Real terms house price falls - what is "real"

chewmylegoff

Cleaver wrote: »

It's funny to think that if you got 100 people off the street to read this sentence 99 of them would have absolutely no idea what it was talking about.

And the 100th would start gibbering about gh0uls.

noodle_doodle

For most people, real term falls are irrelevant if your wages aren't going up with inflation (which they aren't.) With no actual house price rises, steady interest rates and x% inflation, a mortgage would still be as much of your salary next year as it is now. But next year more and more of your salary will be chewed up by food, clothing and fuel, so it'll be harder to service that mortgage and get harder still each year thereafter. In that scenario the longer you wait the harder it is to buy a house. Of couse there's no knowing that scenario will last for any length of time.

STR types see it as a good thing as they believe their deposits are better off earning more money in interest than a house would rise in value over the same time, thus making them more money. You'd really need to have a humungous wedge to make 3% a year after tax worth losing sleep over though.

geneer

noodle_doodle wrote: »

For most people, real term falls are irrelevant if your wages aren't going up with inflation, which they aren't

Incorrect. The increase in average salary since the credit crunch have in fact been on a par with inflation, until recently anyway.

robmatic

geneer wrote: »

Incorrect. The increase in average salary since the credit crunch have in fact been on a par with inflation, until recently anyway.

So the value of a pre-Crunch mortgage will have declined in real terms and be becoming increasingly easy to pay? Interesting.

geneer

Cleaver wrote: »

It's funny to think that if you got 100 people off the street to read this sentence 99 of them would have absolutely no idea what it was talking about.

This ain't the street Cleaver.

I also imagine that if someone who utterly failed to even admit the possibility of a crash attempts to claim victory in the wake of a crash, your average bod from the street would wet themselves laughing.

geneer

robmatic wrote: »

So the value of a pre-Crunch mortgage will have declined in real terms and be becoming increasingly easy to pay? Interesting.

The value of post-crash mortgages will decline in real terms too rob.
In other words double bubble!

Jack_Johnson_the_acorn

When considering Nominal/Real price fluctuations, is it not wise to calculate the cost of renting said home....

Without doing so "real" price info is meaningless, as we all need to somewhere to live and no-one lives anywhere for free.:)

robmatic

geneer wrote: »

This ain't the street Cleaver.

I also imagine that if someone who utterly failed to even admit the possibility of a crash attempts to claim victory in the wake of a crash, your average bod from the street would wet themselves laughing.

Ah, those mythical internet warriors of the halcyon past. Truly your debates from 2006 are the stuff of legend Geneer.

robmatic

geneer wrote: »

The value of post-crash mortgages will decline in real terms too rob.
In other words double bubble!

You really are getting yourself in a logical contortion with this real term falls position that you've adopted.

Of course, all mortgages will decline in real terms in an inflationary environment over time. Just remember that you discount an older mortgage over a greater period of time.

geneer

robmatic wrote: »

Ah, those mythical internet warriors of the halcyon past. Truly your debates from 2006 are the stuff of legend Geneer.

You might have to explain that one rob.
It appears to lake context, credibility or....as is often the case, a point.