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easy2012

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  1. easy2012

    Rising Interest Rates Make Housing More Affordable

    Exactly, interest rate is only one of the factor (of course if they go to a high real rate like +5% above inflation) then of course everything will start to crash and at that point, people with big pot of cash can then just stop working and 'rent seeking' using the saving pot although the 'interest' obviously have to come from somewhere.. Other factors would be supply and demand, credits terms, type of people buying, earning capabilities, tax treatments, inflation expectation - and anything that affects the cash flow (in and out) of the purchase. The only sensible way out of this is lots of building (else we are just playing musical chair) and LVT.
  2. So I am not alone thinking this way..
  3. Yup - spread hit. Some foreign currencies too.
  4. In another word, you can 'consume' the housing..
  5. So are you getting back in ?
  6. Yes, the chart shows nominal price.
  7. Another attempt of you to misrepresent thing. On second read, I suppose (again without a full page of glossary, I can only guess what you mean) that answer the question. I am afraid at this point the feeling is mutual. Best wishes.
  8. I take it that you do actually understand the word 'unlikely' but simply decide to ignore the word ?
  9. Totally out of context, obviously. I think you used the word bubble and leverage too and I suppose that must mean you are also telling people to buy on high leverage ?! The other thing - and yet you still have not answer basic question about your position - whether someone who definitely want to buy and is comfortable to buy should buy or should stay out given known facts.
  10. Firstly, I totaly agree with you where the housing market SHOULD be (for the young, affordability etc), but that is totally different from where it is likely TO BE in the sensible future (1,3,5,10 years). It may not be relevant to you, but it is relevant to the message (according to my interpretation) that you want to express, i.e. staying out at all cost even if one feels strongly about buying and can do so comfortably. Does that mean that leave 1 committed (high, say >80% certainty) meaningful nominal price fall (i.e. 20-30%) poster on this board? Where was a misunderstanding there then. Now, should someone who can comfortably (can cover the mortgage payment easily and with low leverage <3.5x) and feel strong about buying - should they jump in or stay out at all cost in anticipation of the 5% SVR in 5 years? I take that to mean 2-3% or even 5% SVR. Combination of supply and demand, attractive credits, type of people, earning capabilities, tax treatments, inflation expectation - and anything that affects the cash flow (in and out) of the purchase. If say cost of living ex-housing has been reduced to £100 per month (say invention of replicator), then house price will go up even if SVR is 5% if the current supply constrained (planning) remained. Yes, that is what I meant. Is the change stable in the reasonably future (1,3,5 years)? I don't know. Is this stable in the long run? No, but 'long run' is not meaningful to people. I thought this was obvious. If the average mark in a class of 100 is 50, then maybe 95 people will have marks that are 10,20, 75,80,90 etc rather then 50 exactly. The same applies to inflation index and earnings. No. Either you can afford a particular house NOW, or you can't. Whether you can afford the same particular house 5 years from now is another matter. I agree. The same apply to renting though, you enter into a 12/24/36 months contract and the discovered that later whether you can afford it. If circumstances change, you may also discover that you are unable to rent the next one. Ah - STR does not imply massive present massive earning. The chance of a sudden and high inflation through currency collapse is always there and people who get the 'fresh cash' may well be different from the people who do the STR. The chance of another credit bubble is not likely, but nevertheless not zero and local housing availability/price can change rapidly too. Ah.. I think you need to do some research into the true meaning of each to his/her own. Your feeling is not the one true feeling that the world must share.
  11. Good to have your usual sensible self back. I take that as you believe Mr Carney. I don't. Even, that, the limit when QE3 was launched was a lot further from when QE1 was launch. You still have not answer my questions on your view on nominal price changes. I understood your no symmetry as a extremely skewed probability of a nominal fall, e.g. a >80% or even 100% chance of a nominal fall - which I reject. Anything say 30-70 to 30:70 reflects some level of symmetry. The flaw in your analysis is that your the only consideration is the availability of mortgage at attractive rates. No doubt, this is an important factor, but it is not the only one, or an overriding one. Even if SVR is 5% by 2018 (again, I put a less than 50%, probably close to 25% chance on this), that would not affect those on sensible leverage and their nominal salary may have increased by then (say even at 1.6%. that is about 10% higher, and if they moved up the salary scale like BooLoo keep pointing out, it will be higher). The most crucial flaw in your analysis is that it is not the same people who are buying the £250k (or £100k or whatever) house today compared to 10 years ago. The £250k may went to a manager couple 10 years ago, it now goes to a senior manager couple. Another flaw of your analysis on general wage inflation vs general price inflation is that the average rate of wage/price inflation is the wrong rate of inflation for most people (and hence average). It is those with wage inflation above general price inflation who will then be able to buy - and there probably are enough of them to soak out the very limited supply. The only thing that will move this is a lot of force sellers (mind you, voting ones) forced to liquidate their stocks at once which will at the same time crash the housing market - I put less than a 50% chance on this. ( The other option is a lot of building ). Now, come back to my main focus, the STRs with pot of cash as a result from their attempt to short the housing market. They may well be right, or they may well be wrong. These are the individuals could have a bird today, but staying out hoping for 2 (or 1.1 or 1.2 or whatever) in the bush for the same price. This is speculating - which is fine as long as they are comfortable with it. Each to his own. The final crucial point is whether someone will feel a sense of regret and unhappiness at say 50 if they let the chance to buy slipped by them. For people like LiveinHope who doesn't mind buying or not as long as the price is beyond his estimated fair value - that is absolutely no problem at all. For those who may endure year of unhappiness because of a modelled £30k / 20% or so of 'overpricing' it is hardly worth it if they could 'buy' happiness with their cash comfortably (i.e. 30% deposit, 3.5x salary or much less, the less the better). At the very least, your model appear to suggest at least a 5 year 'wait'.
  12. Your are normally quite sensible but I suppose I hit a raw nerve here. I am happy to consider a 30% down and 3.5x salary as being comfortable enough. Many of the STR here obviously fall into this category. A 2 years salary worth of saving as a cushion will be an added advantage. 10 year fixed is rather unnecessary. As for house move, you need to know that the housing market is fairly relative, if the one you buy goes down, the one you have to buy will also go down. I am afraid you made this up and continue to mis-represent my position. I have restate the clearly above. So now you are disciple of Mr Carney ? Perhaps it is helpful if you state your expectation of the future here - do you expect nominal fall in 1,3,5,10 years? And if so, what is the confidence level and by how much. If you don't expect (or rather put a low probability on) any meaningful nominal fall - then I suppose we are in agreement and all the above was nothing more than a misunderstanding. Ultimately - each to its own and there is no need to be rude about it.
  13. But the hard part is to know whether the stitch = buys, or stich = stay out (and for how long).
  14. I suppose I am struggling with those who take an extreme (staying out at all cost) posters here - which is fine as long as they are aware that their view is just that - their views of the future - which may well turn out to be right (or maybe not). I am just trying to make sensible judgement based on known facts. If we know that 1million house will come to the market is 3 years (like Ireland/Spain situation) - then at least it is a reasonable speculation to hold out. There is no such overriding factor in the UK housing market (and plus the constant meddling from BoE/HMG) and to me, the correct answer is to say "I don't know where this thing will turn out". And when you don't know, the best option, if you can comfortably do so, is to grab the bird in your hand. I do suspect that HP will continue to fall in real term which is based on RPI which does not reflect most individuals spending pattern. HP nominal changes are anyone's guess I am afraid. It is not an investment, so it cannot turn out to be a rubbish investment. P&L is not supposed to be relevant here at all. One is buying something to bring up and family and be happy (if renting makes one happier, then that is fine too). I think it is the post WW2 HPI + inflationary policies (post 1914 Fed) that made people get into this mental state they have to profit / they should never 'loss' money on a house. In fact, if we don't have this inflation craze (plus the good productivity break through), the building should depreciate at about 2% pa while the land price stay constant. The land part is merely a tool to extract excess productivities and monetary inflation.
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