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Financial Hack

Too Many People Ignoring The Lifecycle Of A Bubble

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Lots of you seem to have started talking like the endless crappy press releases send out by property investment companies.

Some people are going crazy thinking HPC is over because house prices went up a little, and you're obviously forgetting about the lifecycle of a bubble. Let me refresh your memories.

bubble-lifecycle.gif

Right now, we're in the return to 'normal' phase, just before fear, capitualtion and despair.

Even if the recession ends tomorrow, which is highly unlikely, house prices will continue to fall for many years before reaching an eventul bottom. It has happened before, and it will happen again.

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Lots of you seem to have started talking like the endless crappy press releases send out by property investment companies.

Some people are going crazy thinking HPC is over because house prices went up a little, and you're obviously forgetting about the lifecycle of a bubble. Let me refresh your memories.

bubble-lifecycle.gif

Right now, we're in the return to 'normal' phase, just before fear, capitualtion and despair.

Even if the recession ends tomorrow, which is highly unlikely, house prices will continue to fall for many years before reaching an eventul bottom. It has happened before, and it will happen again.

Not that I am a bull but of course its undeniable that by many measures we are already at or thereabouts mean... so the starkness of the chart is good for illustrating the dangers of a bull trap but may not be reflective of where we are now.

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Lots of you seem to have started talking like the endless crappy press releases send out by property investment companies.

Some people are going crazy thinking HPC is over because house prices went up a little, and you're obviously forgetting about the lifecycle of a bubble. Let me refresh your memories.

bubble-lifecycle.gif

Right now, we're in the return to 'normal' phase, just before fear, capitualtion and despair.

Even if the recession ends tomorrow, which is highly unlikely, house prices will continue to fall for many years before reaching an eventul bottom. It has happened before, and it will happen again.

I feel better now - a timely post of that graph. You are a bit like the only boy aboard the spaceship who has not yet succumbed to the alien's mental powers!

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Guest DissipatedYouthIsValuable

Listen, rite. It's been 24 degrees on sunshine here, all day. That should be enough to double the average houseprice.

What's that Flipper? Skippy is caught in a tree?

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Not that I am a bull but of course its undeniable that by many measures we are already at or thereabouts mean... so the starkness of the chart is good for illustrating the dangers of a bull trap but may not be reflective of where we are now.

There's no real scale to the graph, it's just a rough indication of the phases involved. But look at the early 90s, prices hit the mean a little time before the end of the recession, then they carried on going down, more slowly, for years until they were well below the mean.

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There's no real scale to the graph, it's just a rough indication of the phases involved. But look at the early 90s, prices hit the mean a little time before the end of the recession, then they carried on going down, more slowly, for years until they were well below the mean.

I know all that... but many WILL interpret the graph to mean theres going to certainly be a steep fall , in fact the vast majority of the fall AFTER a bull trap.. which as I'm sure you will agree is not necessarilly true.

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Isn't the lesson of this recession is that all bets and predictions are off. No one knows where we go from here.

Saying that I am sick of all the VIs who claim for definite the recession is over blah blah blah. Its your opinion - nothing is certain.

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The huge problem you face is that no-one can tell for sure whether we are

on the cusp of a bull trap or on the bottom of the capitulation/despair phase.

It's always a risk, putting money into a market.

All a matter of timing.

You pays your money and you takes your choice.

(And if it all goes wrong- there's no-one to blame but yourself.)

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I know all that... but many WILL interpret the graph to mean theres going to certainly be a steep fall , in fact the vast majority of the fall AFTER a bull trap.. which as I'm sure you will agree is not necessarilly true.

That's true, I think we've probably seen the steepest fall already, and the bull trap is late in reference to this diagram, but I still think it's a bull trap and I think price will continue on a general downward trend for many years to come.

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The huge problem you face is that no-one can tell for sure whether we are

on the cusp of a bull trap or on the bottom of the capitulation/despair phase.

It's always a risk, putting money into a market.

All a matter of timing.

You pays your money and you takes your choice.

(And if it all goes wrong- there's no-one to blame but yourself.)

Actually I don't think its either... but I am convinced prices will continue to fall.. perhaps not everywhere month on month, but everywhere over the next six months... prices will be lower in six months time than they are today....

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definately, £160K for a 3 bed semi in poor condition is the average house.....definately 3 times average wage...which is of course, 53K

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In the last crash not a year passed without some journalist or VI calling the bottom and a 'return to normal.' This opinion backed up by some monthly price stats turning positive and some anecdotal evidence. This is normal.

What has been exceptional in this crash is the speed of the first year and a halfs price falls and the fact that until now there had been no 'optimistic' survey or anecdotal news for the bulls to latch on to. Prices are still way too high relative to incomes. Sales volumes are still very low. Nett borrowing is one tenth of its level during the boom. The auctions are still full of repos. Crash on course.

This had better be bl00dy true as I value houses for a living and I have expressed this view to everybody I know.

edit spelling

Edited by Freeholder

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People keep posting this graph, whilst completely ignoring the most important part of it.

Reversion to mean

Compare the mean line in the bubble graph, with the mean line in the graph on the front page of this site.

We are already below the mean. Somewhere between capitulation and despair, or between despair and return to mean, take your pick. Either way we are very, very close to the bottom.

Edited by HAMISH_MCTAVISH

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People keep posting this graph, whilst completely ignoring the most important part of it.

Reversion to mean

Compare the mean line in the bubble graph, with the mean line in the graph on the front page of this site.

We are already below the mean. Somewhere between capitulation and despair, or between despair and return to mean, take your pick. Either way we are very, very close to the bottom.

theres only one mean on this thread...and thats the tightness of your pocket book at the bar.

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Even if the recession ends tomorrow, which is highly unlikely, house prices will continue to fall for many years before reaching an eventul bottom. It has happened before, and it will happen again.

Err, so let me get this right, the recession ends tomorrow but house prices will still fall, hows thats then. Is this some kind of special end that ends but not really ends. You'll find if the recession ends tomorrow confidence will be restored to the money markets which will kick off another boom.

Nice grapgh BTW, looks like a ski slope, does it factor in that fact that joe blogs can borrow £1,000,000 but only pay £600 a week, where I live a portfolio of 5 houses costing £200K each would yield in rent alone £1500 to £1750 a week!!! with no shortgage of tenants to fill them. Do the maths!!, we are at the bottom now, unless IR hit 8% in the next few months, prices in my neck of the woods have bottomed.

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Err, so let me get this right, the recession ends tomorrow but house prices will still fall, hows thats then. Is this some kind of special end that ends but not really ends. You'll find if the recession ends tomorrow confidence will be restored to the money markets which will kick off another boom.

because even when the recession technically ends, growth will be limited interest rates and taxes will rise.

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Err, so let me get this right, the recession ends tomorrow but house prices will still fall, hows thats then. Is this some kind of special end that ends but not really ends. You'll find if the recession ends tomorrow confidence will be restored to the money markets which will kick off another boom.

Nice grapgh BTW, looks like a ski slope, does it factor in that fact that joe blogs can borrow £1,000,000 but only pay £600 a week, where I live a portfolio of 5 houses costing £200K each would yield in rent alone £1500 to £1750 a week!!! with no shortgage of tenants to fill them. Do the maths!!, we are at the bottom now, unless IR hit 8% in the next few months, prices in my neck of the woods have bottomed.

Fill your boots then!! You'd be stupid not to. Or is there perhaps something stopping you?

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People keep posting this graph, whilst completely ignoring the most important part of it.

Reversion to mean

Compare the mean line in the bubble graph, with the mean line in the graph on the front page of this site.

We are already below the mean. Somewhere between capitulation and despair, or between despair and return to mean, take your pick. Either way we are very, very close to the bottom.

Since when has 4.5 times the average wage been the mean? The problem with the graph on the front page is that it has been severely distorted by the recent bubble. It needs revising down. If you extrapolate the line from around 2002 the mean will be much lower. We have not reached the mean, that's for sure, anyone thinking that over £150k is the mean at this point in time needs their head examining.

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What about transaction volumes?

I think what we've got at the moment is a clear case of market disequilibrium, demand has dropped off a cliff but the downward stickiness of seller's price expectations has kept prices high with transaction volumes taking the hit. I think before we can start talking about prices stabilising we'll need to see transactions returning to normal volumes.

As it stands would the banking system have the funding to support a housing market at current prices back at long term transaction volumes?

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Lots of you seem to have started talking like the endless crappy press releases send out by property investment companies.

Some people are going crazy thinking HPC is over because house prices went up a little, and you're obviously forgetting about the lifecycle of a bubble. Let me refresh your memories.

bubble-lifecycle.gif

Right now, we're in the return to 'normal' phase, just before fear, capitualtion and despair.

Even if the recession ends tomorrow, which is highly unlikely, house prices will continue to fall for many years before reaching an eventul bottom. It has happened before, and it will happen again.

well personally that's my kinda post Financial Hack, tell the fookers straight.

How to make friends & influence people, ala GOM style. :D

here are some other words for the greenshootistsâ„¢:

Great Depression 2 - The Greater Depression (my fav ;) )

bond market

solid fundamentals

chart of pompos prognosticators

gold

hyper-something-or-other ;)

currency crisis

rigged markets (for confounded :D )

ONS stats & GDP :lol::lol:

the UK manufacturing base :P

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Personally I think the crash hasn't actually begun yet, as we're yet to see the real knock-on effect of rising unemployment.

People are either recently out of work, or worried about being out of work and therefore switching from consumer spending to paying off their debts (mortgages) - hence comparatively few forced sales.

It will be a combination of people realising that they can't get another job, decreasing consumer activity leading to further job cuts, and the inevitable raising of interest rates that will start the real crash.

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I feel better now - a timely post of that graph. You are a bit like the only boy aboard the spaceship who has not yet succumbed to the alien's mental powers!

Can we start a thread on how many times this graph has been shown in the last few weeks? I love it, Its so scientific. I mean all the dates, numbers and historical references are just awesome. How can it be wrong? :P:lol::P:lol::P

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Lots of you seem to have started talking like the endless crappy press releases send out by property investment companies.

Some people are going crazy thinking HPC is over because house prices went up a little, and you're obviously forgetting about the lifecycle of a bubble. Let me refresh your memories.

bubble-lifecycle.gif

Right now, we're in the return to 'normal' phase, just before fear, capitualtion and despair.

Even if the recession ends tomorrow, which is highly unlikely, house prices will continue to fall for many years before reaching an eventul bottom. It has happened before, and it will happen again.

Rather than trotting out a generic graph (it's pretty) and doing a Nouriel Roubini, where's your economic data to back up your assertion we're about to have another impending crash of a magnitude (on your graph) of 4 times bigger (which would place average house prices at something obsurd like 70k)?

Everyone keeps harping on about the 90s and the 5 year falls - average rates were well over triple what are they are now for most people on mortgages, and there's no indicators from govt/corp bonds or money markets at present that rates will return to anything like 10%, despite the fearmongers best efforts.

The cost of mortgage financing has NEVER been more affordable for most people, and considering it takes up such a large proportion of home-owner's net pay, this will have a big difference on domestic income and spending power. The only thing that will limit demand is the deposit requirement as a result of LTVs falling - the end result will be a stagnant market, not a collapsing market - we've had that for the past year (or longer in some areas)

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Rather than trotting out a generic graph (it's pretty) and doing a Nouriel Roubini, where's your economic data to back up your assertion we're about to have another impending crash of a magnitude (on your graph) of 4 times bigger (which would place average house prices at something obsurd like 70k)?

Everyone keeps harping on about the 90s and the 5 year falls - average rates were well over triple what are they are now for most people on mortgages, and there's no indicators from govt/corp bonds or money markets at present that rates will return to anything like 10%, despite the fearmongers best efforts.

The cost of mortgage financing has NEVER been more affordable for most people, and considering it takes up such a large proportion of home-owner's net pay, this will have a big difference on domestic income and spending power. The only thing that will limit demand is the deposit requirement as a result of LTVs falling - the end result will be a stagnant market, not a collapsing market - we've had that for the past year (or longer in some areas)

this is correct, most people have never been able to buy a home.....as long as by "most people" you mean they are less than 7 years old.

I think 70% of the population living in their own homes might count as "most people"

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