Stockmarket Fall Back To 1997 Prices, Will House Prices Follow?

[laurejon]

Prices will fall back to an income multiple of 3x1 annual earnings.

There is downward pressure on earnings, and it is true women will see the greater brunt of a drop in earning capacity.

Guessing the average wage for males will be 24k and females 22k then its pretty clear that prices will drop to around 100k or a tadd shy of that figure.

97 prices were around that so the answer is Yes.

[interestrateripoff]

A number of major industrial companies in UK are currently seeking legal advice on ways of reducing contractual base salaries of all of their staff.

If they aren't earning any money by selling goods just how does the law think wages will be paid?

[scottbeard]

Can you accept that house prices are over valued, or do you believe that at this time they are fair value?

You accept that a fall of 40% is needed to bring them in line with average wages, do you expect wages to remain at this level while the economy is contracting? The stock market is a leading economic indicator as I said at the start of the thread, if the companies are suffering then in time people will suffer as they companies lose profits and jobs later in the year.

I think some people have been reading more between the lines of my post than in them.

All I said was that IF house prices are to return to 1997 THEN the only reason they will do so is if wages return to 1997 levels.

To answer enrieb's response directly

- I believe house prices are currently significantly overvalued and will fall further

- I expect wages to fall during the recession

- I do not know for sure if wages will fall to the same level as 1997, because no-one knows for sure. For the record, my opinion is that they will not, in part because of quantatitive easing.

I maintain, however, that stock market movements and house price movements have a loose enough correlation that you cannot say that on any given day the two should match up, which is what you are saying if you believe that the two markets should both be exactly the same in 2009 as they were in 1997, even though they have been at times wildly different before and after that date.