What Makes Someone Cheer On And Support House Price Inflation?

nearlynew

julieq wrote: »

House price inflation destroys jobs does it?

So what are the relative employment rates in the UK, where there has been housing cost inflation, and Spain, where there has been deflation?

You're going to struggle to find a causal link there I fancy. As a matter of fact, if anything, falling house prices drive deflation in the general economy and destroy jobs.

Anyway, leaving aside bear mutual back slapping about just how much more wonderful the world would be if we suddenly removed the rules of supply and demand from the world and linked arms around cheap houses and sang Kumbaya, HPI is neither good nor bad. There is no moral element to pricing of resources. It happens because we as a society seem determined to allow less homes to be built than are needed.

And it isn't a Ponzi scheme. There is plenty of money generated by 40 or more years of employment. Ponzi schemes are negative sum games, housing isn't. It's paid for by a drawdown against future earnings, and can't become a Ponzi scheme until the sum of future earnings diminishes to less than the value of all houses, which is nowhere near being the case.

There will be upwards pressure on houses UNTIL we build enough of them. Simple as that. You will figure it out eventually.

You are a debt-junkie.

And no matter how you dress up your (long) posts to give a veneer of economic wisdom, nobody is going to take your views seriously.

Your persistent supply and demand argument betrays your lack of insight and renders your argument meaningless.

guitarman001

Amazing thread lol

the_flying_pig

HAMISH_MCTAVISH wrote: »

Because the growth of house prices and the growth of the wider economy are inextricably linked.

Eh? You're implying that we need HPI for economic growth? that feel wrong intuitively & a quick glance at the respective post crunch performances of the US and UK fairly conclusively that it's not true.

HAMISH_MCTAVISH

guitarman001 wrote: »

No, I just want housing to be affordable for all. Not some 'investment'

Like it or not, the housing market is inextricably linked with the wider economy.

And houses are indeed investments. Just because an asset also has utility value doesn't mean it isn't an asset.

I can at least rest easy knowing that I have no hidden agenda - I am 100% honest in the fact that I want lower prices so thhat everybody can pay out less each month and live a bit better.

Just as I and many others are 100% honest in the fact that we stand to directly benefit from the inevitable upwards trajectory of house prices in this country.

However we're also able to look at the wider picture and see that an increase in lending and rising house prices are on the whole better for society than the current situation.

Restricted lending has locked more people out of the housing market and forced more potential FTB-s to enrich their landlords instead of themselves than higher house prices ever did.

shortchanged_2

HAMISH_MCTAVISH wrote: »

Restricted lending has locked more people out of the housing market and forced more potential FTB-s to enrich their landlords instead of themselves than higher house prices ever did.

Don't you think it's more a case of greedy sellers rather than lack of lending?

I understand people who bought between 2005 to 2007 will lose out through negative equity but in every cycle there are always winners and losers. That is the unfortunate effect of rampant HPI. It's happened before and unless governments/banks control house prices it will keep happening.

HAMISH_MCTAVISH

shortchanged wrote: »

Don't you think it's more a case of greedy sellers rather than lack of lending?

No, of course not.

The mortgage famine has resulted in lending falling by 65%, but prices only falling by 10% or so from peak levels whilst volume has collapsed instead.

So unless prices fall by 65%, (which is laughable given the massive housing shortage in this country), then fewer people will be able to buy houses.

The thing is though, most sellers don't actually need to sell. And in a time of restricted lending, where many people can't get a mortgage at all, or if they can on nowhere near as good a term as their existing one, then if they can't get a good price for the house there is simply no point in selling.

I understand people who bought between 2005 to 2007 will lose out through negative equity but in every cycle there are always winners and losers. That is the unfortunate effect of rampant HPI. It's happened before and unless governments/banks control house prices it will keep happening.

These people don't lose out though, so long as they don't sell. And with supply being restricted like it is, prices will inevitably rise soon enough.

shortchanged_2

HAMISH_MCTAVISH wrote: »

The thing is though, most sellers don't actually need to sell. And in a time of restricted lending, where many people can't get a mortgage at all, or if they can on nowhere near as good a term as their existing one, then if they can't get a good price for the house there is simply no point in selling.

This is exactly the point Hamish.

It's not a lack of lending as such, as I stated it is fundamentally seller greed.

I see it all the time. Houses that are priced realistically sell quickly, the ones that are not sit on the market for months, even years.

Why do people whinge all the time my house isn't selling? Simple fact, because it is overpriced.

RenovationMan

I dare say that if they sold Ferraris for £100 each, they would sell quickly.

shortchanged_2

RenovationMan wrote: »

I dare say that if they sold Ferraris for £100 each, they would sell quickly.

Quite right. So what does that tell you RenoMan?

HAMISH_MCTAVISH

shortchanged wrote: »

It's not a lack of lending as such, as I stated it is fundamentally seller greed.

No, it is a lack of lending.

Banks are lending 100% of the funds they have available to lend.

If prices fell by 10%, then they could only lend 10% more mortgages. A few thousand more a month.

But they need to be lending 200% to 300% more mortgages in order for sales volumes to return to normal levels, let alone to take care of pent-up demand. So another hundred thousand a month at least.

If everyone dropped their prices by 10%, or 20%, or 30%, there would only be a very small increase in numbers of buyers. They wouldn't triple, because the banks simply don't have the ,money to lend.

Equally, if a million FTB's approached their banks this year with a spotless credit history and a 25% deposit, the banks would have to change the goalposts yet again to deny mortgages to 65% of them, as they simply don't have the money to lend.

Until banks start lending more, then the majority of potential FTB-s will remain excluded form the housing market. And lowering prices won't change that fact in any meaningful way.