JonoP

The Nineties

84 posts in this topic

Certain people on this forum are prone to posting that they will not buy until prices return to where they were at (in terms of income multiples) in the mid nineties. I think that this is deluded. Houses in the mid nineties were undervalued, in the same way that they are overvalued today. I do not, in my lifetime, expect to see houseprice/income ratios return to where they were 15 to 20 years ago.

The same people also often quote the ‘long term’ trend of average house prices averaging 3.5 times average income. Again, I think this model is flawed. The long term average spans many years where it was the norm for the husband to work and the wife to stay at home as a housewife. That model is now long gone. Both husbands and wives now routinely work so the new norm is the double income family.

Finally, interest rates were historically a lot higher than they are now. This meant historically the cost of servicing a small loan was similar to the current cost of servicing a large loan. People argue that IRs will rise, and indeed I believe they will. But not by much and not very fast. I think that it is quite conceivable that someone taking out a new Mortgage today could see IRs stay below 2.5% for the entire duration of their mortgage. Look at Japan.

So, although I would LIKE house prices to revert back to nineties levels in terms of price/income ratios, I do not think they will.

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[quote name='JonoP' timestamp='1329307832' post='3261966']
Certain people on this forum are prone to posting that they will not buy until prices return to where they were at (in terms of income multiples) in the mid nineties. I think that this is deluded. Houses in the mid nineties were undervalued, in the same way that they are overvalued today. I do not, in my lifetime, expect to see houseprice/income ratios return to where they were 15 to 20 years ago.

The same people also often quote the ‘long term’ trend of average house prices averaging 3.5 times average income. Again, I think this model is flawed. The long term average spans many years where it was the norm for the husband to work and the wife to stay at home as a housewife. That model is now long gone. Both husbands and wives now routinely work so the new norm is the double income family.

Finally, interest rates were historically a lot higher than they are now. This meant historically the cost of servicing a small loan was similar to the current cost of servicing a large loan. People argue that IRs will rise, and indeed I believe they will. But not by much and not very fast. I think that it is quite conceivable that someone taking out a new Mortgage today could see IRs stay below 2.5% for the entire duration of their mortgage. Look at Japan.

So, although I would LIKE house prices to revert back to nineties levels in terms of price/income ratios, I do not think they will.
[/quote]

You think that people will never realise or be bothered that they have become debt slaves and the government can print wealth?

Am I right?

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you are wrong

[quote name='JonoP' timestamp='1329307832' post='3261966']
Certain people on this forum are prone to posting that they will not buy until prices return to where they were at (in terms of income multiples) in the mid nineties. I think that this is deluded. Houses in the mid nineties were undervalued, in the same way that they are overvalued today. I do not, in my lifetime, expect to see houseprice/income ratios return to where they were 15 to 20 years ago.

[/quote]

cycles happen and overvaluations follow undervaluations follow overvaluations

undervaluation will come again, not sure when, but it will

[quote]

The same people also often quote the 'long term' trend of average house prices averaging 3.5 times average income. Again, I think this model is flawed. The long term average spans many years where it was the norm for the husband to work and the wife to stay at home as a housewife. That model is now long gone. Both husbands and wives now routinely work so the new norm is the double income family.

[/quote]

the proportion of productive working adults indeed does affect the disposable income available for house purchase and rentals (propping up yields and by association)

however, the increase in working couples is smaller than the increase in retirees and in education, ergo the direction of the affect is down not up

you are extremely wrong here

[quote]

Finally, interest rates were historically a lot higher than they are now. This meant historically the cost of servicing a small loan was similar to the current cost of servicing a large loan. People argue that IRs will rise, and indeed I believe they will. But not by much and not very fast. I think that it is quite conceivable that someone taking out a new Mortgage today could see IRs stay below 2.5% for the entire duration of their mortgage. Look at Japan.

[/quote]

in Japan house prices are 70% down in real terms since peak, interest rates are only low because of a weak economy

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[quote name='Democorruptcy' timestamp='1329308080' post='3261972']
You think that people will never realise or be bothered that they have become debt slaves and the government can print wealth?

Am I right?
[/quote]

no, he's either an estate agent or just bought a house

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What about the trend for increasing precarity of employment? Okay, so both husband and wife might be employed but they are more likely to experience unemployment with permanent jobs increasingly hard to come by. The difference between now and when a single wage earner was supporting the household is also that the single wage earner, barring the loss of the industry they were employed in, may well have had a job for life.

Would like to see some statistics about when having two wage earners became increasingly common but I think that trend was on the rise long before the mid-nineties bottom for the housing market.

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Wow, after such a robust analysis, I see that the economy is not FUBAR'd, and having a £4 Trillion debt mountain is nothing to worry about, and won't affect house prices at all.

Quick, anyone know the number of any decent estate agents, I need to call one asap, so that I don't miss the boat.

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[quote name='JonoP' timestamp='1329307832' post='3261966']
Certain people on this forum are prone to posting that they will not buy until prices return to where they were at (in terms of income multiples) in the mid nineties. I think that this is deluded. Houses in the mid nineties were undervalued, in the same way that they are overvalued today. I do not, in my lifetime, expect to see houseprice/income ratios return to where they were 15 to 20 years ago.
[/quote]

My first thought on seeing this title was "no return to the good days"; it didn't even occur to me that this would be a HP thread.

In the mid nineties the economy was growing well, unemployment was on the way down and government finances were in a good state. 15 years later and the rest of europe is on the edge of meltdown, unemployment is going up, the economy is going down and govenment finances are a disaster.

No return to mid nineties multiples? Are you sure?

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[quote name='Lepista' timestamp='1329308524' post='3261986']
Wow, after such a robust analysis, I see that the economy is not FUBAR'd, and having a £4 Trillion debt mountain is nothing to worry about, and won't affect house prices at all.

Quick, anyone know the number of any decent estate agents, I need to call one asap, so that I don't miss the boat.
[/quote]

try "JonoP Estates, Woking, Kent - your path to a better sale and higher house value - call now for a free quote"

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[quote name='Si1' timestamp='1329308269' post='3261978']
no, he's either an estate agent or just bought a house
[/quote]

I bought a two story house. One story before I bought, and another after.

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[quote name='JonoP' timestamp='1329307832' post='3261966']
Certain people on this forum are prone to posting that they will not buy until prices return to where they were at (in terms of income multiples) in the mid nineties. I think that this is deluded. Houses in the mid nineties were undervalued, in the same way that they are overvalued today. I do not, in my lifetime, expect to see houseprice/income ratios return to where they were 15 to 20 years ago.

The same people also often quote the 'long term' trend of average house prices averaging 3.5 times average income. Again, I think this model is flawed. The long term average spans many years where it was the norm for the husband to work and the wife to stay at home as a housewife. That model is now long gone. Both husbands and wives now routinely work so the new norm is the double income family.

Finally, interest rates were historically a lot higher than they are now. This meant historically the cost of servicing a small loan was similar to the current cost of servicing a large loan. People argue that IRs will rise, and indeed I believe they will. But not by much and not very fast. I think that it is quite conceivable that someone taking out a new Mortgage today could see IRs stay below 2.5% for the entire duration of their mortgage. Look at Japan.

So, although I would LIKE house prices to revert back to nineties levels in terms of price/income ratios, I do not think they will.
[/quote]

Most people typically believe the way things are, or have been of late, will persist into the forseeable future.

In terms of near term action you are probably right. But you have to rule out some dark cygnet like things and also other changes we know are happenning such as the ageing of the surge of people wanting larger houses that has put their prices up more than average and thereby increased the overall average. In the next few years, some of that stock may start to be relinquished by the old and infirm in increasing numbers.

I would argue that more than most of the changes you mention, it was the devaluation of the pound by 35% and the flood of money into London picking up bargains stopped the house price crash being even bigger. It distorted the overall average and will have resulted in a ripple effect.

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[quote name='Bloo Loo' timestamp='1329309283' post='3262002']
I bought a two story house. One story before I bought, and another after.
[/quote]

very droll B)

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I know of two people that bought in the 90's both lost a fortune.

My girlfriends mum and dads house was valued at £450K in 1991...they sold it in 1996 for £250K...Someone offered £220K and they nearly accepted.

This is the reality. Buy at the wrong time and you loose a fortune.


Buying now, is the wrong time !!!

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[quote name='JonoP' timestamp='1329307832' post='3261966']
Certain people on this forum are prone to posting that they will not buy until prices return to where they were at (in terms of income multiples) in the mid nineties. I think that this is deluded. Houses in the mid nineties were undervalued, in the same way that they are overvalued today. I do not, in my lifetime, expect to see houseprice/income ratios return to where they were 15 to 20 years ago.

The same people also often quote the 'long term' trend of average house prices averaging 3.5 times average income. Again, I think this model is flawed. The long term average spans many years where it was the norm for the husband to work and the wife to stay at home as a housewife. That model is now long gone. Both husbands and wives now routinely work so the new norm is the double income family.

Finally, interest rates were historically a lot higher than they are now. This meant historically the cost of servicing a small loan was similar to the current cost of servicing a large loan. People argue that IRs will rise, and indeed I believe they will. But not by much and not very fast. I think that it is quite conceivable that someone taking out a new Mortgage today could see IRs stay below 2.5% for the entire duration of their mortgage. Look at Japan.

So, although I would LIKE house prices to revert back to nineties levels in terms of price/income ratios, I do not think they will.
[/quote]

shouldn't you be fixing initial entry's on right move,you'll never get all these houses sold.

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[quote name='JonoP' timestamp='1329307832' post='3261966']
Certain people on this forum are prone to posting that they will not buy until prices return to where they were at (in terms of income multiples) in the mid nineties. I think that this is deluded. Houses in the mid nineties were undervalued, in the same way that they are overvalued today. I do not, in my lifetime, expect to see houseprice/income ratios return to where they were 15 to 20 years ago.

The same people also often quote the ‘long term’ trend of average house prices averaging 3.5 times average income. Again, I think this model is flawed. The long term average spans many years where it was the norm for the husband to work and the wife to stay at home as a housewife. That model is now long gone. Both husbands and wives now routinely work so the new norm is the double income family.

Finally, interest rates were historically a lot higher than they are now. This meant historically the cost of servicing a small loan was similar to the current cost of servicing a large loan. People argue that IRs will rise, and indeed I believe they will. But not by much and not very fast. I think that it is quite conceivable that someone taking out a new Mortgage today could see IRs stay below 2.5% for the entire duration of their mortgage. Look at Japan.

So, although I would LIKE house prices to revert back to nineties levels in terms of price/income ratios, I do not think they will.
[/quote]

high unemployement,

upto 5 years of no pay rises and wages erroded by inflation

Mortgages harder to obtain, regardless of house price/worth

rising energy costs

rising everying in price

job security low

sentiment low

and that JUST in the UK, feed in sentiment from abroad as well.

but none of that matter, as IR's are still at a historically low level, and Merv is printing more money

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Houseprices are a function of credit.

Credit = debt

Debt is a claim on future productivity.

Debt bubble requires exponential growth to ensure that future claims do not become entirely unserviceable.

Peak growth/productivity = peak energy production (primarily fossil).

Peak energy = 2005*

Future claims on productivity no longer viable.

Debt ceases to have any value.

No more credit.

* course if el greco e-cat man or some other dude pulls a viable LNR out of the bag then l'll turn on a sixpence and be buying a house immediately.

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[quote]
Houses in the mid nineties were undervalued, in the same way that they are overvalued today. [/quote]
The median vs. mean wages is pretty stable - 60% of working people earn less than the mean. Did then. Do now.

[quote]The same people also often quote the 'long term' trend of average house prices averaging 3.5 times average income.
Again, I think this model is flawed. [/quote]
I agree. It is flawed. Affordability should be nearer 2x average individual income, as the staples of life, bills we all pay, are so much more expensive against income than they were back then.

[quote]The long term average spans many years where it was the norm for the husband to work and the wife to stay at home as a housewife. That model is now long gone. Both husbands and wives now routinely work so the new norm is the double income family.[/quote]
The 'New Norm' is stll subject to the historic rigour of comparison.
£26k is average individual wage, £32k average household income. Over Two thirds earn less than average wage. And how many individual FTB are there, compared to couples?

[quote]Finally, interest rates were historically a lot higher than they are now. This meant historically the cost of servicing a small loan was similar to the current cost of servicing a large loan. People argue that IRs will rise, and indeed I believe they will. But not by much and not very fast. I think that it is quite conceivable that someone taking out a new Mortgage today could see IRs stay below 2.5% for the entire duration of their mortgage. [/quote]
Senior Bankers would disagree with you. 'A raft of repossessions' is one quote. Doesnt Matter what your guess is. Can you get a 29 yr fixed rate, from your bank, and the BOE in writing? [And why would you unless you enjoy being robbed and raped?]

Its all a scam. Government are Paid by the Bankers to ensure the population does nothing about it.

The average age of a FTB is reported as being 38 years old, because people who are 38 have been unable to afford to buy a house since they began working. Next year it will be 39, the year after it will be 40.
[And yet people, who are 42, 43 years old, who are in the same job on the same wages are sitting on £250k assets which they bought for £80k]

[Yet to allow this fascist situation to continue, they had to bail out banks, and steal our taxes and future's, so we contiue to pay for other peoples houses. ]

If it didnt mean 20 years in Prison, I would have paid a visit to my local MP's house by now. With a Bat.

Our elected officials have orchestrated this to happen so a few crooks can extract untold hundreds of millions from the rest of us.

And seriously damaged or destroyed our lives in the process.

And not one of them gives a F@ck. Edited by Milton

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[quote name='Milton' timestamp='1329312228' post='3262076']
The median vs. mean wages is pretty stable - 60% of working people earn less than the mean. Did then. Do now. [/quote]
I looked at this recently. Its worse than that. Much closer to 70% of people earn less than the mean now, closer to 60% back then.

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[quote name='SeeYouNextTuesday' timestamp='1329312557' post='3262083']
I looked at this recently. Its worse than that. Much closer to 70% of people earn less than the mean now, closer to 60% back then.
[/quote]

Thankyou.

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[quote name='Milton' timestamp='1329312611' post='3262084']
Thankyou.
[/quote]
I asked FreeTrader about it on one of his threads, looked up some figures for myself

http://www.housepricecrash.co.uk/forum/index.php?showtopic=173699&st=30

[quote name='SeeYouNextTuesday' timestamp='1325861934' post='3225320']
I was trying to illustrate how few people earn this average. If, historically, Halifax have used the ASHE figures to give their earning multiples, it would be interesting to know the historical deviation between median and means. In these times of income inequality is there a greater divergance in mean and median than ever before? A quick look on google yields the 1998 ASHE figures. It is on a weekly rather than annual basis but the Mean figure 'appears' closer to the 60th percentile than the 70th back then. I've no idea if this change is statistically significant, nor is a linear interpolation of the Mean figure's percentile correct but how far wrong is it?

1998
median/50th 372.7,
60th 420.3
Mean 438.3 (linear interpolation - 63rd percentile?)
70th 479.0

2011

median/50th 28409
60th 32218
Mean 36511 (linear interpolation - 69th percentile?)
70th 37197

Maybe FreeTrader has some nugget from the stats regarding this. Is this yet another of the indicators of how the imbalance in the housing market is distorted by quasi-official figures? Using the same stats for consistency but not reflecting the changing trends in those 'consistent' stats?
[/quote]

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[quote name='TheCountOfNowhere' timestamp='1329309631' post='3262011']Buying now, is the wrong time !!![/quote]

Tommorrow isn't looking good either.

Come back when people say houses are a terrible investment... it's probably a good time to buy then.

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[quote name='Milton' timestamp='1329312611' post='3262084']
Thankyou.
[/quote]
Salaries in my industry are about 60% higher than in the 1990s but work paid overtime, which used to bump up my earnings considerably. Add in lower housing costs, food and utility bills and I am significantly poorer now than I was back then.

Sure, some things were more expensive in relative and absolute terms then. I still have CDs with £15.99 stickers from the 90s but they were all discretionary, whereas the hikes in prices since them have been non-discretionary. The situation is unsustainable.

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[quote name='TheCountOfNowhere' timestamp='1329309631' post='3262011']
I know of two people that bought in the 90's both lost a fortune.

My girlfriends mum and dads house was valued at £450K in 1991...they sold it in 1996 for £250K...Someone offered £220K and they nearly accepted.

This is the reality. Buy at the wrong time and you loose a fortune.


Buying now, is the wrong time !!!
[/quote]


Yep got to be clear about what point of the 90s we are talking about. Although 1991 was crash plus two years, it took another 4/5 years into 1995/6 to see those record low income multiples on Haliwideof three. I tend to agree with the OP we will not get to those levels again, but maybe 3.5 in around 2015. After all we are at 4.33 on the apples with apples Halifax index from 6 and I reckon a bit of flat-lining and gentle falls should get us to 3.5 in about three years.

One thing for sure the crash aint over, seven years last time, dream on if you think Brown and King's Mother of all f**k ups has corrected where we are now at crash plus 4.5 years. Edited by crashmonitor

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[quote name='when' timestamp='1329315317' post='3262137']
I agree but how long can you wait for. I've waited 4.5 years and still no crash here in Essex. I dont have the luxury of time on my side therefore at some point I need to get on with life.
[/quote]

what a load of b0ll0cks

what is this 'get on with life' b0ll0cks?

Is having ball-crunching negative equity 'getting on with life'?

if so, buy!

or have some balls

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As others have mentioned - the cost of fuel today is way higher. Didn't oil hit $10 a barrel in the '90s?

Which decade did women start entering the workforce en masse, thus pushing up house prices according to the OP? It wasn't the '00s, that's for sure.

If the number of years up equals the number of years down, the best time to buy would in theory be between 2015 - 2018. That's a long time to go... Under such a scenario, Brown's housing bubble will be the defining moment of many a Gen X'ers personal fortune and career prospects.

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