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the end is a bit nigher

Why Were 2007 Prices The 'correct' Market Prices

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Ok. So the Bulls failed on questions 1 and 2.

1. What is demand?

2. Where will the £200bn funding gap come from?

So, to give them a fair chance, here is question 3.

Why were the prices asked for in 2007 the correct prices? They (Bulls) keep saying that people are waiting for 2007 prices to come back and only desperate people would sell for less than those prices. However, why is the peak price the correct one? Historically it isn't. In the current market it isn't. So why cling to it? Alternatively, why not just declare your house to be worth £2m and say you won't sell until it reaches that? They are selecting a price at a time period that had various economic conditions to support it. Those days are gone, so why persist in their delusion?

Edit for clarity

Edited by the end is nigh

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yes, I've asked this once or twice, never got an answer. I've also added the point that, in my street, no one actually sold (or has sold since) at 2007 prices, making them entirely without basis in the real world.

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The 2007 price was correct for the market at 2007 (plenty of lax lending). The same can be said of the price of houses in 1995 - the price was correct compared to what people could borrow/raise and were prepared to pay. We are going through a correction - from unsustainably high house prices to hopefully something more reasonable. I remember reading that house prices always revert to 3 1/2 times salary (or something like that). Maybe this answer is stating the bleeding obvious. I've read certain bulls talk about supply and demand. They are right. The houses that are being supplied are too high in price to have any demand. Simple as that

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I notice a certain Aberdonian looked at this thread. He didnt give an answer.

Certain "awkward" questions go unanswered by the bulls, I have noticed.

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yes, I've asked this once or twice, never got an answer. I've also added the point that, in my street, no one actually sold (or has sold since) at 2007 prices, making them entirely without basis in the real world.

Exactly, so why not just claium £2m is the correct price. This strikes me as what happens when an EA values a property for sale. They just dream up a price. If someone makes an offer far below then the offer is derisory. Remember the old joke:

a man offers £200k for a property on the market for £400k

the EA says "you're taking the piss"

the man says "well you started it"

The 2007 price was correct because it made me feel rich and I could mew till my heart's content.

Ok, best answer so far!

I notice a certain Aberdonian looked at this thread. He didnt give an answer.

He didn't get Qus. 1. or 2. either

The 2007 price was correct for the market at 2007 (plenty of lax lending). The same can be said of the price of houses in 1995 - the price was correct compared to what people could borrow/raise and were prepared to pay. We are going through a correction - from unsustainably high house prices to hopefully something more reasonable. I remember reading that house prices always revert to 3 1/2 times salary (or something like that). Maybe this answer is stating the bleeding obvious. I've read certain bulls talk about supply and demand. They are right. The houses that are being supplied are too high in price to have any demand. Simple as that

Nicely put.

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My parents took over a year to sell their place in Edinburgh.

Got 4 seperate valuations at 500k. How convenient. :rolleyes:

Not that these professionals just stuck their finger in the air or anything.

I actually did research myself and found that only one similar house had EVER sold for more than 500k. The peak valuation was 475k if they were lucky. These so called experts simply plucked a number out of thin air. Based on nothing more than it was a nice round number.

I imagine this same situation happened across the UK literally millions of times.

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Ok. So the Bulls failed on questions 1 and 2.

1. What is demand?

2. Where will the £200bn funding gap come from?

So, to give them a fair chance, here is question 3.

Why were the prices asked for in 2007 the correct prices? They (Bulls) keep saying that people are waiting for 2007 prices to come back and only desperate people would sell for less than those prices. However, why is the peak price the correct one? Historically it isn't. In the current market it isn't. So why cling to it? Alternatively, why not just declare your house to be worth £2m and say you won't sell until it reaches that? They are selecting a price at a time period that had various economic conditions to support it. Those days are gone, so why persist in their delusion?

Edit for clarity

So what is a bears answer to Q 2? I have been asking this Q over and over here for instance:

HPC Link

If the RMBS market is closed and most do not expect it to re open for a decade or more and even then not in the same was as fueled the property bubble.

If lenders are now reliant on deposits, and deposits are dwindling (low interest rates / moodys downgrades etc).

If economists agree that property prices will not stop falling until approval numbers have doubled and even then the last crash confirms that onc e approvals stabilise prices contd to fall .

Then how can property prices NOT fall and fall a long way?

How do approvals double without prices coming down when lending is down nearly 2/3rds?

Edited by Sybil13

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1. Demand is the ability to undertake a transaction at a stated price i.e. there is funding available

2. That £200bn won't be coming from anywhere soon

3. As stated above, the economic circumstances in 2007 were completely different from now, not least the funding issue. Without funding at 2007 levels there is no demand at 2007 levels. To get back to that level of demand, every dodgy aspect of 2007 must be replaced by something more sustainable. I can't see that in the near future, can anyone else who is sensible see it?

What is clear from L2M's attempted reply, and one of McTavish's other threads, is that the Bulls, in particular McTavsh, still don't understand what demand is.

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They were correct at the time because people were able and willing to pay them. Then they weren't - now it looks like they are again.

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They were correct at the time because people were able and willing to pay them. Then they weren't - now it looks like they are again.

Hometrack April figures show no change but article says:

Richard Donnell, director of research for Hometrack, said: “Overall levels of market activity are well down on what would constitute normal market conditions. The willing purchasers that are returning are largely confined to the more wealthy areas of the country and limited to those buying with cash or who require low loan-to-value mortgages.â€

Mmmmm could that be due to Q2 on this thread, a certain lack of £200bn in RMBS that fueled this particular property bubble?

So the people that were "able and willing to pay" are now the ones we hope will be able to contd to be "able" at least to continue paying the price that they were once "willing" to pay. But not absolutely sure who you mean by "then they weren't" ? Not sure even now many are willing to pay the price, 30% of peak seems to be the price some are now willing to pay but most are still not "ABLE " to pay.

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Hometrack April figures show no change but article says:

Mmmmm could that be due to Q2 on this thread, a certain lack of £200bn in RMBS that fueled this particular property bubble?

So the people that were "able and willing to pay" are now the ones we hope will be able to contd to be "able" at least to continue paying the price that they were once "willing" to pay. But not absolutely sure who you mean by "then they weren't" ? Not sure even now many are willing to pay the price, 30% of peak seems to be the price some are now willing to pay but most are still not "ABLE " to pay.

I suspect it was less of " ..people were willing and able .." but more of the VI's wished to perpetuate the madness. I Approached my bank to ask about a mortgage in late 2006 and again in early 2007. They were willing to offer 4 times salary. I thought they were nuts. Could they see the madness ? Valuers and EAs were also still talking up the market, predicting " a slowing down in the rate of rise " but never a reversal of fortunes.

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QS 4....Why should high/rising house prices to be seen as a good thing ?

QS 5...Who owns all the land in the UK ?

Edited by TheCountOfNowhere

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For some reason i thought the bulls thought the average prices would be c. £350k in time for the olympics. Correct is anything that brings the world economic system to the point of collapse it seems.

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Governments around the world conspired together to use HPI as a means of lubricating the domestic economies whilst China and India developed their manufacturing and service industries at our expense.

The reasoning behind the India and China expansion and our Governments keeness to participate was that the corporations of the world see India and China as a potentially huge market for themselves. We in the UK will not see a brass farthing of the money, despite losing close to 2m jobs to date.

Provided house prices were going up, people around the world felt happy and would turn a blind eye to what was going on. However no in the cold light of day people are realising they were just part of a huge ponzi scheme that was doomed to fail.

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LOL.

They may have a long wait...

Maybe two years from the next peak, which is due in 2025- so 2022 or 2023.

They are welcome to wait that long

You don't anticipate any kind of crazy inflation before 2022/2023 which could accelerate HPI considerably?

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yes, I've asked this once or twice, never got an answer. I've also added the point that, in my street, no one actually sold (or has sold since) at 2007 prices, making them entirely without basis in the real world.

I don't disagree with your logic at all... the frightening thing is that very many are also applying the same logic to their search when prices have "fallen"... eg the "figures" say prices have dropped 30%... but if no house or comparable property in their local area has sold for that sum then their assumption of where prices are for what they want are as you say entirely without basis in the real world.... and with very low sale volumes its likely to remain that way for a considerable time.

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Certain "awkward" questions go unanswered by the bulls, I have noticed.

That is more due to your myopia than the bulls' reticence.

The first two questions have been answered on the thread where posed. The OP is talking rubbish, presumably why he posted a separate thread, to avoid the answers.

If he wants an answer to his third question he should respond to where the suggestion that 2007 prices were the "correct" prices was made rather than having it look like he just made that up as well.

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That is more due to your myopia than the bulls' reticence.

The first two questions have been answered on the thread where posed. The OP is talking rubbish, presumably why he posted a separate thread, to avoid the answers.

If he wants an answer to his third question he should respond to where the suggestion that 2007 prices were the "correct" prices was made rather than having it look like he just made that up as well.

Well, I have asked a couple of questions, and they went unanswered.

There may not have been a direct statement that 2007 prices were correct, but we get a lot of arguments from bulls that prices haven`t fallen that far, and prices will be, or are now increasing. If this is true, then it won`t be too long before prices are back to 2007 levels.

I`ll ask again, why is HPI a good thing ? (A question that has been asked several times by other bears).

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Well, I have asked a couple of questions, and they went unanswered.

There may not have been a direct statement that 2007 prices were correct, but we get a lot of arguments from bulls that prices haven`t fallen that far, and prices will be, or are now increasing. If this is true, then it won`t be too long before prices are back to 2007 levels.

I`ll ask again, why is HPI a good thing ? (A question that has been asked several times by other bears).

But you have to find the post where anyone said it was a good thing and ask it there. Context may be the key.

It's a bit like me saying that the bears have no answer to the question why is homelessness a good thing?

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That is more due to your myopia than the bulls' reticence.

The first two questions have been answered on the thread where posed. The OP is talking rubbish, presumably why he posted a separate thread, to avoid the answers.

If he wants an answer to his third question he should respond to where the suggestion that 2007 prices were the "correct" prices was made rather than having it look like he just made that up as well.

Qu 1 was answered incorrectly by those Bulls who bothered. The key thing about demand is that it includes the ability to fund the transaction at a given level. None of the Bulls managed to get this correct, instead continuing to believe that it was down to people wanting or needing a property which is just plain wrong.

Qu 2 I can't even remember seeing an answer for.

Qu 3 is perpetuated by the likes of Hamish and Sibley asking why anyone would sell for lower prices than wait. Hence my comment about why not value your property at £2m and just 'wait'. In reality I think most of our Bulls are on the wrong side of one or more property transactions and are just desperate for 2007 prices to return.

Of course if you would like to provide a better answer to any of the questions then here is your platform to do so.

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Why were the prices asked for in 2007 the correct prices?

That was the level at which willing sellers and buyers agreed a price, also at high volumes so millions of people did believe prices then were correct.

However, why is the peak price the correct one?

No-one sells a house at a nominal loss unless forced to (repo or job move).

Historically it isn't. In the current market it isn't. So why cling to it?

Psychological anchoring.

People like to boast about how much they have made on their property, no one likes to admit to a loss as that makes them look stupid.

Alternatively, why not just declare your house to be worth £2m and say you won't sell until it reaches that?

That would still be seen as silly by both bulls and bears. Their anchor point was never at £2m.

They are selecting a price at a time period that had various economic conditions to support it. Those days are gone, so why persist in their delusion?

They don't believe those times are gone so don't see it as a delusion. The typical expectation is that the lenders will start to lend and compete with each other again. One chartered accountant and JPMorgan employee (works with CDS) I was talking to this weekend had that view, they don't think house prices are dropping any more.

The views of the JPMorgan guy were quite interesting. Their ability to mark-to-myth means than can go back to setting their profits levels wherever they want. (They want "their" bonuses back). That sort of thing overcomes any liquidity shortgage, boost apparent earnings and can restore general confidence, even though it isn't really supported by anything.

Since bears see a different side of it, the result will be standoff until large numbers of owners are forced to sell by job loss or not keeping up with reset mortgage rates. I fear we are now in the long, boring phase of slow declines in a dead market.

VMR.

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