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Simple Bullish Question

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The Nationwide house price calculator might say a bulls property is down £50k on Summer 2007- but they care not as they ain't sellin. Mortgage is pretty affordable so they are looking at this in cashflow rather than capital terms, which is the view that keeps them smiling.

If they are not that old, they are likely to see wage inflation through their career. Doesn't matter much that their house is worth a bit less than they paid for it. In fact, if prices drop appreciably from here then they may well upsize or buy another- and that is the main reason why they visit this very entertaining site.

The other reason is to troll of course.

Am I wrong??

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The Nationwide house price calculator might say a bulls property is down £50k on Summer 2007- but they care not as they ain't sellin. Mortgage is pretty affordable so they are looking at this in cashflow rather than capital terms, which is the view that keeps them smiling.

If they are not that old, they are likely to see wage inflation through their career. Doesn't matter much that their house is worth a bit less than they paid for it. In fact, if prices drop appreciably from here then they may well upsize or buy another- and that is the main reason why they visit this very entertaining site.

The other reason is to troll of course.

Am I wrong??

That's like a man in shorts and T shirt walking in the mountains in summer looking around and thinking that as long as everything carries on as it is he'll be fine.

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The Nationwide house price calculator might say a bulls property is down £50k on Summer 2007- but they care not as they ain't sellin. Mortgage is pretty affordable so they are looking at this in cashflow rather than capital terms, which is the view that keeps them smiling.

If they are not that old, they are likely to see wage inflation through their career. Doesn't matter much that their house is worth a bit less than they paid for it. In fact, if prices drop appreciably from here then they may well upsize or buy another- and that is the main reason why they visit this very entertaining site.

The other reason is to troll of course.

Am I wrong??

why should people care how bulls feel. the fact is that it has fallen 50k, end of story.

its like saying, "a mans £100,000 share portfolio has fallen 50% to £50,000. he doesnt care. is he right not to care?"

Edited by mfp123

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The Nationwide house price calculator might say a bulls property is down £50k on Summer 2007- but they care not as they ain't sellin. Mortgage is pretty affordable so they are looking at this in cashflow rather than capital terms, which is the view that keeps them smiling.

If they are not that old, they are likely to see wage inflation through their career. Doesn't matter much that their house is worth a bit less than they paid for it. In fact, if prices drop appreciably from here then they may well upsize or buy another- and that is the main reason why they visit this very entertaining site.

The other reason is to troll of course.

Am I wrong??

The thing is you haven't really described a bull. You've described somebody who accepts there will be/has been a crash and is content to see it through because they think prices will pick up again at some point in the future, and they think they are well positioned to exploit it when it happens. A bit like a lot of the bears on here.

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There are certainly some that have done very well out of the collarless trackers, clearly the lenders "didn't see it coming"..but then they didn't see much coming did they. Great if you are one of those.

In fact, if prices drop appreciably from here then they may well upsize or buy another- and that is the main reason why they visit this very entertaining site.

See, now you are beginning to understand: HPC is good for everybody.

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In fact, if prices drop appreciably from here then they may well upsize or buy another- and that is the main reason why they visit this very entertaining site.

You are correct. Lower prices are better for everyone except those who have bought as an investment or see property as their pension. Unfortunately most people are too stupid to realise this.

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The Nationwide house price calculator might say a bulls property is down £50k on Summer 2007- but they care not as they ain't sellin. Mortgage is pretty affordable so they are looking at this in cashflow rather than capital terms, which is the view that keeps them smiling.

If they are not that old, they are likely to see wage inflation through their career. Doesn't matter much that their house is worth a bit less than they paid for it. In fact, if prices drop appreciably from here then they may well upsize or buy another- and that is the main reason why they visit this very entertaining site.

The other reason is to troll of course.

Am I wrong??

Yes you're wrong.

The ONLY reason is to troll.

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It's a simple question but the answer is complex.

1. If house prices fall in inflation-adjusted real terms, then when you sell the house you will not be able to buy as much other stuff (holidays, fancy dinners, handjobs) with the money. This might not bother you particularly if you sell one house to buy another at about the same price. If you downsize when you retire, the difference will buy you less non-property stuff in your dotage. If you upsize, it will be cheaper in real terms to buy the extra amount of housing. If you die and bequeath the property to your children, they will inherit less in real terms.

2. The general wage inflation question is not so much an argument between bulls and bears as much as it is between lenders and debtors. Movements in interest rates aside, you have promised to send your bank £x every month to repay your mortgage. If there is a lot of inflation, the real cost of that £x payment will fall. You will have won, and the bank will have lost. A bear will still be in pretty much the same position (assuming he has been smart enough to inflation-proof his savings) after inflation as before. True, he might have been in a better position if he'd bought a house immediately before a period of high inflation. However, taking on a big mortgage now in anticipation of future inflation is not a risk-free investment strategy: inflation might remain low and house prices might fall in both real and nominal terms, leaving you sitting on a real loss of capital. In addition, high interest rates to combat high inflation will cost you a lot of money, especially if they are sustained. Quantitative easing is no guarantee of high inflation: Japanese quantitative easing did not result in hyperinflation, and Japanese-style deflation increases the real cost of mortgages year on year.

Right now we are certain to have real falls in house prices, which will benefit (inflation-proof) bears no matter what. Inflation is anybody's guess. Take your pick.

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One obvious point is that the man in your example should have kept his money out of property in the first place. He's lost money - the fact he doesn't seem to care doesn't change anything.

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It's a simple question but the answer is complex.

1. If house prices fall in inflation-adjusted real terms, then when you sell the house you will not be able to buy as much other stuff (holidays, fancy dinners, handjobs)

lol so there we have the answer - its all about handjobs :lol:

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If they are not that old, they are likely to see wage inflation through their career.
Good point. Everyone I talk to seems to be getting whacking great pay rises. People's jobs are generally secure. We're not facing the first global depression. Sorry, my mistake. Strike everything I just said and reverse it.

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Thanks for your replies, especially Barely Legal. I entirely agree that if your main objective is to make money, the situation is more complex. But if your main objective is having somewhere to live, then it's a win-win. The way I see it, when your house is increasing in value you are making money on it; when it is not you still get to live there until you do start making money on it again.

The fact a bull is sitting on a 50k loss will probably only make them more bullish I expect. If they buy something thinking it is a good buy, but that it then falls in value by 20%, the bullish approach is to see this as an opportunity to buy more at what they consider to be an even better discount. If it falls in value by another 20%, they rub their hands and buy twice as much again.

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The fact a bull is sitting on a 50k loss will probably only make them more bullish I expect.

Yep coz thats exactly how the phsychology of markets work isnt it, as prices go lower and lower the majority of the population get more and more bullish. THats why throughout history at the bottom of any market absolutely everyone wants to pile in.... or then again maybe not eh

Edited by Tamara De Lempicka

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Yep coz thats exactly how the phsychology of markets work isnt it, as prices go lower and lower the majority of the population get more and more bullish. THats why throughout history at the bottom of any market absolutely everyone wants to pile in.... or then again maybe not eh

Indeed, not everyone, just the bulls.

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Good point. Everyone I talk to seems to be getting whacking great pay rises. People's jobs are generally secure. We're not facing the first global depression. Sorry, my mistake. Strike everything I just said and reverse it.

:lol:

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Thanks for your replies, especially Barely Legal. I entirely agree that if your main objective is to make money, the situation is more complex. But if your main objective is having somewhere to live, then it's a win-win. The way I see it, when your house is increasing in value you are making money on it; when it is not you still get to live there until you do start making money on it again.

Sorry but this just doesn't make sense. If property prices are falling then you can get somewhere better to live without spending as much money, by renting (assuming that the capital depreciation and interest costs on a mortgage exceed the rent you pay, which they are highly likely to). That's not win-win at all. If you buy a property and it drops in value then you've lost, because you could have rented, had somewhere to live and avoided losing money (and bought property cheaper at a later date).

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Sorry but this just doesn't make sense. If property prices are falling then you can get somewhere better to live without spending as much money, by renting (assuming that the capital depreciation and interest costs on a mortgage exceed the rent you pay, which they are highly likely to). That's not win-win at all. If you buy a property and it drops in value then you've lost, because you could have rented, had somewhere to live and avoided losing money (and bought property cheaper at a later date).

I agree with keeprenting. This sounds suspiciously like pound-cost averaging, which is fine when applied to planned regular share purchases towards a pension, but utter nonsense when buying the-most-expensive-thing-you-will-ever-buy-in-your-life-apart-from-the-next-time-which-will-be-even-bigger-and-more-stoopid!

So, there you have it ;)

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The OP seems to have confused falling house prices with the general level of inflation:

1. Falling house prices benefit people who do not own houses.

2. High inflation (together with inflation-matching pay rises as in the 1970s) benefits people with large mortgages.

Falling house prices does not automatically mean there will be high inflation. If the OP believes we are about to hit a period of high inflation, high enough that it will significantly reduce the real lifetime cost of his mortgage by more than he is about to lose on the real price of his house, then that is his assessment. As I say, it is a risk and there is not much agreement about the inflationary environment we are heading into.

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The Nationwide house price calculator might say a bulls property is down £50k on Summer 2007- but they care not as they ain't sellin. Mortgage is pretty affordable so they are looking at this in cashflow rather than capital terms, which is the view that keeps them smiling.

If they are not that old, they are likely to see wage inflation through their career. Doesn't matter much that their house is worth a bit less than they paid for it. In fact, if prices drop appreciably from here then they may well upsize or buy another- and that is the main reason why they visit this very entertaining site.

The other reason is to troll of course.

Am I wrong??

During the historical periods of wage inflation, the mortgage holders and debtors who would have benefited were a minority? the average punter wanted a pay rise to pay his council rent, buy a loaf and a pint of beer? the rise of the overindebted and the "homeowning" class coresponds with the rise of the biggest ponzi scam in history? so basically, if you bought the lies (and the house) and didn`t cash out before you couldn`t cash out, you lost. Unemployment, the bursting of a massive bubble, and an oversupply of housing doesn`t bode well for house prices? even if "owners" and owners all get together and clench their **** cheeks they can`t stop price drops. It`s like eating three currys, drinking twenty pints of cider and ten packets of dry roasted peanuts, sooner or later you are going to have to squat and let it drop?

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