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Exponential House Price Growth 10% Yoy

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Exponential house price growth.

For those who think big falls aren't possible here are some figures if your house is worth £100,000 what would happen if prices kept going up by 10% YoY.

100000

110000

121000

133100

146410

161051

177156.1

194871.71

214358.881

235794.7691

259374.246

285311.6706

313842.8377

345227.1214

379749.8336

417724.8169

459497.2986

505447.0285

555991.7313

611590.9045

672749.9949

740024.9944

814027.4939

895430.2433

984973.2676

1083470.594

1191817.654

1310999.419

1442099.361

1586309.297

1744940.227

1919434.25

2111377.675

2322515.442

2554766.986

2810243.685

3091268.053

3400394.859

3740434.344

4114477.779

4525925.557

4978518.112

5476369.924

6024006.916

6626407.608

7289048.369

8017953.205

8819748.526

9701723.378

10,671,895.72

First 50 Years.

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The 2nd 50 years:

11739085.29

12912993.82

14204293.2

15624722.52

17187194.77

18905914.25

20796505.67

22876156.24

25163771.86

27680149.05

30448163.95

33492980.35

36842278.38

40526506.22

44579156.85

49037072.53

53940779.78

59334857.76

65268343.54

71795177.89

78974695.68

86872165.25

95559381.77

105115320

115626851.9

127189537.1

139908490.9

153899339.9

169289273.9

186218201.3

204840021.5

225324023.6

247856426

272642068.6

299906275.4

329896903

362886593.3

399175252.6

439092777.8

483002055.6

531302261.2

584432487.3

642875736

707163309.6

777879640.6

855667604.7

941234365.1

1035357802

1138893582

1252782940

£1,378,061,234

So after 100 years you end up with a house worth £1,378,061,234

Or £1.38bn, although because everyone is bored with billions at the moment a reasonable priced house.

So no problems here then is there?

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My dear old Mum and Dad paid 2,500 for their first house in 1968.

The same house was on the market last year for 110,000.

Can you work out the annual rate of monetary inflation, err I mean appreciation in value.

Edited by dazednconfused

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Exponential house price growth.

For those who think big falls aren't possible here are some figures if your house is worth £100,000 what would happen if prices kept going up by 10% YoY.

100000

10,671,895.72

First 50 Years.

Out of interest - in what way would you expect that to convince anyone that believes 'big falls' aren't possible, that they are?

I do believe they are possible*, by the way, although if I recall not nearly to they extent you do, but I'm a little confused by your hypothesis here.

* For clarity I'm assuming we are both using 'possible' as a substitute for 'plausible' rather than in the true quantum sense of the word 'possible'.

Edited by daniel stallion

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Now apply this same exponential function to the money supply and the collective amount of debt in the economy, and remember under our present system it has to grow in this fashion or it fails.

Edited by sillybear2

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Out of interest - in what way would you expect that to convince anyone that believes 'big falls' aren't possible, that they are?

I do believe they are possible*, by the way, although if I recall not nearly to they extent you do, but I'm a little confused by your hypothesis here.

* For clarity I'm assuming we are both using 'possible' as a substitute for 'plausible' rather than in the true quantum sense of the word 'possible'.

I just thought I'd post how damaging and unrealistic continued HPI of 10% is. Completely unsustainable over the long term, yet many I suspect where over extending to borrow money because house prices can only ever go up and they'll keep going up at the same rate.

Economically impossible.

And yes apply the same logic to the money supply and you really do have a huge problem.

You can also apply the same logic to those "funds" that offer a guaranteed rate of return of 10%, this is what some investors are looking for.

The system is completely illogical it makes no economic sense, but everyone wants growth and everyone wants big returns. We can no longer breathe we can only ever inflate because to deflate ends the illusionary game.

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My dear old Mum and Dad paid 2,500 for their first house in 1968.

The same house was on the market last year for 110,000.

Can you work out the annual rate of monetary inflation, err I mean appreciation in value.

Yes, use logs.

2,500 x (1 + r/100) ^ (2008 - 1968) = 110,000

Simplifies to

2,500 x (1 + r/100) ^ (40) = 110,000

and then again to

(1 +r/100) ^ (40) = 44

Now take logs of both sides

40 log (1 + r/100) = log 44

then simplfy

Log (1+ r/100) = ( log 44 )/ 40

Log (1+ r/100) = 0.04108631

now reverse the logs

(1 + r/100) = 10 ^ 0.04108631

then solve for r

r = 100 ((10 ^ 0.04108631) - 1)

So r = 9.9%

Just to test

2,500 x (1.099)^ 40 = £109, 105 so just about there without using more decimal places

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My dear old Mum and Dad paid 2,500 for their first house in 1968.

The same house was on the market last year for 110,000.

Can you work out the annual rate of monetary inflation, err I mean appreciation in value.

Approx 9.9224% YOY

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I just thought I'd post how damaging and unrealistic continued HPI of 10% is. Completely unsustainable over the long term, yet many I suspect where over extending to borrow money because house prices can only ever go up and they'll keep going up at the same rate.

Economically impossible.

And yes apply the same logic to the money supply and you really do have a huge problem.

You can also apply the same logic to those "funds" that offer a guaranteed rate of return of 10%, this is what some investors are looking for.

The system is completely illogical it makes no economic sense, but everyone wants growth and everyone wants big returns. We can no longer breathe we can only ever inflate because to deflate ends the illusionary game.

So more of a 'our system is based upon Alice in Wonderland politics, magically delicious economic reasoning and is masterminded by a Wizard of OZ-esque, seemingly all knowing, but ultimately pathetic, entirely disappointing, soul destroying, weak willed, maniac - anything is possible once the strong smell of coffee pervades amongst the masses’, rather than a mathematical hypothesis of proof.

Now it makes sense!

Edited by daniel stallion

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So more of a 'our system is based upon Alice in Wonderland politics, magically delicious economic reasoning and is masterminded by a Wizard of OZ-esque, seemingly all knowing but ultimately pathetic, weak willed, maniac - anything is possible once the strong smell of coffee pervades amongst the masses’, rather than a mathematical hypothesis of proof.

Now it makes sense!

yep,

sentiment (power & greed) drives financial markets....nothing else......it's not scientific in the slightest, they just want YOU to believe that it is.

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Or just:

(110,000/2500)^(1/40) - 1

Any bull using this info should bear in mind the rampant general inflation of the 70's which kept HPI in line with non-HPI.

Over the last ten years the opposite happened and that's why house prices still have a long way to fall.

Edited by Dave Spart

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Yes, use logs.

2,500 x (1 + r/100) ^ (2008 - 1968) = 110,000

Simplifies to

2,500 x (1 + r/100) ^ (40) = 110,000

and then again to

(1 +r/100) ^ (40) = 44

Now take logs of both sides

40 log (1 + r/100) = log 44

then simplfy

Log (1+ r/100) = ( log 44 )/ 40

Log (1+ r/100) = 0.04108631

now reverse the logs

(1 + r/100) = 10 ^ 0.04108631

then solve for r

r = 100 ((10 ^ 0.04108631) - 1)

So r = 9.9%

My how you complicate things!

All I did was type in the Windows calculator: 110000 / 2500 = x^y 0.025 =

and Bob's your uncle. (0.025 being approx. 1/39 where 39 is the no. of years of the appreciation.)

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I just thought I'd post how damaging and unrealistic continued HPI of 10% is.

In what is supposed to be a low inflation environment, excessive HPI polarises society into the haves and have nots and if allowed to continue unchecked leads to financial catastrophe.

Whenever the price of any substitute-free necessity is allowed to inflate excessively then crisis is sure to ensue. That's not an economic issue - its an issue of basic morality.

How long until we have H20PI or O2PI?

I can just see the BTLers salivating at the prospect.

Edited by Dave Spart

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Wage growth of 10% if avg salary is £17K a year.

17000

18700

20570

22627

24889.7

27378.67

30116.537

33128.1907

36441.00977

40085.11075

44093.62182

48502.984

53353.2824

58688.61064

64557.47171

71013.21888

78114.54077

85925.99484

94518.59433

103970.4538

114367.4991

125804.2491

138384.674

152223.1414

167445.4555

184190.001

202609.0011

222869.9013

245156.8914

269672.5805

296639.8386

326303.8224

358934.2047

394827.6251

434310.3877

477741.4264

525515.5691

578067.126

635873.8386

699461.2224

769407.3447

846348.0791

930982.887

1024081.176

1126489.293

1239138.223

1363052.045

1499357.249

1649292.974

1814222.272

1995644.499

2195208.949

2414729.844

2656202.828

2921823.111

3214005.422

3535405.964

3888946.561

4277841.217

4705625.338

5176187.872

5693806.659

6263187.325

6889506.058

7578456.664

8336302.33

9169932.563

10086925.82

11095618.4

12205180.24

13425698.27

14768268.09

16245094.9

17869604.39

19656564.83

21622221.31

23784443.45

26162887.79

28779176.57

31657094.23

34822803.65

38305084.01

42135592.41

46349151.66

50984066.82

56082473.5

61690720.85

67859792.94

74645772.23

82110349.46

90321384.4

99353522.84

109288875.1

120217762.6

132239538.9

145463492.8

160009842.1

176010826.3

193611908.9

212973099.8

£234,270,409.8

So end wage in 100 years would be £235m a year. Even bankers don't get that.

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So end wage in 100 years would be £235m a year. Even bankers don't get that.

At least not as far as the tax man is concerned!

Judging by their Cheshire Cat like smugness, they probably do.

.............I should let this Alice in Wonderland thing go now shouldn't I?

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Whenever the price of any substitute-free necessity is allowed to inflate excessively then crisis is sure to ensue. That's not an economic issue - its an issue of basic morality.

Indeed, what's Gordon's next masterplan... is he going to starve the Irish?

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Indeed, what's Gordon's next masterplan... is he going to starve the Irish?

No, he's going to starve the English by taxing them to pay for Scottish banking and politicians mistakes whilst allowing said bankers and politicians to live in the lap of luxury with their gold plated pensions. :angry: :angry: :angry:

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With regards to the 10% Yoy HPI, I just found this article which says that you could buy a new Volvo 144 in 1968 for £1,353.

Assuming car prices had inflated 10% Yoy too, over the same period, a similar type car would now cost over £61,000.

Being generous, I think the nearest equivalent to the 144 nowadays is the S80 which retails at £22,000.

No-one could afford to buy one and the car industry would go out of business.

Could you imagine that! The car industry going out of business! :lol: Don't be so ridiculous! :lol:

Er . . . :blink:

Edited by Dave Spart

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no one has ever returned 10% year on year in the long run. fact.

manhatten was bought for 24$ nearly 400 years ago

if it had returned 10% year on year it would be into the quadrillions

anyone know anyone with a quadrillion $ ?

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With regards to the 10% Yoy HPI, I just found this article which says that you could buy a new Volvo 144 in 1968 for £1,353.

Assuming car prices had inflated 10% Yoy too, over the same period, a similar type car would now cost over £61,000.

Being generous, I think the nearest equivalent to the 144 nowadays is the S80 which retails at £22,000.

No-one could afford to buy one and the car industry would go out of business.

Not if some bank came out with liar car loans on the basis that car prices only ever rise! That old Volvo is about the same size as the modern S60, but did the former version have ABS, air-con, power steering, etc? :lol: The CPI measure actually hedonically adjusts for such qualitative improvements and classifies it as deflation!

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no one has ever returned 10% year on year in the long run. fact.

manhatten was bought for 24$ nearly 400 years ago

if it had returned 10% year on year it would be into the quadrillions

anyone know anyone with a quadrillion $ ?

That's exactly what they're asking in the head quarters of AIG as we speak.

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I just thought I'd post how damaging and unrealistic continued HPI of 10% is. Completely unsustainable over the long term, yet many I suspect where over extending to borrow money because house prices can only ever go up and they'll keep going up at the same rate.

[...]

It's completely unsustainable over the short term! HPI like this sucks so much money out of the real economy and out of FTBs' pockets, that just five or six years of it will collapse the system, as we're now seeing.

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My dear old Mum and Dad paid 2,500 for their first house in 1968.

The same house was on the market last year for 110,000.

Can you work out the annual rate of monetary inflation, err I mean appreciation in value.

About 10%, funnily enough!

2,500 x (1 + 0.097)^(2009-1968) ~= 2,500 x 44.5 = 111,250

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Exponential house price growth.

For those who think big falls aren't possible here are some figures if your house is worth £100,000 what would happen if prices kept going up by 10% YoY.

First 50 Years.

Any chance of running those numbers again using the current national median house price and projecting out for the next 50 years assuming that the growth figure is the same as what it was for the last fifty years?

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