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House Price Crash Forum


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About OmniCognate

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  1. From the EconBrowser article (quoted from somewhere else): Now hang on a minute. No big deal?!??!!!? Wasn't lending against dubious collateral and being blase about the risk what caused this whole crisis in the first place? What makes the fed think they're immune? Actually, this is a serious question. I know b****r all about the monetary system (I just bought a book though - don't think I've got a hope of understanding the financial system until I've learned that), so perhaps I'm missing something. Surely there is a reason the fed requires collateral here. Relaxing that requirement so you may be giving practically unsecured loans doesn't sound like "no big deal" to me, Am I wrong? Tom
  2. Who is Peter Spencer, and what does his end have to do with house prices?
  3. That would dampen apparent house prices movements, wouldn't it? Say house prices double while inflation other than house prices is 0. The inflation index would go up by 30%, so the (wrongly) corrected house prices would go up by a factor of 2/1.3 = 1.53. Or am I talking b***s again?
  4. Not just equivalent. They actually are companies. It says here that the shares are actually in "Special Property Companies". This isn't a way of investing in houses at all. It's a way of investing in landlords. Given this, I would be surprised if the regulatory situation were significantly different to any other stock exchange allowing the trading of shares in companies. It's just that all of the companies on this exchange will start life with a single hugely overvalued asset and a feeble income stream.
  5. It is as long as you decide never to sell the house, which is my point. Many BTL or buy-to-sit people are speculating on house prices. I'm not sure how many of them fully appreciate the fact that the gains are only on paper until you sell, but at least they have the option of selling if and when they think the market peaks. With these shares that doesn't look quite so easy. Absolutely. Looking at the house price graph hardly makes me think "yay - better buy right away!". Also, it's hard to get good graphs of rents for some reason. I had a go at producing some here. My point was more that many people (misguidedly) think "house prices have been going up so they'll continue to go up - better buy!". The graphs show that rents haven't been going up in the past, so people might not be so keen. I'm certainly not saying I agree with this reasoning. Rental yields (rent divided by house price) are apparently in the region of 4% at the moment. An important metric for publicly traded companies is price-to-earnings ratio, which is total company value divided by its income. Crudely, it would appear that when one of these houses is floated it's PE ratio would be in the region of 100/4 = 25. In the Wikipedia article, the comment for PE ratios of 25+ is "A company whose shares have a very high P/E may have high expected future growth in earnings or the stock may be the subject of a speculative bubble". Hmmmmmmmmmmmmmmmmmmmmmmmmmmmmm...
  6. Please correct me if I'm talking b***s (I'm no expert), but buying these shares looks to me like a fairly pure bet on rents (ie. not house prices), The shares are not really "shares in a house". They are shares in a "Special Property Company" which owns the house. Selling the house would presumably require a majority agreement by the shareholders to sell the house and wind up the company (again please correct me if I'm wrong). This seems very unlikely to happen under normal circumstances. It's certainly a lot less likely than an individual homeowner deciding to sell up. It therefore seems very unlikely that shareholders on this market would ever realise capital gains however high the magical mystery money machine house market goes. The sole source of income would be the rent. I wonder if people will be that keen if they realise they are betting on this, rather than this.
  7. It's an evil one because each can be either a verb or a noun giving 4 meanings, all subtly different. From google define, the meanings are: affect - verb: act physically on; have an effect upon affect - noun: the conscious subjective aspect of feeling or emotion effect - verb: act so as to bring into existence; "effect a change" effect - noun: a phenomenon that follows and is caused by some previous phenomenon Affect as a noun is the odd one out - hardly anyone uses it except psychologists. I'm pretty sure you either need to use effect as a noun or restructure the sentence so affect becomes a verb - eg. "Low interest rates do not fundamentally affect this." Anyway, I probably am coming across as pedantic by now. I promise I'm not really a grammar nazi :-) Thanks for the Economist tip. I'd actually just subscribed. It was awfully confusing - I have no idea whether I'm going to be charged £12 for the whole year, £12 per edition or something like £84 for the lot. I don't mind particularly, but it was a very strange sign-up procedure. At least I know I haven't been phished as my new login works. Looking forward to the next section...
  8. I have no idea what your background is, but that strikes me as by far the most well-written, detailed and apparently objective overview of this I've seen yet. Many thanks for your effort in writing it - it must have taken ages. There are lots of ideas in there I hadn't seen yet, particularly about inflation/deflation and monetary policy, which is something I am still a long way from understanding properly. I'm more convinced than ever that I need to get stuck into an economics textbook. Would you be able to recommend a good one, preferably with a global but UK-ish view? I don't mind maths. Hope you won't think it pedantic if I point out a few proofreading things: Not sure that last one's a typo :-)
  9. You've dodged a fair question there. I'm not trying to be argumentative or cast aspersions, but "IT" covers a multitude of sins, from the people who create your user accounts when you join a company to the guys that make sure the stock exchange runs 24/7. The offshoring situations are different. Which are/were you?
  10. Thanks for the suggestion. I rebased the CPI figures by dividing them all by the '95 CPI, which I think has the same effect. Here are the updated prices graph and data (the number of tenancies one is unaffected): Assured/assured shorthold rental rices 1995-2006, adjusted for CPI based at 1995 (ie. '95 prices) Data
  11. Many thanks for these, particularly the Communities and Local Government one. I've had a go at adjusting the prices for inflation and producing a couple of graphs. (Please nobody use these for anything - I'm just some random bloke with a copy of OpenOffice.) Assured/assured shorthold rental rices 1995-2006, adjusted for CPI Total assured/assured shorthold tenancies 1995-2006 Details on how I produced these - please correct me if I have made any mistakes The data is The prices and tenancies data came from the "Assured - All" column of table 731 at http://www.communities.gov.uk/index.asp?id=1156260 (spreadsheet link http://www.communities.gov.uk/embedded_obj...asp?id=1156279). 2 sets of figures are given for 2002, calculated using different census figures - I took the mean. A set of numbers is given for each year, but they appear to be averages for that year and the previous year. The inflation data came from http://inflationdata.com/inflation/inflati...lInflation.aspx. Since the prices/tenancies data are averages over 2 years, I used the mean of the two annual CPI figures for the years involved. I divided the rental prices by the CPI and plotted them and the tenancy figures against the 2nd year in the 2-year interval. The line is a cubic spline.
  12. From the economic despair article: He means the spike around 60, Shirley?
  13. So depending who you listen to, current high house prices are due to either: A speculative bubble driven by easy credit, or A chronic housing shortage aggravated by high immigration and a restrictive planning system. (Not meaning to introduce a false dichotomy here, these just seem to be the most popular viewpoints.) Either argument can obviously explain high house prices, but only the first one seems at first sight to be able to explain rental prices remaining steady. I've looked and looked, and I can't see how people who attribute current house prices to a shortage of supply explain this. I have two questions: Have rental prices actually remained steady? According to RentRight, there appears to have been a sharp jump in March (any comments?) but otherwise steady prices for a year or so. Anecdotally, my own rent hasn't changed for a couple of years. Assuming they have, how do those holding to the second view above explain this? Note that I'm not asking how a speculative bubble can explain this - I think I understand that already. I'm looking for the bull argument that I have not been able to find so far. As an aside, I had a look at the executive summary of Kate Barker's report and it doesn't appear to mention rentals at all, though no doubt the full report does. The introduction contains the following interesting paragraph: That seems to me to indicate that the author is not taking a position on whether current house prices are due to "solid fundamentals" or not, but pointing to a much longer-term issue. I'm no economist, but is it possible both of the viewpoints above could be correct but over different timescales?
  14. Ah, now you agree that there is a consensus but are dubious about why there is a consensus. Here I have to agree with you. The scientists certainly may be saying things because they are being controlled by the people who hold the purse strings. Or they could be under the influence of drugs in the water supply, or alien signals they receive through their teeth. In fact the whole word, including yourself may not exist at all. Or they might just be saying that because it is their professional opinion. I admit that I have no evidence one way or the other.
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