[interestrateripoff]

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.

[interestrateripoff]

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?

[babesagainstmachines]

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.

This post has been edited by dazednconfused: 05 March 2009 - 07:46 AM

[daniel stallion]

interestrateripoff, on Mar 5 2009, 08:42 AM, said:

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'.

This post has been edited by daniel stallion: 05 March 2009 - 07:53 AM

[interestrateripoff]

daniel stallion, on Mar 5 2009, 07:51 AM, said:

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.

[Mikhail Liebenstein]

dazednconfused, on Mar 5 2009, 07:45 AM, said:

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

[robo1968]

dazednconfused, on Mar 5 2009, 07:45 AM, said:

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

[daniel stallion]

interestrateripoff, on Mar 5 2009, 09:00 AM, said:

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!

This post has been edited by daniel stallion: 05 March 2009 - 08:12 AM

[grumpy-old-man-returns]

daniel stallion, on Mar 5 2009, 08:11 AM, said:

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.

[Dave Spart]

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.

This post has been edited by Dave Spart: 05 March 2009 - 08:16 AM

[Qetesuesi]

mikelivingstone, on Mar 5 2009, 08:08 AM, said:

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.)

[Dave Spart]

interestrateripoff, on Mar 5 2009, 08:00 AM, said:

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.

This post has been edited by Dave Spart: 05 March 2009 - 08:28 AM

[interestrateripoff]

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.