House Price Crash Discussion Thread

Generali

ericajones80 wrote: »

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

That's what I always thought but I now use 2 sorts of profit and loss: realised and unrealised.

Realised profit or loss is what you get when you sell an asset you've bought.

Unrealised profit or loss is what you have when you still have the position.

boinging_2

Vincenzo wrote: »

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.

To be honest I do agree and if we are looking at this from a pure mathematics perspective it is, as quite rightly pointed out, "poo".

However. There are two things I see, one is the people believing the house will rise to £110,000 going out and spending the £10,000 on a new car / holidays. Or those that will market there house on day 365 at £110,000 because the EA / in their world that's what it's worth. Thus when they only receive £90,000 for it. They are back in this "poo" stuff and it will definately feel like a 20% drop.

John_Pierpoint

neverdespairgirl wrote: »

No slapped wrist intended! I just answered your question, that's all.

I get paid to chat for my job, so I think I'm one of the class (-:

Hi,

The slapped wrist remark was actually aimed at the previous poster here:

!!!!!!? wrote: »

Hopefully all the private education stuff can go off to a different thread as it really is killing the thread.

As I live East of Greenwich in the dreaded "Thames Gateway" I am not allowed to chatter so I had better find an on-topic link;)

Will this do:
Wierdoe misses three payments, mortgage provider evicts and sends property for auction:

http://www.foxnews.com/story/0,2933,332952,00.html

John_Pierpoint

Generali wrote: »

That's what I always thought but I now use 2 sorts of profit and loss: realised and unrealised.

Realised profit or loss is what you get when you sell an asset you've bought.

Unrealised profit or loss is what you have when you still have the position.

Plesase can we talk about the "opportunity cost" of having hung on to a house for say 24 months from June 2007.

My bet is that anyone who was clever or lucky to Sell to Rent at that time will be quids in, when interest is added to the big slug of cash they have put on deposit.

It always used to annoy me when some punter, in the office at work, would take up a share tip, only to see the damned thing had gone down 20%, when the expected takeover did not happen; he would then try to say "Well I have not lost anything until I sell it".
Totally false reasoning. I used to go over and slap a tenner on the desk saying Ok sell the ........ thing and then tell me you have not lost anything.

Rant over, I must go and count my losses:

6K in Northern Wreck.
etc. etc.

HammersFan

John_Pierpoint wrote: »

Plesase can we talk about the "opportunity cost" of having hung on to a house for say 24 months from June 2007.

My bet is that anyone who was clever or lucky to Sell to Rent at that time will be quids in, when interest is added to the big slug of cash they have put on deposit.

It always used to annoy me when some punter, in the office at work, would take up a share tip, only to see the damned thing had gone down 20%, when the expected takeover did not happen; he would then try to say "Well I have not lost anything until I sell it".
Totally false reasoning. I used to go over and slap a tenner on the desk saying Ok sell the ........ thing and then tell me you have not lost anything.

Rant over, I must go and count my losses:

6K in Northern Wreck.
etc. etc.

Without a crtystal ball its hard to base decisions on hypothetical opportunity costs. Some one who bought a house in 2007 (lets say as investment, for arguments sake) will be quids in in ten years time. The chances of it being worth nothing are virtually zero. They might not make as much money as in another investment, but I don't think they will be too bothered.

m00m00

but buy to let speculators HAVE been basing their decisions on the hypothetical opportunity cost of HPI continuing, and outstripping other investments.

HammersFan

m00m00 wrote: »

but buy to let speculators HAVE been basing their decisions on the hypothetical opportunity cost of HPI continuing, and outstripping other investments.

I think that's a bit of a generalisation. HPI yes, quite often is the reason (and a pretty sound one, historically, if a medium to long-term view is taken). Outstripping other investements? I don't think so - there's something tangible about property, it has the feel of a secure investment. As long as people keep having babies and people keep living longer, there will be good demand for houses. Its hard to make that case for a lot of other investments.

boinging_2

HammersFan wrote: »

Without a crtystal ball its hard to base decisions on hypothetical opportunity costs. Some one who bought a house in 2007 (lets say as investment, for arguments sake) will be quids in in ten years time. The chances of it being worth nothing are virtually zero. They might not make as much money as in another investment, but I don't think they will be too bothered.

You asked me for a prediction so I'll return the question.

How many "quids in" will some who bought in 2007 be in 10 years time?

HammersFan

Fair question. Historically, prices have doubled. But I'd say an avewrage of 5% per year (guesswork). I think that's about 70% (compound). If it was in BTL that would be likely to be geard. So with a 25k investement in a 100k house, the owner would pull out 95k for the orginal 25k investment before tax. I'll try to meet you here in 10 years to discuss - but I haven't got a diary that stretches that far ahead, I'll do my best though.

boinging_2

When you say historically they have doubled which period of history are you looking at?

Prices did not double from 1990 - 2000. Yet they did nearly triple 1995 - 2005. You can take a 10 year period of 30 years and get very different results.