the reaper, on Jul 12 2008, 11:17 AM, said:
average house 180k average salary 23k-median.currently 7.82 times long term average 3.5 = 80.5k.......................
and thats if the average salary doesn't go down into the recession.
I've been doing the same kind of calculations for Mrs FTBagain.
If you take a slightly bullish set of numbers say salary at £26k at 3.5 multiple you get £91k, or with two salaries at 2.5 multiple you get £130k. These would be modestly above average mortgages in a sensible market at todays wage levels.
Now compare these figure against the prices for the average UK home, widely regarded as the classic 3 bed semi. Here in Bath, which has very little going for it in economic terms as far as I can see (some MOD establishments that could well be closed down in the nearish future and tourism). Semis in Bath are going for anything between £200k and £400k. Median price from what I saw yesterday on Rightmove is in the region of £250k to £300k. To get even close they are going to have to fall by 50%.
The chances are, of course, the market will over shoot.
That takes us into the 60 to 70% drops over 3 to 4 years from peak. We are nearly a year in already so the market has got to get moving. Maybe that is why we are seeing such big MoM drops at the moment. If the market is to achieve such big total drops over the normal cycle period then it is going to have to drop quickly.
It is a truely saddening situation when I find myself hoping for economic hard times, just so I can stand a chance of buying a house for a fair price.
<!--quoteo--><div class='quotetop'>QUOTE</div><div class='quotemain'><!--quotec-->In short although I would certainly say that the market is full of ignorant people, who just happened to be in the right asset class at the right time and have made a lot of money, there is also a calculated and measured nurturing of the economy going on by the mainstream press. The problem is that you can not hold back the numbers forever.<!--QuoteEnd--></div><!--QuoteEEnd-->