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Rinoa

Rising Unemployment = Falling House Prices...

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The erosion of debt was very handy during 83 - 86, but even if we accept that the rise in real prices was none existent, there was no real price fall either during the period.

So the rising unemployment in those years didn't acheive what HPC thinks it will do this time round.

;)

Edited by Rinoa

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The erosion of debt was very handy during 83 - 86, but even if we accept that the rise in real prices was none existant, there was no real price fall either during the period.

So the rising unemployment in those years didn't acheive what HPC thinks it will do this time round.

;)

WHat did rates do 81-83? Also, do you think that there are more mortgages nowadays dependent on 2 incomes than the early 80s, or less?

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Big myth indeed.

Lastly the Government Homeowner Mortgage Support Scheme.

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

Ah, the infamous Mortgage Support Scheme:

Only about 6,000 homes in England are expected to benefit from the mortgage rescue scheme.

The number of mortgage accounts in arrears rose by 31% in 2008, according to figures from the Financial Services Authority (FSA).

At the end of 2008 there were 377,000 accounts in arrears by 1.5% or more of their loan balance, roughly equivalent to arrears of at least three months.

http://news.bbc.co.uk/1/hi/business/7763378.stm

Now, I wonder how rising unemployment might affect these figures?

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There is actually a very good book written by David Smith called Boom to Bust and it documents the 70-80s monetary policy experiments, its a good summary of events, especially for those of us that lived through the time. David Smith is quite eloquent when it comes to writing about past events and what went wrong in hindsight.

The book documents the trials and tribulations of the Thatcher/Major leadership, right up to the point of the conservatives joined the ERM. The final chapter of the book was an optimistic predication of Britons stable future in the ERM.

Fair play to D. Smith for coming back and adding a new chapter to later editions of the book in which he wrote a good summary of what went wrong in hindsight. I believe the Americans have a phrase 'monday morning quarterback'

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graphunemploymenthousep.jpg

It correlates quite well, better than I would have thought.

I dont like commenting on silly threads normally as it is so obvious that the unemployment rate has a fundamental influence on house price/rental price but...

It could be worth pointing out that the unemployment rate alone can be over emphasised in house price decline where and when other influences are more prevailant.

It could be argued that prices have risen, albeit slighty, over the last few months despite record increases in unemployment. The fact many have decided it is now a better time to put money into a house (tangible asset) instead of leaving cash in a very low interest account together with the continuing access to very cheap money has outweighed the influence of the rising unemployment.

This time unemployment is not isolated to any small lower income group and will be affecting all areas of employment influencing various levels of the housing market as it does so.

But it is not just unemployment. Even larger numbers of small business owners are seeing their incomes plummet and in many cases into the red, many high level management are seeing their salaries and bonuses slashed. All this is going to get much much worse.

There are still large proportions of the population unaware of the true impact of this recession. Many have been totally unaffected and wonder what all the fuss is about, as I and most people were in the dot com bust where a handful of people thought it a disaster. This time it will affect everyone, but not straight away.

So far

Certain areas of the banking and financial sectors have been affected, which will get progressively worse over the coming years. Most in this sector are aware but not all there will be pockets of the unaffected.

Just about everyone within the building and construction industry are aware with the possible exeption of those with long term maintenance contracts etc

All those within heavy industry and engineering will be aware as well as most within general manufacturing

Most within the food distribution would be aware as food outlets.

Most within the retail sector would also be aware.

But

Many in the IT sector would be unaware/feel they are immune as jobs have held up to date as is many within healthcare.

The EA industry has held up quite well, much better than I predicted, where many long term denialists believe they can sell their way out of crisis as "anyone can sell on price but it takes a professional salesperson to sell a higher priced product/service on the benefits alone" which is true, and those who can will survive.

It is those that work in local government and in government jobs which make up the biggest group that have been totally unaffected. They probably had a grumble about only getting a 1% pay rise and believing this is the worst that the recession has to offer :lol: as they say to other "but you see we are providing an essential service" :lol:

There will be a wide awakening.

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The erosion of debt was very handy during 83 - 86, but even if we accept that the rise in real prices was none existent, there was no real price fall either during the period.

So the rising unemployment in those years didn't acheive what HPC thinks it will do this time round.

;)

The drop in prices [thus far] has been caused mainly by a lack of credit; unemployment has not been a factor yet. Unemployment will become a factor later in the cycle, as the economy (profits) will recover before the jobs market does.

By this time next year credit will still be tight, there will be a lot more unemployed (3m+?), banking interest rates will be on their way up and the new government will be announcing savage cuts in public expenditure. HPC is still on.

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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.

Burned by a newspaper article by David Smith? Ha Ha Ha!.... HA HA HA HA!.... HO HO HO HO... chough cough cough....

Why don't you start a HPC mythbusting thread Hamish? It would be interesting to track going forward. Kind of an opposing view thread...

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This graph shows an increase in reasl prices and an increase in unemployment happening similtaneously in the early 80's. Not a big increase, but an increase.

I think this chart shows a slight decrease in unemployment alongside an increase in house prices in the late 70's, not the early 80's. Correct me if I'm wrong but wasn't there a stronger union representation in the 70's?

Your point is...

Anyone with any sort of statistical background can see an inverse correlation between house prices and unemployment rates.

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I thought I'd been redirected from HPC to the 'Fvckwits-R-us' website when I clicked on the link and first read Rinoa's post :rolleyes:

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UK House Prices will Fall for as Long as Unemployment Rises

"Almost everyone seems to have developed the belief that a further 10% will be enough for the UK housing market to hit rock bottom. This will mean a 26.5% drop from peak if you go by the current Land-Registry index, and 30 - 35% if you go by some of the other indexes floating around. Several reports have recently either forecast and/or said that this recession will be/is equal to or worse than the great depression of the 1930s.

This is undoubtedly based on the last recession/house price crash between the late 80s to early 90s, when the average house price fell 28% from peak to trough. But this recession is to be worse and there is no mystical floor when it comes to house prices. It is more likely that prices will continue to fall for as long as unemployment rises; for however long that maybe and to whatever percentage that fall is."

Link

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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.

Couldn't agree more.

When you can't pay your mortgage, banks and building societies NEVER :

1/Issue a writ against you.

2/Take you to court

3/Repocess the property

4/Evict you

5/Sell it at auction for a knock-down price

6/Hunt you down like a dog for years to reclaim the shortfall

Who are you trying to convince? Us, or yourself?

P.S Your avatar. Is he

(a)Just about to start

or

(b)Just finished

Chugging a c0ck?

Edited by simpleton

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Possibly. But at least I can spell drivel. ;)

you set yourself up for this one though

This graph shows an increase in reasl prices and an increase in unemployment happening similtaneously in the early 80's. Not a big increase, but an increase.

Drivel, of course, is your specialty - so it's no surprise you got that one correct.

Edited by scuuzeme

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Oh, it's David Smith. Don't think I'll be changing what I think based on anything he writes.

Try again.

no. really ? is it david smith ?

oh dear oh dear. hasn't he been right about as often as Dr. Bubb ? :lol:

or perhaps someone should point the bulls in the direction of the recent dislocation between single percentage point

interest rate falls and rising house prices. When IR's went from what was it ? 4% down to 1% in 2008/09 what happened to house prices ?

similarly, in such extraordinary times, and with such unconventional measures propping up the economy, it's not good to hold on for too long to any supposed norms re the behaviour of the housing market. Rising prices along with higher IR's ? maybe maybe not. what about rising prices where there is a stagflationary environment in the economy or severely anaemic growth

.....i can see all that wealth destruction creating buy opportunities but it doesn't bode well for sustained rebound. more doldrum like. a few months of prices going pretty much nowhere in many regions and it's time to pop the champagne corks ? yeah, i'm squiming alright. in the knowledge the fundamentals don't exist for the type of timescale of recovery the bulls are predicting for the housing market.

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no. really ? is it david smith ?

oh dear oh dear. hasn't he been right about as often as Dr. Bubb ? :lol:

You don't like Dr. Bubb?

If so, why?

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ive never heard anyone spout so much sh*te

Yes another drossy Times property article.

The thing they don't get is that the banks are still not lending. Thus house prices will fall. The recent mini bounce was a spring phenomenon coupled with a few bored and frustrated STRers. That has now dried up and I hear I the agent front the offices have gone quiet again.

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... has no basis in reality. Says Sunday Times

Yet another HPC myth bites the dust.

Oh right, so one article in a Murdoch newspaper puts that theory to rest then. How silly we must all be to think that an income is required to buy a house. :rolleyes:

The effects of unemployment as a lagging indicator do not immediately feed through into the economy, since I could be in a job for 6 months, apply for a mortgage and buy a house and then be made redundant in my 7th month. I might sustain myself on savings or redundancy money for another 6 months before I start claiming benefits.

Cretinous piffle as usual from the forum bimbo-bicyle.

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a few bored and frustrated STRers.

:blink:

There were 58,000 sales last month. Do you really think a few bored STR's made any difference?

That has now dried up and I hear I the agent front the offices have gone quiet again.

I got cold called last week form the office I bought my latest house through. Desperate for properties, not enough stock and too many buyers.. Yes it's anecdotal, and admittedly the Scottish selling season is different and runs later into summer, but still, thats something that just wouldn't have happened last year at all.

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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.

I wonder how many people will think they are lucky when interest rates are as high as the 1980s (ie consistently above 10%) - although its true the debt does erode, but there is a cost. If this happens now there will be repossessions on an unprecedented scale.

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