I don’t know nor do you. But to fall to long term average they need to fall about 20% not 40%.

IveSeenTheLight

nembot wrote: »

http://news.bbc.co.uk/1/shared/spl/hi/in_depth/uk_house_prices/html/houses.stm

^^^

Where did the the figures come from?

Sources:

England and Wales

Land Registry of England and Wales, Crown copyright. The information above is based on figures provided by the Land Registry of England and Wales.
Figures for England and Wales are for the period April to June 2011.

Couple of things: -
1) your figure is for the UK, not just England and Wales
more importantly
2) its sold figures from April to June.

There is no mix adjusting, no Repeat Sales Regression. This means that price changes on a flat in Mayfair are not compared to those on a flat in the Old Kent Road.

Hence why your 3 month snapshot is not a true reflection of the average price.

ukcarper

Graham_Devon wrote: »

Oh is that what we are arguing about? Again, I never said they did. I was looking at the trends. When the CML graph was rejected, I linked up to the nationwide one which also shows my point.

I have never stated that the CML and Nationwide are showing the same thing using the same data.

I'm out. This argument is pointless as all this is is a few people wanting to firmly bury their heads in the sand and reject any data which doesn't match their viewpoint of affordability.

Stick to Halifax

From your post 131
“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=...hWe66_1ty-tqMA”


So why do you say that 3.7 is just below the long term average then link to CML graph where the average is obviously a lot higher than 4x.

IveSeenTheLight

Graham_Devon wrote: »

So do the math.

Average salary according to ONS (2010) = £25,900

6.26x average wage.

40% reduction, would see average house price vs average wage at 3.7x.

Hence why such figures are not used by the more bullish.

No point using medians as in the above post. Though I do understand it inflates salaries!

Graham, house prices have historically always been compared to the male median salary, you know this.
To try and compare against a median average salary may have merit in an ideal world, however it's is not historically how it's been compared

According to the true historical comparison, the ONS would show that the average full time male mean wage was £35,814 (ASHE2010 Table 1, spreadsheet 1.7a)

Average house price (according to LR) = £162,347

£162,347 / £35,814 = 4.533 multiplier.

Now granted that is slightly above the long term historical multiplier, however we know that the balance or property purchases has moved more towards joint mortgages, hence this has contributed to pushing prices up.
Quite frankly, with the level of supply, it's hard to consider property realistically going back to a single income procurement.

Consider also if you will: -

Prospective Buyer 1 (Average Full Time Mean Male with a salary of £35,814) is interested in a property along with Prospective buyer 2 (Average Full Time Median with a salary of £25,879).
Who has the greater purchasing power?
Who is more likely to be purchasing the property?

IveSeenTheLight

Jimmy_31 wrote: »

I work in the construction industry via the self employed sole trader route, i really cant see the banks giving me or the lads i know with deposits a mortgage when lay offs are very very common in my line of work at the moment and the banks have reigned in the lending.

Hmmm, yet you are predicting that increasing unemployment would drive prices 40% lower and thus give you the opportunity to buy

Jimmy_31 wrote: »

We knew we would need a large deposit anyway before the banks started asking for larger than normal deposits, due to our line of work.


Now that the house prices in certain areas have come down a fair bit it is now becoming more and more likely that those of us who have been saving large deposits will probably not need a mortgage.

Classic, so you wish house prices to lower to an extent that you could buy for cash, without a mortgage.

Would that potentially not mean that those with a similar deposit could outbid you with a mortgage?

Jimmy_31 wrote: »

I would welcome a redundancy but as it is in our game you get nothing anyway (just another lay off) so have always had things in place that would cover a mortgage whilst i was out of work, just like lots of the other lads.

You seem to be saying you can afford to cover a mortgage, surely many more can also, so where's the drive and need to lower prices

IveSeenTheLight

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.

Interesting graph from your same link

For much of the decade, the ratio has been relatively stable despite progressively higher house prices and stretched income multiples

IveSeenTheLight

Jimmy_31 wrote: »

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.

If it is that rough and work is hard to come by, have you considered moving to a better area?