andybee33, on 27 September 2011 - 02:53 PM, said:
I was surprised to see one of my posts being quoted in the article. I have to admit that, taken out of the HPC context, it did look a little harsh - bit I would still stand by it.
The argument made about homeowners holding onto their equity was specious. The real issue here is the debt-fuelled pyramid and the original article fails completely to address that.
Yes, in the three 'plus' points for prices 'not falling' as described in the latest article, they cite the need for some to fund retirements:
Many wish to use the equity in their homes or buy-to-lets as a replacement for otherwise poor retirement pension prospects so they need high values.
The author has singularly failed to grasp who ultimately pays for this retirement, and why it is neither desirable or sustainable.
The author might go further to examine what happens to new entrants in a stable pricing regime. Are a person's retirement plans aided by paying more interest over the life of the mortgage? Seems to me that in a stable pricing regime, the lower the cost the better for every new entrant, as it allows less to be spent securing the home and thus frees up more income to fund retirement plans rather than being given to a bank in interest. The equity withdrawal aspect of funding retirement is only sustainable with constant HPI, and constant HPI is an impossibility of Ponzi dreams. End of.
EDIT to add, the other two points about high prices being 'good' are pretty poor VI nonsense to boot:
They help avoid negative equity (where loans are higher than the property's value). This can prevent people moving for a new job or to accommodate a larger family as well as preventing losses to lenders.
They provide economic and social stability - plunging house prices prevent people moving and can lead, as in the United States, to areas where no one buys because they are waiting for "a cheaper tomorrow".
No negative equity but try and get an extra bedroom and it'll cost you £100k, great. I feel a lot better off. Interesting that the author argues for a Ponzi scheme twice in the three points made- lenders losses cannot be prevented by ever-rising prices, in fact it makes catastrophic losses much more likely, as amply demonstrated lately.
The second point is just rubbish- is the author seriously arguing that higher house moving costs make it easier to move?
The author is like a child being dragged to the dentist- in the child's mind there are overriding reasons for avoiding the chair at that moment in time, irrespective of how much good it will do in the long run.
This post has been edited by cheeznbreed: 27 September 2011 - 03:27 PM