[Webmaster]

I think the best way to get the Wiki populated is to get separate threads going where we can all put the arguments into then we'll pick out the relevant bits and add these to the Wiki.

We'll start off with "Why a house price boom is not good for homeowners" on this thread. Both sides of the argument please, we need to make the wiki as informative as possible.

[Jason]

Ok, i've started it.

Direct link: http://www.housepricecrash.co.uk/wiki/Why_..._for_homeowners

I've also added a bit about the Property Ladder... (Now's where's that funny pic of a broken ladder?)

This post has been edited by Jason: 17 April 2006 - 04:00 PM

[Webmaster]

Good work Jason. I'll get one of the Fubra graphics guys to draw some cartoon images to liven up the pages.

[teddyboy]

I want to add things to this but I cant add to Jasons post???

Anyone help me? I have registered and am logged in. I could edit it at the start but since Jason's post I cant add to it

TB

SORRY!! Being a noobie!! Done now

This post has been edited by teddyboy: 17 April 2006 - 04:43 PM

[Webmaster]

Good work Teddyboy, just read your Wiki contribution, excellent stuff.

[DoubleBubbleTrouble]

There's quite a few reasons in here starting at the "Moving up the ladder" paragraph after the FTB stuff;

http://www.pricedout.org.uk/Articles/There...08/Default.aspx

Feel free to cut and paste, or link or whatever, I'm not fussed as long as the message is out there!

[Webmaster]

Thanks DoubleBubbleTrouble

[BillyShears]

One thing this page doesn't do is show numerically how a house price crash would benefit existing home-owners. I posted some numerical examples on this some time ago, but can't find them.

Imagine that you have a family. They buy a starter home, but have their eyes on a larger property that they would like to buy later on. Assume that when they buy, the starter home is 100K, and their next rung on the ladder is 180K.

Then we have 40% price inflation. The value of the house that they own goes up to £140K, but the next rung house goes up to £252K. So if they want to move up the ladder, they sell their own house, and then purchase the next house for £112K more than they sold for. The total amount they have spent on housing is £100K + £112K = £212K.

Assume that they didn't buy the house, and there is a 20% house price drop. The value of their house drops from £140K to £112K, and the value of the next rung house drops from £252K to £201.6K. If they then want to move up the ladder, they only need to find £89.6K, a lesser amount. The total amount they would have spent on housing would be £100K + £89.6K = £189.6K. Or, quite a bit less than they would have spent in the absence of a house price crash.

In general, when discussing the consequences of HPI, people seem to concentrate too much on poor liddle FTBs. This is a serious problem, but I think that a fair chunk, perhaps the majority, of homeowners couldn't give a toss. Showing that HPI may well limit their choices too may have more effect for many.

A second thing to consider, but which I don't have a worked example for, is that if we presume that there is a housing ladder, then people's true housing costs are higher than they would be otherwise. In the extreme case where someone buys their next house without increasing their mortgage, they would have had to save a fair chunk of money each month. This is impossible if their first home was at the limit of affordability so that after the mortgage payment there is insufficient money left over to save for a move up the ladder. At the other extreme, assuming that they don't save any additional equity, then they need their income to grow sufficient to afford the larger mortgage. What percentage of people's income grows sufficiently to afford this?

Billy Shears

[Spring In The Air]

What you all either fail to realise or just simply ignore is that for 99.9% of the people in this country (that buy a house at some stage of their lives) the equity they build up in the house is the only real wealth they accrue in their lives.

Which would you prefer?

You could struggle all your working life with high mortgage payments etc as you work your way up the ladder and end up with a house worth half a million which you can sell to help fund your retirement.

Or you could have a better lifestyle throughout your working life because you have lower mortgage payments but, when you retire, your house is not worth selling and downsizing as it won't release any meaningful amount of equity. You then face a retirement of pretty abject poverty.

Rightly, or wrongly, most home owners think high house prices will, eventually, benefit them greatly. The only thing, therefore, that will cause house prices to drop is a recession. And it needs to be the sort that means that high unemployment makes everyone fear for their jobs and discourages people from taking on more debt.

No sign at all of that happening yet. A bit of increased unemployment lately but very much in the 'nothing to see here' category.

[Converted Lurker]

Is there an argument to be had that posting such nonsense as emotional irrational content on a wiki stub is well...useless? I`ve had a good look around wiki and I`m genuinely struggling to imagine what the benefit of this exercise will be other than vain glorious "Oh I did that bit " recognition by posters, or promotion of this forum for commercial benefits As mentioned earlier I`m more than happy to contribute if anyone can give me a convincing reason to support this exercise. Looking at wiki, starting with real estate bubble, the subject is more than catered for...

[teddyboy]

Anyone know how to fix the 'leading' on the text. Mine seems to have gone a bit skewiff!!

TB

CL,
I think the main benefit of the WIKI is it can GROW. Your comments in its present state are probably true but lets see if it grows.

TB

[kingofnowhere]

Hi

Depends on where you are compared to whether you are short or long in housng.


If we say you are in your final house , so housing neutral then rising house prices are good for you are they provide capital that can be accessed in the future, either by downsizing or equity release.

If you are half way there, then you are short of half a house, so the rise in prices is bad. However it does again provide a source of wealth that can be accessed at competitive rates

No HO, then really bad news, short of one house, now higher price to pay for house and no access to the cheap capital

Owning more housing then its great news

[teddyboy]

kingofnowhere, on Apr 18 2006, 01:49 PM, said:

Hi

Depends on where you are compared to whether you are short or long in housng.
If we say you are in your final house , so housing neutral then rising house prices are good for you are they provide capital that can be accessed in the future, either by downsizing or equity release.

If you are half way there, then you are short of half a house, so the rise in prices is bad. However it does again provide a source of wealth that can be accessed at competitive rates

No HO, then really bad news, short of one house, now higher price to pay for house and no access to the cheap capital

Owning more housing then its great news

top post KON

I think the problem is more at the bottom 2-3 rungs of the ladder. I dont know what the stats are but I reckon people probably move on average 2-3 times in a lifetime? Those that are near the top wont feel this AS MUCH but surely the amounts of borrowings SO LATE IN LIFE must have an affect???

TB

[andrew flintoff]

Hi
All depends upon comparison either short or long housing. Increase in house prices are good for you in you are in your final house.
Sometimes rise of house prices is not beneficial for you if you are there halfway.