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eastleighfan

Recession V House Price Crash

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Just looking at the Nationwide graph ,showing the line of "normality "

I noticed that the house price falls ,crossed the line of normality at around the end of 1990 , the start of the last recession .

House prices continued to fall for around another years , and reached a trough of about £74,000 , just marginally above the '82 trough of £66,000 .

Looking at the graph , it looks as tho the house price line will cross the line of normality around the early part of this year , just as we are entering recession again .

Going by past performance ,could it be that house prices continue to fall for another 6 years , and that they will reach a trough of around £90,000 , just marginally above the last trough in October '95 of £74,000 ?

As I said ,this is totally unscientific ,and I have used rough figures , I have done no real mathamatics on it , just looked at past performance , but what has happened before can happen again , and the £90,000 figure would fall roughly at 50% falls from peak .

I will stand back now ,and watch as some mathematician , or economist rips my figures to shreds !!!!

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I will stand back now ,and watch as some mathematician , or economist rips my figures to shreds !!!!

It's as good a method as any other I've seen.

I wouldn't trust an economist to predict the past, let alone the future.

VMR.

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I wouldn't trust an economist to predict the past

:lol::lol::lol:

I love British sanguine.

The ham & cheese ones are especially good.

Edited by Dave Spart

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reached a trough of about £74,000 , just marginally above the '82 trough of £66,000 .

Going by past performance ,could it be that house prices continue to fall for another 6 years , and that they will reach a trough of around £90,000 , just marginally above the last trough in October '95 of £74,000 ?

There is nothing at all wrong with your analysys, I agree with it 100% it has long the bassis of my own 50% veiw

Chartist traders use the exact same method to trade on volatility. The 'support line' accross the troughs is where a market hits some sort of floor, true fundimental value if you like, free of speculative froth.

Remeber also that the 'normality' line does not realy represent true value because in a speculative bubble it gets pulled upwards, so it's more like just the average between insanity and reality

Edited by Sonic the Hedge Fund

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Just looking at the Nationwide graph ,showing the line of "normality "

I noticed that the house price falls ,crossed the line of normality at around the end of 1990 , the start of the last recession .

House prices continued to fall for around another years , and reached a trough of about £74,000 , just marginally above the '82 trough of £66,000 .

Looking at the graph , it looks as tho the house price line will cross the line of normality around the early part of this year , just as we are entering recession again .

Going by past performance ,could it be that house prices continue to fall for another 6 years , and that they will reach a trough of around £90,000 , just marginally above the last trough in October '95 of £74,000 ?

As I said ,this is totally unscientific ,and I have used rough figures , I have done no real mathamatics on it , just looked at past performance , but what has happened before can happen again , and the £90,000 figure would fall roughly at 50% falls from peak .

I will stand back now ,and watch as some mathematician , or economist rips my figures to shreds !!!!

The inflation-adjusted chart is useful but doesn't tell the whole story. House prices revert to average earnings over the long term as our money is what we use to pay for them - irrespective of the short term level of interest rates. The terndline to which you refer in the ifnlation-adjusted chart is merely the average rate of real wage growth. All of this can be seen easily when you look at house prices adjusted for earnings:

UKHPvAvEarnings2.jpg

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but that line of normality is only the result of the existing data, there is no reason why its gradient shouldn't go down. Also, if you look at it, it seems to have increased its rate of growth faster than over the first 70% of the chart indicating that the normality is also out of sync and needs correcting.

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but that line of normality is only the result of the existing data, there is no reason why its gradient shouldn't go down. Also, if you look at it, it seems to have increased its rate of growth faster than over the first 70% of the chart indicating that the normality is also out of sync and needs correcting.

Yes - if real wages fall, the trendline flattens.

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The inflation-adjusted chart is useful but doesn't tell the whole story. House prices revert to average earnings over the long term as our money is what we use to pay for them - irrespective of the short term level of interest rates. The terndline to which you refer in the ifnlation-adjusted chart is merely the average rate of real wage growth. All of this can be seen easily when you look at house prices adjusted for earnings:

UKHPvAvEarnings2.jpg

Interesting how the recent peak busts way through the average peak line set preveiously.

I assume this is due to looser credit conditions (High LTV, higher salary multiples etc.) themselevs a product of mortgage securitisation?

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Interesting graph , EM

I have read before that a house price crash usually falls to roughly 3 times average earnings , and the chart bears that out .

Assuming the average uk wage is nearly £24,000 (I wish!!!) , that would take the current crash to around £71,000 ish . That isn't too far from my "prediction" of around £80-90,000 .

In my opinion , anyone believing this will be just a short correction is fooling themselves . This one is going to be huge !

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eastleighfan, I think the approach you take is fairly reasonable.

An economist or mathematical modeller might say, ah but you left out this factor, you haven't corrected for this or adjusted for that, and would consequently end up with a very complicated model but without a clue as to the correct boundary conditions or indeed any other factors.

Having done some of this sort of modelling work in my early days, the fact is that these multidimensional/multivariate models do not usually yield good results unless they are for a well defined systems that don't exhibit to many non linear characteristics. So I'd be happy if someone did a mock up and simulated flight for an Airbus A380, but for an economy there are too many unknowns and variations, so it is better to stick to the macro trends.

On that basis a visual inspection and estimate is as good as anything else a so called professional would produce.

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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