Sanity About House Prices

Graham_Devon

Loughton_Monkey wrote: »

You really are a mate of Graham aren't you?

So here's your preference. Buy a house at £100K. Sell it 3 years later at £95K. Buy a house that was worth £200K, but is now only worth £190K. That will require your original mortgage plus another £95K. The day after this, you are sitting on a house worth £190K.

Now I buy a similar house (say in the south where they are going up. You buy in the north where they are going down) at £100K. Sell it 3 years later at £105K. So because I want to keep exactly to your own outlay, I buy a house worth £200K using an additional £95K mortgage. Exactly the same as you.

Both of us have the same mortgage. But I live in a house worth £200K. You live in one worth £190K. You (and Graham) are the losers by £10K.

Brilliant!

.. large gin & tonics all round....

LOL.

Oh dear.

If only it worked like that and each house fell by 5k, rather than falling by a percentage of value....eh?

Your 100k house becomes worth 90k. Your 200k house becomes worth 180k. Cost to change = 90k

If increasing by 10%, your 100k house becomes 110k, your 200k house becomes 220k. Cost to change = 110k.

Won't confuse you further and bring in stamp duty, fee's, etc.

Loughton_Monkey

Graham_Devon wrote: »

LOL.

Oh dear.

If only it worked like that and each house fell by 5k, rather than falling by a percentage of value....eh?

Your 100k house becomes worth 90k. Your 200k house becomes worth 180k. Cost to change = 90k

If increasing by 10%, your 100k house becomes 110k, your 200k house becomes 220k. Cost to change = 110k.

Phew!!!

This is hard work.

READ MY POST AGAIN!

Scenario 1: House prices went down 5%.
Scenario 2: House prices went up 5%.

Scenario 1: £100K house went down 5% to £95K. £200K house went down 5% to £190.
Scenario 2: £100K house went up 5% to £105K. The house I bought was presumably worth £190,476 at the start (but that's irrelevant), and increased 5% to £200K

Scenario 1: You live in a house worth £190K. Mortgage = X
Scenario 2: I live in a house worth £200K. Mortgage = X

It's called "mathematics".

You really do try hard, don't you? Please keep posting this stuff, as I dine out on it quite a lot.....


... large gin & tonics all round....

Graham_Devon

Loughton_Monkey wrote: »

Phew!!!

This is hard work.

READ MY POST AGAIN!

Scenario 1: House prices went down 5%.
Scenario 2: House prices went up 5%.

Scenario 1: £100K house went down 5% to £95K. £200K house went down 5% to £190.
Scenario 2: £100K house went up 5% to £105K. The house I bought was presumably worth £190,476 at the start (but that's irrelevant), and increased 5% to £200K

Scenario 1: You live in a house worth £190K. Mortgage = X
Scenario 2: I live in a house worth £200K. Mortgage = X

It's called "mathematics".

You really do try hard, don't you? Please keep posting this stuff, as I dine out on it quite a lot.....


... large gin & tonics all round....

Not half as hard as you try, using the value of the house you are buying from 3 years ago, which is of absolutely no relevance to you as a buyer when you are looking to buy and sell. Notice you've not paid the mortgage down either, brilliant!

The way you have totally twisted and confused the 200k house too. Legendary. You've simply made it 10k less expensive when talking about price rises, so your figures work.

Spose if you sell it to yourself in that way, your view of the world remains intact.

Loughton_Monkey

Graham_Devon wrote: »

Not half as hard as you try, using the value of the house you are buying from 3 years ago, which is of absolutely no relevance to you as a buyer when you are looking to buy and sell. Notice you've not paid the mortgage down either, brilliant!

Spose if you sell it to yourself in that way, your view of the world remains intact.

As I said, my view of the world includes "mathematics". It's not too difficult. I don't need to sell anything to myself, because I learnt it many years ago at school.

Presumably you disagree with the maths? Please give everyone a laugh and explain what part of it you disagree with. And explain where you think 'each' house fell by £5K. Especially the one that dropped from £200K to £190K.

Graham_Devon

Loughton_Monkey wrote: »

As I said, my view of the world includes "mathematics". It's not too difficult. I don't need to sell anything to myself, because I learnt it many years ago at school.

Presumably you disagree with the maths? Please give everyone a laugh and explain what part of it you disagree with. And explain where you think 'each' house fell by £5K. Especially the one that dropped from £200K to £190K.

You really have no idea of what you have done do you?

You've reduced the price of both houses in scenario A by the same percentage over the same timeframe (3 years)

In scenario B, you have increased the price of the first house by 5% over 3 years. However, for the 200k house, you have decided to ignore the 3 years inflation and have decided you are buying it at a 3 year old price.

House 2 can't be 200k in one scenario and lose 5% on that over 3 years, and then 190k in the next scenario and increase by 5% from there.

Well done you.

zagfles

Loughton_Monkey wrote: »

You really are a mate of Graham aren't you?

So here's your preference. Buy a house at £100K. Sell it 3 years later at £95K. Buy a house that was worth £200K, but is now only worth £190K. That will require your original mortgage plus another £95K. The day after this, you are sitting on a house worth £190K.

Correct. But a I live in a house twice as big, since it was twice the price.

Now I buy a similar house (say in the south where they are going up. You buy in the north where they are going down) at £100K. Sell it 3 years later at £105K. So because I want to keep exactly to your own outlay, I buy a house worth £200K using an additional £95K mortgage. Exactly the same as you.

Both of us have the same mortgage. But I live in a house worth £200K.

But I live in a house twice as big as my previous house. You live in a house 1.9 times as big your previous house. We've spent the same but I have a better house than you.

You live in one worth £190K. You (and Graham) are the losers by £10K.

Brilliant!

I live in a bigger house than you. On the financial side, my net worth has decreased but so has the housing element of my cost of living, so they cancel out exactly.

It's basic common sense that if something you need goes up in price, that's bad news. If something you own goes up in price, that's good news. If something you need and own goes up in price, that's pretty much neutral.

But you, like most people it seems, lose all track of common sense when it comes to house prices. It's a cost of living as well as an asset.

It's like thinking a 10% pay rise makes you better off when inflation is 10%.

Loughton_Monkey

Graham_Devon wrote: »

....Your 100k house becomes worth 90k. Your 200k house becomes worth 180k. Cost to change = 90k

If increasing by 10%, your 100k house becomes 110k, your 200k house becomes 220k. Cost to change = 110k.

Won't confuse you further and bring in stamp duty, fee's, etc.

It occurs to me that you could well be struggling (still) with this. We had "Janet & John" books at junior school. I wonder if they still use them?

Anyway, let's clear the matter up using the 10% change that you chose. [Perhaps you're more bullish than me? I only chose 5%]

Janet's house cost £100K and went down ten percent to £90K. Over the same period, the larger house went down from £200K by ten percent to £180K. Poor Janet had to borrow an extra £90K, and pay stamp duty of 1%. Phew! That was £1,800.

John lives in a differnet area. His house cost £100K and went up ten percent to £110K. John was very envious of Janet, but admired her financial acumen. He wanted to keep his mortgage the same as Janet. She told him she borrowed an axtra £90K. So true to his word, John borrowed an extra £90K. Just to be the same. But when he added his £110K to the extra £90K, he found he could afford a more expensive house than Janet. He could pay £200K for a house. But he had to pay stamp duty of £2,000.

Later that day, John boasted that for exactly the same mortgage cost, he was now £20K better off. But the conversation in the playground went like this:

John: Poor you, Janet. You chose a house that went down in value. I bought in an area that went up. So I am better off than you.

Janet: I don't understand the mathematics of that. And anyway, you can't be because you paid more stamp duty.

John: Well yes. I had to pay an extra £200 Stamp duty more than you did. A small price to pay for living in a house worth £20K more than yours.

Janet: No it isn't.

John: Why?

Janet: I can't explain why. We haven't done adding up yet. Just the 1 times table. But Graham told me you are worse off.

John wept.......

Loughton_Monkey

Graham_Devon wrote: »

...In scenario B, you have increased the price of the first house by 5% over 3 years. However, for the 200k house, you have decided to ignore the 3 years inflation and have decided you are buying it at a 3 year old price.....

Is it Hamish who calls you a ninny? Well you really are.

I have not chosen to ignore anything. I have simply set out the fact that if we both buy houses of the same value, and then sell, getting the same top up mortgage, that I can afford to buy a house [at exactly the same mortgage and deposit cost] more expensive than you.

Why are you fixated with what my second house was worth 3 years ago? It's irrelevant. I told you that.

ukcarper

zagfles wrote: »

Correct. But a I live in a house twice as big, since it was twice the price.

But I live in a house twice as big as my previous house. You live in a house 1.9 times as big your previous house. We've spent the same but I have a better house than you. I live in a bigger house than you. On the financial side, my net worth has decreased but so has the housing element of my cost of living, so they cancel out exactly.

It's basic common sense that if something you need goes up in price, that's bad news. If something you own goes up in price, that's good news. If something you need and own goes up in price, that's pretty much neutral.

But you, like most people it seems, lose all track of common sense when it comes to house prices. It's a cost of living as well as an asset.

It's like thinking a 10% pay rise makes you better off when inflation is 10%.

It's good to see someone who understands the post and puts up a good argument against it.

Graham_Devon

Again. LOL.

You are trying extremely hard to twist the point and ignore the percentage increase on he second house. You are simply talking about net worth, and your point about borrowing the same amount as someone else and having the same money is rather obvious.

Pretending I don't get this and need help is juvenile. Either you are on an obvious wind up, or your mind really does work this way.

Either way, to call this mathematics is misguided at best. Stick to using the same variables in both examples, and stick to the actual discussion and you'll soon come unstuck.

No matter how hard you try, you can't get around simple percentage increases and decreases and the effect on moving up or down the chain.