interestrateripoff Posted March 5, 2009 Share Posted March 5, 2009 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. Quote Link to comment Share on other sites More sharing options...
interestrateripoff Posted March 5, 2009 Author Share Posted March 5, 2009 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? Quote Link to comment Share on other sites More sharing options...
babesagainstmachines Posted March 5, 2009 Share Posted March 5, 2009 (edited) 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 March 5, 2009 by dazednconfused Quote Link to comment Share on other sites More sharing options...
daniel stallion Posted March 5, 2009 Share Posted March 5, 2009 (edited) 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 March 5, 2009 by daniel stallion Quote Link to comment Share on other sites More sharing options...
Guest sillybear2 Posted March 5, 2009 Share Posted March 5, 2009 (edited) 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 March 5, 2009 by sillybear2 Quote Link to comment Share on other sites More sharing options...
interestrateripoff Posted March 5, 2009 Author Share Posted March 5, 2009 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. Quote Link to comment Share on other sites More sharing options...
Mikhail Liebenstein Posted March 5, 2009 Share Posted March 5, 2009 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 Quote Link to comment Share on other sites More sharing options...
robo1968 Posted March 5, 2009 Share Posted March 5, 2009 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 Quote Link to comment Share on other sites More sharing options...
daniel stallion Posted March 5, 2009 Share Posted March 5, 2009 (edited) 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 March 5, 2009 by daniel stallion Quote Link to comment Share on other sites More sharing options...
grumpy-old-man-returns Posted March 5, 2009 Share Posted March 5, 2009 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. Quote Link to comment Share on other sites More sharing options...
Dave Spart Posted March 5, 2009 Share Posted March 5, 2009 (edited) 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 March 5, 2009 by Dave Spart Quote Link to comment Share on other sites More sharing options...
Qetesuesi Posted March 5, 2009 Share Posted March 5, 2009 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.) Quote Link to comment Share on other sites More sharing options...
Guest sillybear2 Posted March 5, 2009 Share Posted March 5, 2009 Quote Link to comment Share on other sites More sharing options...
Dave Spart Posted March 5, 2009 Share Posted March 5, 2009 (edited) 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 March 5, 2009 by Dave Spart Quote Link to comment Share on other sites More sharing options...
interestrateripoff Posted March 5, 2009 Author Share Posted March 5, 2009 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. Quote Link to comment Share on other sites More sharing options...
daniel stallion Posted March 5, 2009 Share Posted March 5, 2009 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? Quote Link to comment Share on other sites More sharing options...
Guest sillybear2 Posted March 5, 2009 Share Posted March 5, 2009 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? Quote Link to comment Share on other sites More sharing options...
IMHAL Posted March 5, 2009 Share Posted March 5, 2009 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: Quote Link to comment Share on other sites More sharing options...
Dave Spart Posted March 5, 2009 Share Posted March 5, 2009 (edited) 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! Don't be so ridiculous! Er . . . Edited March 5, 2009 by Dave Spart Quote Link to comment Share on other sites More sharing options...
getdoon_weebobby Posted March 5, 2009 Share Posted March 5, 2009 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 $ ? Quote Link to comment Share on other sites More sharing options...
Guest sillybear2 Posted March 5, 2009 Share Posted March 5, 2009 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? The CPI measure actually hedonically adjusts for such qualitative improvements and classifies it as deflation! Quote Link to comment Share on other sites More sharing options...
Guest sillybear2 Posted March 5, 2009 Share Posted March 5, 2009 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. Quote Link to comment Share on other sites More sharing options...
Leonard Hatred Posted March 5, 2009 Share Posted March 5, 2009 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. Quote Link to comment Share on other sites More sharing options...
daedalus Posted March 5, 2009 Share Posted March 5, 2009 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 Quote Link to comment Share on other sites More sharing options...
Bardon Posted March 5, 2009 Share Posted March 5, 2009 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? Quote Link to comment Share on other sites More sharing options...
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