HPC thread of the week

chucknorris

westernpromise wrote: »

Crashes are a bad thing that impoverish everyone.

Periodic house price corrections are to be expected.

Long term player scare little about either.

What's wrong with pointing any of that out? Do so on HPC and you get banned. I know, I've tried.

This is what surprises me the most, isn't it obvious that house prices fall when the economy is struggling? Yet some posters seem to think that they will be in the same financial position (as when the economy is doing fine) and can take advantage of falling prices, almost as if it was a boxing day sale :rotfl: It is of course forgivable for the youngsters to think that, but some of the posters have been around the block a bit, and they should have realised this.

Of course it would be better if we didn't have boom and busts, but they are the result of human nature. But of course, it is possible for individuals to take advantage of the cyclical nature of house prices, I certainly intend to do so.

Mistermeaner

'Would lower prices be beneficial for large parts of society?' Is a separate question to 'are house prices going to fall?'

Any of the 4 permutations to those 2 questions could represent a valid opinion

I don't understand the animosity

Personally I would say: yes, no.



Edit: as others have pointed out and I have said before low prices of a crash would no use to anyone if they are a result of significant economic distress - regional examples abound: Aberdeen seems a common example, if prices crash there because the oil industry dies why on earth would you want to live there, with no job and likely poor services..... those places exist already in Liverpool and the Welsh valleys. Crashes will not happen in nice prosperous places.

cells

If anyone from the hpc is reading this, I would strongly advise you to discuss amusing yourselves how affordable or not the regions are.

I think you will find the north and midlands are quite affordable and that some towns and cities are very affordable. I think you lot are looking too much at London and the SE and discouraging your north and midlands readers needlessly.

Its ok if you think £500,000 London prices are too expensive but dont make the mistake and think £100,000 northern prices are overvalued

westernpromise

chucknorris wrote: »

This is what surprises me the most, isn't it obvious that house prices fall when the economy is struggling? Yet some posters seem to think that they will be in the same financial position (as when the economy is doing fine) and can take advantage of falling prices, almost as if it was a boxing day sale

I've pointed this out many times and the reaction even here is borderline incredulity.

Essentially in a falling market 90% mortgages become 100% mortgages become 120% mortgages. Lenders in the past dealt with this by requiring much larger deposits and by dropping multiples.

So someone who could today borrow 4x £25k to buy a £100k place with no deposit finds that it's fallen to £80k, but he can now only borrow 3x salary, with a 20% deposit. The result is that the flat is actually less affordable at £80k than it was at £100k, because a £16k deposit is now required. There are also fewer places to choose from because downsizers don't downsize in a slump.

When after 8 or 10 years its value is back at £100k, then buying it becomes feasible again. But we went through this in 1988 to ~1996 and there were people who didn't buy in 1996 because they didn't believe it was over. They waited for a bigger crash; some are still waiting, 80% of a mortgage term later.

The other variable is that when house prices are falling landlords can charge what they like because it you don't like it you have to buy (if you even can) and eat the capital loss yourself. This is another one that has been completely forgotten since 25 years ago and short speculators get very angry if you point it out.

History doesn't repeat, but it rhymes. There'll be a correction and recovery and then another and another. I don't know what the next one will look like nor what will trigger it, but nor does anyone else, either. I do know that someone who predicts it every year for 20 years and ends up poor as a result has no more claim be a source of reliable guidance than a stopped clock does, and for the same reasons.

chucknorris

westernpromise wrote: »

I've pointed this out many times and the reaction even here is borderline incredulity.

Believe me I know, I've been there myself.

westernpromise

chucknorris wrote: »

Believe me I know, I've been there myself.

Have you noticed too that they all think their rent's going to stay the same, when the alternative to renting has just become ruinously expensive?

Have you any idea why they think that?

thequant

cells wrote: »

Its ok if you think £500,000 London prices are too expensive but dont make the mistake and think £100,000 northern prices are overvalued

exactly!

It means the average home in the capital is nearly five times more expensive than in the North East - £488,782 versus £100,670, as the gap continues to grow.

http://www.thisismoney.co.uk/money/mortgageshome/article-3214060/House-prices-rise-4-6-year-Land-Registry-stats-average-property-valu-London-FIVE-TIMES-higher-North-East.html

Let put some flesh on those numbers,

In 2020, when the min wage is increased to £9 an hour, In a dual income household working full time the total income will be £37,740, which represents a houseprice to income multiple of 2.68.

No doubt the typical household in the north east, will have it's income topped up by a plethora of tax payer funded benefits. So the multiple will be far less than above.

A low interest rate mortgage with 25% deposit, will cost £250 per month to service, which is approx 8% of mothly household income, (less when benefits are taken into account)

And these people want prices to fall further!

chucknorris

westernpromise wrote: »

Have you noticed too that they all think their rent's going to stay the same, when the alternative to renting has just become ruinously expensive?

Have you any idea why they think that?

We both know the answer to that, but it isn't exactly PC to express that opinion. But that said, I do acknowledge that there are plenty of intelligent bears on here, and it is worth listening to them, if only to ensure that I'm not being over confident. In reality, these days I tend to act quite bearish myself. Not because that is my nature, but there isn't much point in acquiring more, and taking on additional risk, for money that I won't live long enough to spend.

Thrugelmir

thequant wrote: »

A low interest rate mortgage with 25% deposit, will cost £250 per month to service, which is approx 8% of mothly household income, (less when benefits are taken into account)

And these people want prices to fall further!

And someone on minimum wage is going to save a 25% deposit.
At least think through the logic of your argument. Before getting over excited.

cells

thequant wrote: »

exactly!

It means the average home in the capital is nearly five times more expensive than in the North East - £488,782 versus £100,670, as the gap continues to grow.

http://www.thisismoney.co.uk/money/mortgageshome/article-3214060/House-prices-rise-4-6-year-Land-Registry-stats-average-property-valu-London-FIVE-TIMES-higher-North-East.html

Let put some flesh on those numbers,

In 2020, when the min wage is increased to £9 an hour, In a dual income household working full time the total income will be £37,740, which represents a houseprice to income multiple of 2.68.

No doubt the typical household in the north east, will have it's income topped up by a plethora of tax payer funded benefits. So the multiple will be far less than above.

A low interest rate mortgage with 25% deposit, will cost £250 per month to service, which is approx 8% of mothly household income, (less when benefits are taken into account)

And these people want prices to fall further!

I take the simpler view

In some parts of the country, houses are so cheap, you could not buy the materials and labor to put them together for that price. So you are getting PAID to take the land, the service connections the roads outside, the red tape costs, the design costs, the finance costs and the time cost and risk cost paid to take them!!

For example, stoke-on-trent is just £45k for a whole terrace house. It costs about that much to convert a loft and they want another 50-75% off....


and yes if you look at the median wage to average terrace price for local areas you find a lot of the midlands and north are between 2-4x single full time male income. Joint full time income would thus be close to 1-2x income. The midlands and north look like a bargain. I am not sure how long it will last but if it does not and the north and midlands boom in price like the 2000-2005 period then a lot of people would have made a big mistake not buying at todays 2-4x single full time male income prices