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Rinoa

Rising Unemployment = Falling House Prices...

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as usual, a single graph shows the bulls' argument to be false.

Yup and shows how terrible the quoted article is. How could they not even consider inflation?

Whether there is inflation or deflation this time is pretty irrelevant to the average FTB. If there is high wage inflation, house prices will still come down relative to earnings. If there isn't, house prices will fall and FTBs will get a good price too. As FTBs are needed in the market, either must happen before there will be any floor in house prices.

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Ouch. Thats a lot of bears just got burned.

We should do a HPC mythbusting thread. Theres so many of them, it's ridiculous.

David Smith is as laughable as you two.

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....yeah but ...."average prices rose by 36%".....in the three years prior to '83 inflation totalled 40% ....and rose a further 15% between '83 and '85....therefore real house prices actually fell..... <_<

Yes, but if inflation rose by 40%, your mortgage payments went down 40% in real terms. Your debt was eroded by inflation, but your house was still worth 36% more nominally.

Anyone buying during that period was very fortunate indeed.

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Yes, but if inflation rose by 40%, your mortgage payments went down 40% in real terms. Your debt was eroded by inflation, but your house was still worth 36% more nominally.

Anyone buying during that period was very fortunate indeed.

er, yes.

but-that-was-during-a-period-of-high-wage-inflation.

what part of this don't you understand?

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Yes, but if inflation rose by 40%, your mortgage payments went down 40% in real terms. Your debt was eroded by inflation, but your house was still worth 36% more nominally.

Anyone buying during that period was very fortunate indeed.

My god, you truly are deluded! Were you dropped on your head as a baby?

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His graph is for the US, not the UK. :lol:

And the UK is immune from the effects of unemployment ? There is somehow a different relationship?

Please do tell us why.

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er, yes.

but-that-was-during-a-period-of-high-wage-inflation.

what part of this don't you understand?

Exactly, wages and inflation eroded your debt. It made your mortgage payments 40% less in real terms.

You can't have it both ways and only apply the real price argument to the house price, you have to apply the real price argument to the mortgage payments too.

:)

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My god, you truly are deluded! Were you dropped on your head as a baby?

Now now,

Proof will undoubtedly be provided shortly of the lack of correlation between levels of employment and house prices.

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And the UK is immune from the effects of unemployment ? There is somehow a different relationship?

Please do tell us why.

Don't you find it odd he couldn't find suitable UK graphs?

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Exactly, wages and inflation eroded your debt. It made your mortgage payments 40% less in real terms.

You can't have it both ways and only apply the real price argument to the house price, you have to apply the real price argument to the mortgage payments too.

:)

It's not a whole lot of help to you if YOU DO NOT HAVE A JOB.

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... has no basis in reality. Says Sunday Times
What about the last housing slump? Housing activity, measured by mortgage approvals, hit the bottom just before unemployment peaked in the winter of 1992-93. In a reversal of the 1980s, however, the jobless total fell from nearly 3m at the start of 1993 to less than 2.2m in the spring of 1996 without a recovery in house prices — which stagnated, only picking up later in 1996.

Yet another HPC myth bites the dust.

It's more his own view I think than a fact or some kind of research, his own argument is a bit weak. :P

http://www.cih.org/news/view.php?id=865

2 April 2008

Sunday Times Economics Editor David Smith told delegates at a major housing conference in Wales today that the UK was coming out of the longest period of economic growth ever seen, but was not about to face a recession or a house price crash.

Housing professionals at the Chartered Institute of Housing (CIH) Cymru annual conference in Cardiff heard the leading economist’s assessment that "the housing market is integral to the UK economy" and that demand for housing was outstripping modest rises in house building figures. David Smith said that despite a slow down in house prices, a rise in the cost of borrowing and a cut in the supply of mortgage products by around two thirds, "we should not over-do the gloom".

Quoting a "strong and unusual rise in house prices" over the past ten years where average prices had gone from £60,000 to £180,000, Mr Smith said, "house prices would have to fall quite a lot before we saw the return of negative equity".

Peter Williams, Executive Director of the Intermediate Mortgage Lenders Association, also speaking at the CIH event, emphasised the differences between the UK market and the United States, whose problems with sub prime lending have led to the credit crunch. In the UK sub prime lending accounts for around 6% of the mortgage market, rather than around 20% in the USA. Tighter lending criteria in the UK, a lack of tax relief on mortgages and generally higher interest rates than the USA, made the picture very different in this country, he said.

Mr Williams also emphasised the problems of affordability for first-time buyers in Wales, and predicted that the percentage of homeowners would fall from the current high of 75%, with fewer young people able to get on the housing ladder. The high percentage of first-time buyers relying on "the bank of mum and dad" for their deposit was creating "a big source of inequality" in UK society, he said.

Finally Mr Williams called for housing associations to support local housing markets by providing more flexible low cost home ownership products where homeowners could scale down as well as up to suit their circumstances.

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Now now,

Proof will undoubtedly be provided shortly of the lack of correlation between levels of employment and house prices.

Sorry, moment of weakness.

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Yes, but if inflation rose by 40%, your mortgage payments went down 40% in real terms. Your debt was eroded by inflation, but your house was still worth 36% more nominally.

Anyone buying during that period was very fortunate indeed.

.....not if you bought with cash....as it happens I was buying with a mortgage at that time ... <_<

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His graph is for the US, not the UK. :lol:

I'm using a mixture of graphs to demonstrate a point you muppet!

Can you see a pattern in those graphs yet?

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Exactly, wages and inflation eroded your debt. It made your mortgage payments 40% less in real terms.

You can't have it both ways and only apply the real price argument to the house price, you have to apply the real price argument to the mortgage payments too.

:)

you're a clown.

high earnings growth would almost certainly mean rising house prices. it would also mean that those people who had borrowed in the past would find it easier to pay off their mortgages. a child knows this. but we currently have exceptionally low earnings growth.

go away and come back out of your hole next time we have high earnings growth, your ramping might be appropriate then.

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Big myth indeed.

In actual fact, when faced with the propect of unemployment, should there be a mortgage to repay, then there are several options available such as:

Arranging a new payment plan with lender to reflect new circumstances.

Changing the way payments are made. In some cases paying back over a longer period.

Changing the type of mortgage temporarily converting to an interest only basis.

Lastly the Government Homeowner Mortgage Support Scheme.

So yeah, not sure why bears treat unemployement rise as a de facto drop in house price.

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Now now,

Proof will undoubtedly be provided shortly of the lack of correlation between levels of employment and house prices.

Maybe David Smith's article was prompted by this years events.

Looks like he's spot on for 2009.

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Yes, but if inflation rose by 40%, your mortgage payments went down 40% in real terms. Your debt was eroded by inflation, but your house was still worth 36% more nominally.

Anyone buying during that period was very fortunate indeed.

Wasn't this the period during which Volcker raised the Fed Funds Target Rate to around 18%? I only know the the US rates story off hte top of my head. Care to guess what UK rates (and thus mortgage repayments) did?

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Don't you find it odd he couldn't find suitable UK graphs?

I posted 2 for the UK and 2 For the US!

epicfail-thumb-268x358-1167121.jpg

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So yeah, not sure why bears treat unemployement rise as a de facto drop in house price.

It's quite simple - rents (in the broadest sense) are related to production

The less production there there is, the less can siphoned off by housing 'investment' parasitism

Edited by Stars

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I'm looking forward to one of muckTw@ts funny money calculations at this point, in which is provably obvious that if you were unemployed in 1983 the best thing you could have done was to have liquidated all your available assets and bought 3 or 4 houses on the proceeds.

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Here is another one to add

Just look at the chart below which goes back to 1991. The yellow line shows the average UK house price according to the Halifax indices, while the red line, the latest number of Britons out of work.

318502257123.jpeg

Note how, despite all the talk that they'd been overvalued for ages, home values only nosedived when job losses really began kicking in over the last twelve months. Even if Britain's dole queues only extend as far as the Organisation for Economic Co-operation and Development's three million forecast, imagine what's in store for the housing market.

And if some of the gloomier predictions turn out to be right - taking job losses literally right off the chart - history shows us that complete carnage could be on the cards.

http://www.moneyweek.com/investments/prope...;h=322&as=1

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