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threetimesdead

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Everything posted by threetimesdead

  1. The other way of looking at it - when the interest rates go back up to normal levels average salary in this country will have to go up by 21% for both earners in a household across UK to maintain current prices
  2. No, this is a temporary price stabilisation achieved as follows: price interest monthly payment 160,000 5.50% -£982.54 unsustainable payments at historical rates - BoE reduces rates 160,000 1.50% -£639.90 sustainable payments at current ALL TIME low rates 104,203 5.50% -£639.90 sustainable payments at normal historical rates AND fallen house prices Percentage fall required - (160,000-104,203)/160,000 = 35% - to reach sustainable payments at sustainable interest rates
  3. This was only one example of possible applications - a pretty nasty one too - but it also proves the superior precision of the tool There is no argument about where this "cycle ends", and there is no argument that all the "noise" is unsustainable even in the medium term - this is why it is called a "noise" in the first place But it explains far better what is happening right now and would have given a better idea about which of the ingridients is more likely to trigger the final act and how soon
  4. Historical average should be your worst case scenario accepted by consumer - a maximum he is willing to pay out of his take home Now suppose the BoE and the Treasury have already build this model They know that historical average is X% of the take home (say 20%) The market has been overheating for whatever reason reaching 25% in 2007 In order to stabilise HPC I, as the BoE, will need to bring the base rate by us much down so as the mortgage payments roll back close to historically sustainable 20% of the take home income If that is not sufficient to get me there - I can reduce the VAT rate - increasing take home (instead of reducing the mortgage payments) Knowing that historically acceptable average can be a very powerful tool in the hands of market manipulators
  5. How else (if not by using a dynamic metric) would you clear the HP moves from the effects of any rates changes (in particular in a market considered very unusual by both - americans and europeans - because of its predominant reliance on variable rate mortgages) as well as effects of constant and various govt interventions By including them, what you effectively achieve over the long term, you get to the core/base of the consumer/housebuyer behaviour, you achieve exactly the opposite - clean it from the "noise" of those govt interventions
  6. Its is a simplification for those who never had a stats class. For those who did - it is a "perfect" correlation
  7. It is only as predictive as a yardstick can be - is that ratio historically low or historically high? This would indicate the next price move
  8. "Mortgage repayments as percentage of disposable household income" methodology will include effects of any cheap credit Standard "Gross income multiples" methodology will miss it - cheap credit - completely
  9. No, for instance, gross income will rise and personal tax will rise leaving you with same disposable income. Your multiples will miss that development, will tell you that your affordability has risen , my ratios will not miss it and will tell you that affordability has stayed the same or has fallen. And same applies to many other crucial factors. The bottom line is that anyone using historical gross income multiples is simply deceiving oneself and ends up with silly expectations re HPI/HPC movements.
  10. Please do not make up theories and definitions and then assign them to me This is not an "affordfability ratio" that I am talking about A "high" debt to income ratio means exactly the opposite to what you are stating above - you cannot borrow "gazillions" The metric is dynamic from one time period to the next, and covers amongst other your total debt, interst rates, taxation and that is how and why it is so superior to any static "gross income multiples" And it has alone "predicted " the HPC in US
  11. Just look at the FED link posted above - it will answer soo many questions
  12. OH! Now I see why you have dismissed that data and did not like it at all... It shows the HIGHEST EVER MORTGAGE DEBT RATIO for the 3 years preceding house price crash in US!!! I did not even realise it when I posted the link There it is again: http://www.federalreserve.gov/releases/housedebt/
  13. It does! It is time data-series! Ramp on
  14. The original question was - am I Krusty? (who attended Convent of St Clotilde in Lechlade, now closed and redeveloped into posh housing estate) No, I did not attend that Convent and I do not like Lechlade - the river is dirty, banks full of chavs, the town is low lying and prone to floods, crossed by two busy A roads It is so desperate that is bidding to change the name and call itself Lechlade-on-Thames (how would you like London-on-Thames now?) - too common to digest
  15. I think you may have missed the point - there is just one variable - the proportion - mortgage payments vs disposable household income And after a quick "dig" I came to realise that in US this metric is actually is monitored and published by the FED http://www.federalreserve.gov/releases/housedebt/
  16. Why Baysian? I am not suggesting assigning probabilities to any future scenarios The point is that a regression analysis will take into account most relevant and weed out least relevan factors/variables It is purely judgemental what variables one may wish to consider But one arguing for the inclusion of affordability factors cannot crudely look at single income multiples Affordability should be measured as a relationship between MORTGAGE PAYMENTS and DISPOSABLE INCOME PER HOUSEHOLD It is this PROPORTION that would influence historical house price trend
  17. You can always filter them out and adjust the model
  18. Define the variables Build the model Decide which of them (those variables) are historically out of sink for at least the lifetime of your mortgage (better over your own lifetime)
  19. Nothing scares a central banker more than DEFLATION It is the only financial condition they will admit they have no cure for Their only hjope, or one of the hopes, is to make you believe into exact opposite -HYPERINFLATION - and so get you part with your money to revert DEFLATION In the end you pay for being brainwashed out of deflation
  20. That is exactly what they - GB & Co will want you believe....
  21. And you are on the road to becoming a parrot repeating same line in every post - boring
  22. No, banks don't need it, they got QE - you got zilch
  23. Not necessarily - advent of the IVF only proves that
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