For Anyone Thinking That House Prices Have Bottomed

[Scott]

For anyone thinking that house prices have bottomed out, wake up and smell the coffee, we have a long way to go yet.

Here's why (apologies to any HPC'ers who have been here longer than 6 months as you may have seen me banging this drum already, but it is extremely useful for anyone who hasn't seen it).

I put this graph together in early 2007:-

It shows the growth of average wages and average house prices from a starting point of each £100 from 1971.

The data is taken from the Office of National Statistics for wages and Nationwide for house prices.

It shows the following:-

4.54 = average salary multiple over last 37 years (1971 to 2007)

4.17 = average salary multiple from 1971 to 2000 (prior to latest bubble but including the two previous - 1970's and 1980's)

40% = drop required from 2007 peak to bring average house value back down to average salary multiple over last 37 years

45% = drop required from 2007 peak to bring average house value back to 1971 to 2000 salary multiples (pre current speculative bubble)

54% = drop required from 2007 peak to bring average house value back to the lowest multiple figure over last 37 years

So, there is a long way to go yet.

We are in a classic dead cat bounce, nothing more!!!

And from now on the graph and this explanation will be my signature. Anyone that also wishes to use this signature is more than welcome.

Edited May 24, 2009 by Scott

[Frank Hovis]

Does anybody think that?

Bar the trolls....

The denial phase is ending.

[ccc]

Does anybody think that?

Bar the trolls....

The denial phase is ending.

Yes.

A few of the trolls on this very site are showing clear signs of fear.

[Scott]

Yes.

A few of the trolls on this very site are showing clear signs of fear.

If they own more than one property or have a vested interest then they ruddy well should.

[ccc]

If they own more than one property or have a vested interest then they ruddy well should.

Nah. They are right. We are wrong. End of story.

[hpcman]

Good chart Scott but a suggested improvement is to put the y axis on a log scale. The percentages will not change but visually the chart will be more meaningful. In any event your point is well made.

[Snow Birds]

For anyone thinking that house prices have bottomed out, wake up and smell the coffee, we have a long way to go yet.

Here's why (apologies to any HPC'ers who have been here longer than 6 months as you may have seen me banging this drum already, but it is extremely useful for anyone who hasn't seen it).

I put this graph together in early 2007:-

It shows the growth of average wages and average house prices from a starting point of each £100 from 1971.

The data is taken from the Office of National Statistics for wages and Nationwide for house prices.

It shows the following:-

4.54 = average salary multiple over last 37 years (1971 to 2007)

4.17 = average salary multiple from 1971 to 2000 (prior to latest bubble but including the two previous - 1970's and 1980's)

40% = drop required from 2007 peak to bring average house value back down to average salary multiple over last 37 years

45% = drop required from 2007 peak to bring average house value back to 1971 to 2000 salary multiples (pre current speculative bubble)

54% = drop required from 2007 peak to bring average house value back to the lowest multiple figure over last 37 years

So, there is a long way to go yet.

We are in a classic dead cat bounce, nothing more!!!

And from now on the graph and this explanation will be my signature. Anyone that also wishes to use this signature is more than welcome.

Please forgive me for asking a dumb question but how do the unemployed figure in calclating the average wage. If 1M of lower wage people become unemployed does the average go up? If you are not earning any wages you likely don't get counted but you still need a house.

[Chest Rockwell]

Great post Scott! The VI's certainly do their best to make us see otherwise! Amazes me that they cannot see that the debt has to be paid back! Tw@ts!

[Rinoa]

Yes.

A few of the trolls on this very site are showing clear signs of fear.

We're not the ones who require constant group confirmation to get us through the day.

[Prof]

We're not the ones who require constant group confirmation to get us through the day.

True. All you need is a couple of nappy changes and a feed every 4 hours. And don`t worry, we`ll pick up your dummy when you spit it out, after another 10% fall in property prices.

[Chest Rockwell]

We're not the ones who require constant group confirmation to get us through the day.

No, but the repo squad will sort you evetually!

[grizzly bear]

For anyone thinking that house prices have bottomed out, wake up and smell the coffee, we have a long way to go yet.

Here's why (apologies to any HPC'ers who have been here longer than 6 months as you may have seen me banging this drum already, but it is extremely useful for anyone who hasn't seen it).

I put this graph together in early 2007:-

It shows the growth of average wages and average house prices from a starting point of each £100 from 1971.

The data is taken from the Office of National Statistics for wages and Nationwide for house prices.

It shows the following:-

4.54 = average salary multiple over last 37 years (1971 to 2007)

4.17 = average salary multiple from 1971 to 2000 (prior to latest bubble but including the two previous - 1970's and 1980's)

40% = drop required from 2007 peak to bring average house value back down to average salary multiple over last 37 years

45% = drop required from 2007 peak to bring average house value back to 1971 to 2000 salary multiples (pre current speculative bubble)

54% = drop required from 2007 peak to bring average house value back to the lowest multiple figure over last 37 years

So, there is a long way to go yet.

We are in a classic dead cat bounce, nothing more!!!

And from now on the graph and this explanation will be my signature. Anyone that also wishes to use this signature is more than welcome.

Thanks Scott, a great graph. Thanks for posting.

I know its a classic DCB but very frustrating that its happening all the same.

[MississippiJohnHurt]

bump

Good graph , shows it simply. When was it last updated btw? Doesn't seem to show any falls yet?

[eric pebble]

For anyone thinking that house prices have bottomed out, wake up and smell the coffee, we have a long way to go yet.

EXCELLENT GRAPH. Says it all.

[Profound]

bump

Good graph , shows it simply. When was it last updated btw? Doesn't seem to show any falls yet?

Exactly its only to 2007, if it were to be updated we could have a good indication of how close/far from the bottom we really are, or maybe Scott's keeping that little gem for himself!

[othello]

Good chart Scott but a suggested improvement is to put the y axis on a log scale. The percentages will not change but visually the chart will be more meaningful. In any event your point is well made.

Er, why?

[IntoTheStorm]

For anyone thinking that house prices have bottomed out, wake up and smell the coffee, we have a long way to go yet.

Here's why (apologies to any HPC'ers who have been here longer than 6 months as you may have seen me banging this drum already, but it is extremely useful for anyone who hasn't seen it).

I put this graph together in early 2007:-

It shows the growth of average wages and average house prices from a starting point of each £100 from 1971.

The data is taken from the Office of National Statistics for wages and Nationwide for house prices.

It shows the following:-

4.54 = average salary multiple over last 37 years (1971 to 2007)

4.17 = average salary multiple from 1971 to 2000 (prior to latest bubble but including the two previous - 1970's and 1980's)

40% = drop required from 2007 peak to bring average house value back down to average salary multiple over last 37 years

45% = drop required from 2007 peak to bring average house value back to 1971 to 2000 salary multiples (pre current speculative bubble)

54% = drop required from 2007 peak to bring average house value back to the lowest multiple figure over last 37 years

So, there is a long way to go yet.

We are in a classic dead cat bounce, nothing more!!!

And from now on the graph and this explanation will be my signature. Anyone that also wishes to use this signature is more than welcome.

Great graph, Explains things quite nicely innit..

Where i live/rent in SW London (SW12) pretty much bears this out, if i look on Zoopla at the historic sale prices of the similar houses around where i live (4-5 bedroom reasonably large terraces)

1996 - Approx £175k

2007 - Couple of similar houses selling at £900k

One in later 2008 - Dropping to £825k

Incomes don't seem to have gone up particulary hugely since i first worked in the UK in 2001, as is borne out in your graph.

Logically these houses should get back up to £900k plus as the current weakness is just a temporary blip of foolish sellers and resumption of 'normal' service is just around the corner..

The Ponzi scheme, 'bigger fool' argument mentioned on hpc at times certainly seems to be evident here.

To me doesn't seem to be much incentive to race to jump in and be one of the ones left holding the parcel when the music REALLY stops.....

[Bloo Loo]

to: Bulls who think the bears are wrong because they constantly debate and affirm.

1. the market is constantly changing, we need to get constant weather checks on what the Government is doing and what effect they will have (EG Massive Printing, Negative interest rates, tax)

2. the VI propaganda machine is still at maximum power.....thousands of EAs, MPs, surveyors, solicitiors, bankers, ALL need the lending to start again.

3. new members need to be shown the rubbish you spout is just that, and your VI exposed.

[Firefly]

Great graph, Explains things quite nicely innit..

Where i live/rent in SW London (SW12) pretty much bears this out, if i look on Zoopla at the historic sale prices of the similar houses around where i live (4-5 bedroom reasonably large terraces)

1996 - Approx £175k

2007 - Couple of similar houses selling at £900k

So how much are the median incomes in there ?

[Rinoa]

to: Bulls who think the bears are wrong because they constantly debate and affirm.

1. the market is constantly changing, we need to get constant weather checks on what the Government is doing and what effect they will have (EG Massive Printing, Negative interest rates, tax)

2. the VI propaganda machine is still at maximum power.....thousands of EAs, MPs, surveyors, solicitiors, bankers, ALL need the lending to start again.

3. new members need to be shown the rubbish you spout is just that, and your VI exposed.

If new members need to know the drill. it goes something like this:

Bear 1: "I think house prices will fall lots."

Bear 2: "I think the same"

Bear 3: "Me too with knobs on."

Bear 4: "Anyone who says not is an evil VI troll."

Bear 5: "I'm going to call them nasty names and swear at them."

Group confirmation acheived ~ high fives all round ~ big group hug.

[Godley]

to: Bulls who think the bears are wrong because they constantly debate and affirm.

1. the market is constantly changing, we need to get constant weather checks on what the Government is doing and what effect they will have (EG Massive Printing, Negative interest rates, tax)

2. the VI propaganda machine is still at maximum power.....thousands of EAs, MPs, surveyors, solicitiors, bankers, ALL need the lending to start again.

3. new members need to be shown the rubbish you spout is just that, and your VI exposed.

Precisley, there needs to be a re-assement constantly.

This time last year I was looking at a normal market correction. Since then we have had everything bombarded at the problem, lowering interst rates, QE and media manipulation. The correction IS and WILL continue to happen its more a question of how it is going to play itself out, that really is the only debating point now.

Edited May 25, 2009 by Godley

[red]

If new members need to know the drill. it goes something like this:

Bear 1: "I think house prices will fall lots."

Bear 2: "I think the same"

Bear 3: "Me too with knobs on."

Bear 4: "Anyone who says not is an evil VI troll."

Bear 5: "I'm going to call them nasty names and swear at them."

Group confirmation acheived ~ high fives all round ~ big group hug.

And the bull's drill?

1: Prices won't fall because hardly anybody's selling, ergo prices remain at the level their owners imagine.

2: It's different this time - a new paradigm

3: We've reached the bottom despite all evidence to the contrary

4: Rightmove asking prices are up/volumes are up, ergo sold prices must be going up

5. Change avatar

Repeat enough times to convince yourself that your over-priced shoebox/portfolio will go back up in value - cry yourself to sleep as deep down you know it's curtains.

[judas]

We're not the ones who require constant group confirmation to get us through the day.

You have a point there.

CCC, as one example, is addicted to this site. It is clear that he needs the site and the reassurance it provides.

I suspect, that he would have a nervous breakdown, if by some miracle, prices fail to hit the depths.

[Cnaeus Pompey]

The average house price/average wage argument is so unavoidably persuasive. Unyet my friends still stare blankly back at me when I point it out. I suppose they really did believe Brown's "economic miracle" rhetoric and are just waiting for the bubble to reinflate.

[eric pebble]

Exactly its only to 2007, if it were to be updated we could have a good indication of how close/far from the bottom we really are, or maybe Scott's keeping that little gem for himself!