Who'd vote for lower house prices? Not many...

wotsthat

Graham_Devon wrote: »

You clearly don't understand the point being made if you have wrote that.

ukcarper understands the point being made, Hamish understood the point being made, and I assume so too did ISTL.

I think the point is that if you plot median over time or average or full time male the graph will look the same.

Whatever way you want to look at if you compare wages with house prices we're at or approaching historical averages.

The historical average is a useful point for comparison. It doesn't 'categorically' prove anything. You're looking at the average and saying house prices are 'simply' too high - that's not proven. I could just as easily say that prices now are correct and they were 'simply' too low in the '90's - that's not proven either - although I'd argue the '90's were a great time to buy I'd also say now's not a bad time either.

EDIT: What do you think is the best proxy for UK earnings?

coastline

The first chart here under taxable income for 2004-2005 has the mean wage at £22,000.
18 million are on £20,000 or less....11 million are on more... and only 5 millon are on £30,000 or more.
Looking at that ...around two thirds are on less than average..

http://en.wikipedia.org/wiki/Income_in_the_United_Kingdom

ukcarper

coastline wrote: »

The first chart here under taxable income for 2004-2005 has the mean wage at £22,000.
18 million are on £20,000 or less....11 million are on more... and only 5 millon are on £30,000 or more.
Looking at that ...around two thirds are on less than average..

http://en.wikipedia.org/wiki/Income_in_the_United_Kingdom

Looking at ons for 2011 the overall mean is £26,871 30% of people earn more than £30,000 the median is £21,326 that's why I agree with Graham that median is a better figure to use. I'm not sure what point you are trying to make though.

Graham_Devon

ukcarper wrote: »

We don't know the figures before 1997 so we don't know the difference was greater or lower but it's the best we can do..

The disparity is highly likely to be lower, due solely to type of jobs. Miners, factory workers etc.

Graham_Devon

wotsthat wrote: »

I think the point is that if you plot median over time or average or full time male the graph will look the same.

No it won't, NOT on the graph we were discussing, for precisely the reason we are discussing. If you got what we were discussing, you would figure out how that changes the long term average.

I don't think you get the point being made, which is, going back to the 70's, the difference between mean and median was likely to be slim. The difference has grown over time. It allowed the trend line in the original graph to ignore a 10k difference in house prices to median wages. In 2011, it allowed the graph to ignore a 44k difference in house prices compared to median wages.

If that continued, we'd be hitting a 100k void, as the celebrity culture, footballers, bankers etc pull up the mean line behind them. The graph, however, doesn't care.

Reality, does.

Let's put it a more simple way for you.

1000 factory workers earn 20k a year. Fred and Paul, the bosses, earn 200k a year. The average wage is therefore £20,359. (mean)

Next year, Fred and Paul give themselves a whopping great payrise and earn £5m a year each. The workers get a wage freeze. The average wage is now £29,940. (mean)

The average (mean) wages of the factory have shot up. But for the majority (the 1,000) they earn the same.

Therefore, what use is it, to siggest house prices have now become more affordable for those working in the factory, because the total average wage of the factory has increased by 50%?

House prices are no more affordable for the workers at all. They are the majority. It makes no difference in reality....but on a graph....well, the graph doesn't care. It's just gonna look at the house price and the £29,000 and come up with a one fits all answer.

That's my point. Over the years due to the celebrity culture, football, the banking industry, privatisation, there have been more earning mega wages right at the very top, but for most, they don't earn mega wages. So what's the point at looking at the number in the middle and coming up with "hey, house prices are now more affordable" - which is what you are doing.

ukcarper

Graham_Devon wrote: »

The disparity is highly likely to be lower, due solely to type of jobs. Miners, factory workers etc.

Not sure thats right lots of factory jobs were low paid and techincal jobs such as software technicians, computer technicians etc didn't existand no minimum wage etc but as the ons figures only go back to 1997 we will never know

wotsthat

Graham_Devon wrote: »

I don't think you get the point being made, which is, going back to the 70's, the difference between mean and median was likely to be slim. The difference has grown over time. It allowed the trend line in the original graph to ignore a 10k difference in house prices to median wages. In 2011, it allowed the graph to ignore a 44k difference in house prices compared to median wages.

I get the point.

Remembering back I think the 'rule' is that if there's a divergence in mean and median then the median might be the better measure to use.

That's not a problem - look at a plot of median wages vs. house prices against time and you'll see we're heading towards the long term average. The graphs are what they are - they're not trying to hide £40k here or there.

Plot whatever earnings price graphs you like. The sensible will say that based on whatever proxy for earnings you use current houses are £x above or below the long term average. The less sensible will say they are £x under or over valued.

As far as I can see expensive houses aren't a recent invention.

coastline

ukcarper wrote: »

Looking at ons for 2011 the overall mean is £26,871 30% of people earn more than £30,000 the median is £21,326 that's why I agree with Graham that median is a better figure to use. I'm not sure what point you are trying to make though.

The mortgage and financial industry tend to use average earnings as a guide to affordability...
The posts on here are showing average isn't that accurate and median is a better...
The link I've posted shows that the majority of people don't even earn that and its around 60% of the total.

Graham_Devon

wotsthat wrote: »

Remembering back I think the 'rule' is that if there's a divergence in mean and median then the median might be the better measure to use.

Well done. And I think it's quite fair to say, that if the mean average used, is adding £44k to the affordability indicators, whereas it was only adding 10k 15 years ago....it's worth looking at and questioning.

So quit with the muddle-tastic nonsense.

Graham_Devon

And one final point. The figures calculated earlier, probably show why some stand back with disbelief when people say it was just as hard in the 70's, and were approaching the same level of earnings.

If the mean is much higher than it was in the 70's comapred to median (which is extremely likely based on the data provided so far and the type of earnings) it stands to reason that someone earning real average earnings in the 70's WAS paying 4x their earnings for a house, and the Halifax graph would be correct. They would have been far closer to the mean and therefore te graph provided would have been more accurate.

But that's not the case now. The real average person is paying 6(+)x their earnings, even though the graph says something else, as the mean is so far away from the median.

Explains all the arguments over "well howcome one wage could buy a house in the 70's and it can't now if the average earnings vs house price ratio is close" arguments.

And I'm done.