Don't Panic The Crash Has Just Begun

[steviebrown]

Don't panic Mr Mainwaring the crash has only just begun and it will happen faster and harder than the general populace can imagine, and whatever you do don't believe anyone who says you will miss the boat - you wont - you have will have years to buy at what will seem like bargain BMV prices and all the people who are now saying jump in to the market before prices rebound will then be saying don't invest in property its a mugs game.

Here is a handy chart straight off the Halifax dataset.

They calculate average Earnings to average Prices... don't matter about the source of the data the interesting thing is the trend....

First thing to note 3 is a magic number.... at that price to earnings ratio the average man in the street believes he can afford the average house in the street so he buys it.

I know it might overshoot but believe me it is only when that happens that it is a time to jump in before prices shoot up.

The second thing to look at is the rate of decline this time round. In GC1 - the rate of decline was about half that in PA1 (That's Property Armageddon 1), since we have a global financial crisis the like of which the world has never seen before there is no reason for that rate to decrease, if anything I think it might increase - the current rate would put us on track to hit the magic number of 3 by Nov 2010.

So shut your wallets and when the time comes you will have plenty of choice and plenty of time to make the choice.

Cheer up bears.

[steviebrown]

Sorry I forgot to mention my theory on why the boom kicked off in 2002... seems to me it was all to do with the monetary easing that took place after 9/11...

That kicked off growth in house prices as people got used to lower interest rates and bankers forgot that you need borrowers to pay back the principal too.

Liar loans might have had something to do with it too, but unfortunately I don't have a handy signature to fill in the details.

Anyway once a bubble starts, inflating human nature – "you mustn't miss the boat", "get on the ladder" – does the rest until it pops. Someone has a quote in their signature which sums it up very well, the quote goes something like this "Men go mad in crowds and come to their senses one by one".

[interestrateripoff]

That kicked off growth in house prices as people got used to lower interest rates and bankers forgot that you need borrowers to pay back the principal too.

I don't think bankers forgot, they just didn't care as the profit was rolling in and it was always going to be someone else's problem.

[Joey Buttafueco Jr]

Don't panic Mr Mainwaring the crash has only just begun and it will happen faster and harder than the general populace can imagine, and whatever you do don't believe anyone who says you will miss the boat - you wont - you have will have years to buy at what will seem like bargain BMV prices and all the people who are now saying jump in to the market before prices rebound will then be saying don't invest in property its a mugs game.

Here is a handy chart straight off the Halifax dataset.

They calculate average Earnings to average Prices... don't matter about the source of the data the interesting thing is the trend....

First thing to note 3 is a magic number.... at that price to earnings ratio the average man in the street believes he can afford the average house in the street so he buys it.

I know it might overshoot but believe me it is only when that happens that it is a time to jump in before prices shoot up.

The second thing to look at is the rate of decline this time round. In GC1 - the rate of decline was about half that in PA1 (That's Property Armageddon 1), since we have a global financial crisis the like of which the world has never seen before there is no reason for that rate to decrease, if anything I think it might increase - the current rate would put us on track to hit the magic number of 3 by Nov 2010.

So shut your wallets and when the time comes you will have plenty of choice and plenty of time to make the choice.

Cheer up bears.

I've read and reread your posts but cannot find the new angle. Did this bit of the post go missing?

[Wad]

Look carefully at the graph.

Now just imagine what will happen if average wages start falling in nominal terms - in other words wage deflation - at say 5% per annum for 5 years.

Oh yes - do the maths - house prices have to fall 10% per annum for the next five years just to get back to 3 x salary.

Now imagine what happens if the house prices overshoot to the downside after a 50% fall from where we are now. No it is not too horrible to think about - just think logically would you choose repossession or a life time of debt?

Everyone has a choice - red pill or blue pill??

[1929crash]

Don't panic Mr Mainwaring the crash has only just begun and it will happen faster and harder than the general populace can imagine, and whatever you do don't believe anyone who says you will miss the boat - you wont - you have will have years to buy at what will seem like bargain BMV prices and all the people who are now saying jump in to the market before prices rebound will then be saying don't invest in property its a mugs game.

Here is a handy chart straight off the Halifax dataset.

They calculate average Earnings to average Prices... don't matter about the source of the data the interesting thing is the trend....

First thing to note 3 is a magic number.... at that price to earnings ratio the average man in the street believes he can afford the average house in the street so he buys it.

I know it might overshoot but believe me it is only when that happens that it is a time to jump in before prices shoot up.

The second thing to look at is the rate of decline this time round. In GC1 - the rate of decline was about half that in PA1 (That's Property Armageddon 1), since we have a global financial crisis the like of which the world has never seen before there is no reason for that rate to decrease, if anything I think it might increase - the current rate would put us on track to hit the magic number of 3 by Nov 2010.

So shut your wallets and when the time comes you will have plenty of choice and plenty of time to make the choice.

Cheer up bears.

Thanks, but GC1?

[50%deposit]

interesting, it makes the latest blip look more like noise

[Radge]

interesting, it makes the latest blip look more like noise

Especially as the uptick occurred with what a year ago would have been considered negligible volume.

[grey shark]

Sorry I forgot to mention my theory on why the boom kicked off in 2002...

Boom 'kicked off' in 1998 imo .......by end of 2002 was already out of control .

Edited February 8, 2009 by grey shark

[steviebrown]

interesting, it makes the latest blip look more like noise

That indeed is the point of the post - this crash is already happening twice as fast as the last one and to get back to normality ie. 3 x average earnings we still have a long way to go; and that neglects the fact that this is not normality, this is the most significant banking crisis the world has ever seen.

So don't get all fretful at one months blip in the figures.

The new angle for those that missed it, and I apologise if someone else has posted on this before, is the pace of the change in Price - Earnings ratio, twice as fast - I say twice as fast as Great Crash 1....

[steviebrown]

World War One only became known as World War One once World War Two became apparent.

They didn't call them The Great War and World War Two or, even worse, The Great War One and World War One - which is what you seem to be suggesting.

Fair cop Guv'

So which do you prefer...

GC1 and GC2

or

The Great Crash and Property Armageddon

[cockrobin]

Boom 'kicked off' in 1998 imo .......by end of 2002 was already out of control .

Boom kicked off May 5th 1997.

[carseller]

I have seen that chart countless times in other items such as everything from utilities, nuclear companies, and it's connected to the inflationary cycle we are in. It's going to move up from here. As rents will move up. It's somehow complicated to explain, but it's somehow connected to kind of demand that's coming from BRIC, and other emerging countries, in what's a devaluation cycle for the US and the dollar, causing great inflation in the years ahead. The only time I think I have seen a permanent increase in real house prices never followed by a significant decline was after WW2, and I think that's what's going to happen this time as well.

Edited February 8, 2009 by carseller

[endofcrash2]

All this talk of average earnings is great , however your graph takes no account of interest rates!! Remember back in the early 90's interest rates where 15% now they are lets think 1%. Also before anyone say's but mortage rates are higher than that then yes however on average I doubt that they are much above 4% now.

So you need to take into account that people can get a much bigger mortage and still pay the same amount as they where in the 90's. Sorry but you will not see your average earnings heading towards 3 or even below 4 any time soon.

I have said it before and will keep saying it the bottom of the market has been reached and it is only up from here. Look at the halifax house price rise of 1.9% in Jan!!!

[Prof]

All this talk of average earnings is great , however your graph takes no account of interest rates!! Remember back in the early 90's interest rates where 15% now they are lets think 1%. Also before anyone say's but mortage rates are higher than that then yes however on average I doubt that they are much above 4% now.

So you need to take into account that people can get a much bigger mortage and still pay the same amount as they where in the 90's. Sorry but you will not see your average earnings heading towards 3 or even below 4 any time soon.

I have said it before and will keep saying it the bottom of the market has been reached and it is only up from here. Look at the halifax house price rise of 1.9% in Jan!!!

Wake up endofcrash2, it`s time to take your medicine.

[time 2 raise interest rates]

The Halifax know house prices will keep on crashing that's why they slashed their loan to value on their

buy-to-let mortgages this week, the only reason for them to slash them to 65% LTV is the fact they are

pricing in around 30-35% more falls in house prices.

Edited February 8, 2009 by time 2 raise interest rates

[zilly]

All this talk of average earnings is great , however your graph takes no account of interest rates!! Remember back in the early 90's interest rates where 15% now they are lets think 1%. Also before anyone say's but mortage rates are higher than that then yes however on average I doubt that they are much above 4% now.

So you need to take into account that people can get a much bigger mortage and still pay the same amount as they where in the 90's. Sorry but you will not see your average earnings heading towards 3 or even below 4 any time soon.

I have said it before and will keep saying it the bottom of the market has been reached and it is only up from here. Look at the halifax house price rise of 1.9% in Jan!!!

Just utter rubbish.

Watch the news, read the papers and try to get a grasp of what's going on.

Then consider how ridiculous your statements are.

[carseller]

Just utter rubbish.

Watch the news, read the papers and try to get a grasp of what's going on.

Then consider how ridiculous your statements are.

I know many normal people who are just a little interested in economy, and they would typically reject the notion that we could be at a bottom. It's human. However, these are the same that buys mutual funds when it's expensive, and none the less never is able to buy at the bottom. That's reserved for those that have what it takes to buy when there is blood on the streets.

[HaveAniceDay]

If you can answer yes to the following then the crash is over !!!!!!!

1. I can get a 100% mortgage easily.

2. If we want to start a family we could easily survive on just one wage (and still pay our mortgage )

3. Unemployment has just fallen below 1 million

4 ALL EA's have a future which is full of ferraris and exotic holidays not a clapped out fiesta and a weekend in skeggy.

[carseller]

If you can answer yes to the following then the crash is over !!!!!!!

1. I can get a 100% mortgage easily.

2. If we want to start a family we could easily survive on just one wage (and still pay our mortgage )

3. Unemployment has just fallen below 1 million

4 ALL EA's have a future which is full of ferraris and exotic holidays not a clapped out fiesta and a weekend in skeggy.

That's after the average prices have risen 20-30 % , and it's impossible to make a good deal, way below the average at the time:)

[FernandoMorientes]

Even the pro-property porn BBC have woken up and smelt the coffee!

This has a long way to go yet this year is going to be an absolute shocker, bottom of the housing market will not be seen for another year and half to years at least, and it's going to take a decade prior to any kind of recovery.

The average price of UK homes rose by 1.9% in January from December's figure, according to the Halifax.

However it warned that one month's figures did not indicate an end to the downward trend in prices, which it says have dropped 17.2% in the past year.

The average house price has now reached £163,966, according to the Halifax.

Last week, a survey by Nationwide suggested house prices fell by 1.3% in January, and they said job worries were putting off people buying homes.

I know many normal people who are just a little interested in economy, and they would typically reject the notion that we could be at a bottom. It's human. However, these are the same that buys mutual funds when it's expensive, and none the less never is able to buy at the bottom. That's reserved for those that have what it takes to buy when there is blood on the streets.

[grizzly bear]

All this talk of average earnings is great , however your graph takes no account of interest rates!! Remember back in the early 90's interest rates where 15% now they are lets think 1%. Also before anyone say's but mortage rates are higher than that then yes however on average I doubt that they are much above 4% now.

So you need to take into account that people can get a much bigger mortage and still pay the same amount as they where in the 90's. Sorry but you will not see your average earnings heading towards 3 or even below 4 any time soon.

I have said it before and will keep saying it the bottom of the market has been reached and it is only up from here. Look at the halifax house price rise of 1.9% in Jan!!!

Its true that interest rates are lower, but you still need to pay off the capital... which unlike in the 1970s will not be eroded away by inflation over time. So maybe prices should now be 3.5x average salaries rather than 3x.

RE: bottom of the market being reached, who knows but you certainly can't call it now, especially when nationwide went down - please remember that prices went down on a monthly basis on the way up.

[time 2 raise interest rates]

All this talk of average earnings is great , however your graph takes no account of interest rates!! Remember back in the early 90's interest rates where 15% now they are lets think 1%. Also before anyone say's but mortage rates are higher than that then yes however on average I doubt that they are much above 4% now.

Ave mortgage in the last crash was £50,000 + 15% = £7,500 a year IO. rates were only 15% for a week

but l'll give you the benefit.

Today ave mortgage is £150,000 + 5% as most are = £7,500 a year IO.

And house priecs crashed in the 90s for 7 years as they will today but just by a much larger amount £35,000

this year alone and the recession thsn't even started. LTV is all you need to know. And most want 65-70%

[Peter Hun]

The average price of UK homes rose by 1.9% in January from December's figure, according to the Halifax.

.

The average house price has now reached £163,966, according to the Halifax.

Last week, a survey by Nationwide suggested house prices fell by 1.3% in January, and they said job worries were putting off people buying homes.

The Halifax are a Government organisation. Why would anybody believe them?

Edited February 8, 2009 by Peter Hun

[endofcrash2]

Just utter rubbish.

Watch the news, read the papers and try to get a grasp of what's going on.

Then consider how ridiculous your statements are.

I do watch the news and read the papers. Are you saying that prices didn't rise by 1.9% in January. If so you should have gone to specsavers!!