Plunging house prices and the economy

macaque_2

This month, house prices fell by over 37% on an annualisd basis. If a home buyer put down a 5% deposit today, they would be in negative equity within 6 weeks.

'Occams Razor' is based on the principle that the simplest answer is often correct. The simplest expanation to our current economic difficulties is; too much debt lent against unproductive assets. Private debt is currently around £1.5t, much of it borrowed against property that has already been built. As a result, home owners are trapped. They cannot move house, invest in productive ventures, start businesses or take risks. Employers find it cheaper to outsource from abroad where employees are not saddle by huge accomodation costs. The only winners are paper pushers in the square mile.

If people had borrowed £1.5t to invest in manufacturing and technology, the story would be very different today and our debt mountain would be seen as an asset rather than a liability.

Crumbling house prices do not solve a problem for today's lenders or borrowers who have overreached themselves but, assuming prices keep falling, it does hold out hope for the future. If younger people are able to find accomodation at more affordable prices, the wider benefits to the economy will be huge.

If the Government have heard of Occam's razon, there is no evidence that they listened.

Amid a credit crisis caused by excessive debt, much of it secured to overpriced property, the Government now proposes to encourage laxer lending to people with no history of repaying debt so that they can buy overpriced property.

chewmylegoff

Is this just based on 12 x 3.1% = 37.2% per annum?

In which case your thread is rubbish because -3.1% is the fall in new asking prices on rightmove and is not an indicator of sold prices.

julieq

Desperate even by Macaque's recent standards. Keep flailing away dear, you'll find a straw eventually.

MrRee_2

HA HA HA HA HA HA HA HA ...... was 'Macaque' the name of a Clown? It is now ...............

julieq

Occam's raisin? What's that anyway

purch

I thought Occam's Razor was a PRINCIPAL in it's own right, not something based on a principal.

Linton

macaque wrote: »

This month, house prices fell by over 37% on an annualisd basis. If a home buyer put down a 5% deposit today, they would be in negative equity within 6 weeks.

And in 3 years time sellers will be paying you to take over their house. Not long to wait!!

macaque_2

Understanding human signals in the Bull/Bear Cycle

Phase 1. - Rising market
Bull's posts are polite, thoughtful and rational but also intensely smug and self congratulatory. Any suggestion of a bear market is dismissed with quiet amusement.

Phase 2. - Market top
Bulls become less polite and more arguementative. Their posts adopt evermore complicated and contradictory theories as to how property can defy market forces 'this time'.

Phase 3. - Start of Bear Market
Bulls abandon polite debate and resort to insults and mockery. Many start quitting the forum to avoid the 'told you so moment'.

Phase 4. - End of the Bear Market
Bears become the new bulls

Desperate even by Macaque's recent standards. Keep flailing away dear, you'll find a straw eventually.

HA HA HA HA HA HA HA HA ...... was 'Macaque' the name of a Clown? It is now ...............

Is this just based on 12 x 3.1% = 37.2% per annum?
In which case your thread is rubbish because -3.1% is the fall in new asking prices on rightmove and is not an indicator of sold prices.

chewmylegoff

This is all very well but I'm sitting on a pile of cash having sold in 2007 and would therefore prefer prices to fall. However, rightmove is a useless indicator and this thread is therefore pretty rubbish.

quantic

I sometimes genuinely get the feeling that posters on this forum, and other forums - really do believe that if they talk down the market enough it will become a self fulfilling prophecy. If they can make enough people believe what they believe it will come true.

Pete111

This month (today actually :beer: ) we completed on the flat that we bought in 2004 and have rented out since 2007

In late 2008 it was worth (according to the banks re-mortgage valuers) only 5-10% more than we paid for it and many were convinced it would soon be worth less. However we have just realised a 36% tax free profit by selling it at approximately 2007 peak. This despite 4 years of further wear and tear by tenants.

We are now mortgage free on our House despite buying it and not selling the flat in 2007 - yet apparently there has been a housing crash.

Go figure.