House Price Crash Discussion Thread

wolvoman

boinging wrote: »

As you say people forget that prices going from 10% growth YoY to 10% decline YoY will be in effect a 20% drop.

I don't get that - can you explain?

boinging_2

wolvoman wrote: »

I don't get that - can you explain?

Okay...

Day 1 - House worth £100,000. Expectation market will increase 10%. Thus day 365 house to be worth £110,000.

Reality - Day 365 market has fallen by 10%, house is actually now worth £90,000.

Difference = £20,000 or 20% of price on day 1.

WTF?_2

boinging wrote: »

You want a prediction - house prices (sold prices) will be at least 10% lower by Oct 2008 if you look at a YoY comparison (i.e Price at 1st Oct 2008 vs Price at 1st Oct 2007).

Is that a crash? That's for you to call not me. All I know is that I can buy a house cheaper today than I could in June 2007 and by October 2008 houses will be cheaper than if I buy today.

The trick will be having a secure job at that time.

Thanks to repeated staving off of small recessions since 2001 and a policy of encouraging a massive unsustainable credit boom, large-scale house price deflation and a nasty recession are now coming hand in hand and they will feed off each other. If your job is looking dodgy or you're out of work then 'cheap' houses aren't going to do you a lot of good as you won't get a mortgage to buy one.


Those with a decent deposit and a decent job are going to be in an excellent position though, so my advice to would-be buyers is start/increase saving and look around for a solid 'safe' job now if you don't already have one.

adr0ck

boinging wrote: »

Okay...

Day 1 - House worth £100,000. Expectation market will increase 10%. Thus day 365 house to be worth £110,000.

Reality - Day 365 market has fallen by 10%, house is actually now worth £90,000.

Difference = £20,000 or 20% of price on day 1.

£100,000 x 1.1 = £110,000

£110,000 x .9 = £99,000

how has it fallen by £20,000 or 20%

wolvoman

boinging wrote: »

Okay...

Day 1 - House worth £100,000. Expectation market will increase 10%. Thus day 365 house to be worth £110,000.

Reality - Day 365 market has fallen by 10%, house is actually now worth £90,000.

Difference = £20,000 or 20% of price on day 1.

You've now confused me even more.
If it started at £100K and is now £90K - isn't that a 10% drop?

Vincenzo

wolvoman wrote: »

You've now confused me even more.
If it started at £100K and is now £90K - isn't that a 10% drop?

Yes! To build in an expectation of growth and then deduct it from a notional figure is ridiculous!

Day 1 house = £100,000
Day 365 house = £90,000

Therefore 10% reduction in value.

Simple.

Generali

wolvoman wrote: »

You've now confused me even more.
If it started at £100K and is now £90K - isn't that a 10% drop?

I think that the idea is that you believe that the £100k house is going to be worth £110k as you believe it will increase in value by £10k. In fact it falls by £10k.

If you add together the 'loss' you have made by it not increasing in value by £10k and the loss you have made by the value actually falling by £10k you come up with a figure of £20k.

That all sounds like a load of bull poo to me and valuing assets and measuring profit and loss is mostly what I do for a living. The £10k loss you make from the house not increasing in value isn't a loss at all.

PasturesNew

House is £100k today
It is £90k in 1 year
If in that year you've saved £10k then the house has effectively dropped 20% too.

Buy today: £100k
Buy in 1 year: £90k-£10k deposit = £80k

If we're going to twist things a bit

ericajones80

no profit no loss until sell....that was my finance professor's mantra

Vincenzo

PasturesNew wrote: »

House is £100k today
It is £90k in 1 year
If in that year you've saved £10k then the house has effectively dropped 20% too.

Buy today: £100k
Buy in 1 year: £90k-£10k deposit = £80k

If we're going to twist things a bit

No it hasn't. You just saved £10k!!! OK assume no saving, you have £10k deposit:

100k purchase, 10k deposit = 10% of purchase price
90k purchase, 10k deposit = 11.1% of purchase price

You are simply paying £10,000 less for the property.

This thread is getting silly.