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Wiki Update Why a house price boom is not good for homeowners

#1 User is offline   Webmaster 

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Post icon  Posted 17 April 2006 - 02:31 PM

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.

#2 User is offline   Jason 

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Posted 17 April 2006 - 04:00 PM

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

House Price changes

NO LONGER UPDATED.

----------------------- Peak ---------- Trough -(% trough fall) - Current - (% from peak) - (% from Trough)
Halifax: -------------- Aug07 199,612 - Apr09 154,490 (-22.60%) - Oct09 165,528 (-17.08%) - (+07.14%)
Nationwide: ----------- Oct07 186,044 - Feb09 147,746 (-20.59%) - Oct09 162,038 (-12.90%) - (+09.67%)
Rightmove: ------------ May08 242,500 - Jan09 213,570 (-11.93%) - Nov09 226,440 (-06.62%) - (+06.03%)
DCLG (formerly ODPM): - Jan08 221,758 - Mar09 187,193 (-15.59%) - Jul09 196,338 (-11.46%) - (+04.89%)
Land Registry (Mth): -- Nov07 186,009 - Apr09 152,803 (-17.85%) - Sep09 158,377 (-14.86%) - (+03.64%)
FT HPI: --------------- Feb08 231,804 - Apr09 199,953 (-13.74%) - Aug09 205,338 (-11.42%) - (+02.69%)
Land Registry (Qtr): -- Q307 230,474 -- Q109 198,939  (-13.68%) - Q209 224,064  (-02.78%) -- (+12.63%)


Topic Link: http://www.housepric...howtopic=127421
Links: Halifax, Nationwide, Rightmove, Land Registry (monthly), Land Registry (Raw data - Quarterly).
____________________________________________

Read what the papers said during the last crash: Here.

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Posted 17 April 2006 - 04:17 PM

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

#4 User is offline   teddyboy 

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Posted 17 April 2006 - 04:41 PM

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

What they say... what common sense says..... "A HPC would be bad for the economy" - The boom has helped to damage the economy - a correction would go to fix it!
"20/30/40% off asking price? Thats silly" - Asking prices 20/30/40% above last sold is whats silly - these reductions are righting a wrong!

25/05/2005 Liverpool 3-3 AC Milan - Liverpool win on penalties EUROPEAN CHAMPIONS FOR THE 5TH TIME
22/04/2006 Liverpool 2-1 Chelsea - Liverpool in the FA Cup Final
23/04/2006 Steven Gerrard named PFA Player of the Year
13/05/2006 Liverpool win FA Cup Final
31/12/2006 Steven Gerrard honored Steven Gerrard M.B.E.
MAY 2007 - Liverpool Premiership Champions?????? OK games up - Not got a f***ing chance ;)
MAY 2008 - Liverpool Premiership Champions?????? Getting closer - but not quite there yet imho
MAY 2009 - Liverpool Premiership Champions?????? This is the year!!!

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Posted 17 April 2006 - 06:05 PM

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

#6 User is offline   DoubleBubbleTrouble 

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Posted 17 April 2006 - 07:41 PM

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!

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Posted 18 April 2006 - 08:24 AM

Thanks DoubleBubbleTrouble

#8 User is offline   BillyShears 

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Posted 18 April 2006 - 08:56 AM

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

#9 User is offline   Spring In The Air 

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Posted 18 April 2006 - 09:04 AM

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.

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Posted 18 April 2006 - 10:04 AM

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... <_<
Propaganda is to a democracy what violence is to a dictatorship

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Posted 18 April 2006 - 11:38 AM

View PostSpring In The Air, on Apr 18 2006, 10:04 AM, said:

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.


Work it out.
FFS.
2005 1.8% GDP growth.

You are living in a dream world.

This post has been edited by megaflop: 18 April 2006 - 11:38 AM


#12 User is offline   teddyboy 

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Posted 18 April 2006 - 12:23 PM

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
What they say... what common sense says..... "A HPC would be bad for the economy" - The boom has helped to damage the economy - a correction would go to fix it!
"20/30/40% off asking price? Thats silly" - Asking prices 20/30/40% above last sold is whats silly - these reductions are righting a wrong!

25/05/2005 Liverpool 3-3 AC Milan - Liverpool win on penalties EUROPEAN CHAMPIONS FOR THE 5TH TIME
22/04/2006 Liverpool 2-1 Chelsea - Liverpool in the FA Cup Final
23/04/2006 Steven Gerrard named PFA Player of the Year
13/05/2006 Liverpool win FA Cup Final
31/12/2006 Steven Gerrard honored Steven Gerrard M.B.E.
MAY 2007 - Liverpool Premiership Champions?????? OK games up - Not got a f***ing chance ;)
MAY 2008 - Liverpool Premiership Champions?????? Getting closer - but not quite there yet imho
MAY 2009 - Liverpool Premiership Champions?????? This is the year!!!

#13 User is offline   kingofnowhere 

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Posted 18 April 2006 - 12:49 PM

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

#14 User is offline   teddyboy 

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Posted 18 April 2006 - 01:29 PM

View Postkingofnowhere, 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
What they say... what common sense says..... "A HPC would be bad for the economy" - The boom has helped to damage the economy - a correction would go to fix it!
"20/30/40% off asking price? Thats silly" - Asking prices 20/30/40% above last sold is whats silly - these reductions are righting a wrong!

25/05/2005 Liverpool 3-3 AC Milan - Liverpool win on penalties EUROPEAN CHAMPIONS FOR THE 5TH TIME
22/04/2006 Liverpool 2-1 Chelsea - Liverpool in the FA Cup Final
23/04/2006 Steven Gerrard named PFA Player of the Year
13/05/2006 Liverpool win FA Cup Final
31/12/2006 Steven Gerrard honored Steven Gerrard M.B.E.
MAY 2007 - Liverpool Premiership Champions?????? OK games up - Not got a f***ing chance ;)
MAY 2008 - Liverpool Premiership Champions?????? Getting closer - but not quite there yet imho
MAY 2009 - Liverpool Premiership Champions?????? This is the year!!!

#15 User is offline   andrew flintoff 

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Posted 17 October 2007 - 06:43 AM

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.

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