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Realistbear

How Job Losses Affect House Prices

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http://uk.biz.yahoo.com/21072009/389/job-l...use-prices.html

Cliff "Clifford" d'Arcy

..../

To find the correlation coefficient we need, I compared the quarterly unemployment data from the Office for National Statistics with house-price data from Nationwide BS, over the past 26 years.

The result: one goes up, the other goes down

According to my nifty spreadsheet, the correlation coefficient in my example was -0.81.

In other words, when unemployment rose, house prices dropped 81% of the time , and vice versa. This is quite a strongly negative relationship..../

And the collapse will not stop at 3.81m unemployed.....try 10m +.

House prices are well done melba toast.

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http://uk.biz.yahoo.com/21072009/389/job-l...use-prices.html

Cliff "Clifford" d'Arcy

..../

To find the correlation coefficient we need, I compared the quarterly unemployment data from the Office for National Statistics with house-price data from Nationwide BS, over the past 26 years.

The result: one goes up, the other goes down

According to my nifty spreadsheet, the correlation coefficient in my example was -0.81.

In other words, when unemployment rose, house prices dropped 81% of the time , and vice versa. This is quite a strongly negative relationship..../

And the collapse will not stop at 3.81m unemployed.....try 10m +.

House prices are well done melba toast.

When unemployment rises demand drops and house prices drop. When you add a credit bubble to the mix a cautious man thinks this has a way to run. Why anyone thinks the worst is over is beyond me - a large part of the economy is built on the public sector - that sector of the economy is only beginning to feel the effects of the recession.

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And the collapse will not stop at 3.81m unemployed.....try 10m +.

House prices are well done melba toast.

Heck RB, this is wasteland, no recovery territory. I thought I was the only one!

Having watched boom/bust in housing since 1972, this monumental collapse has a never-before-seen, stop-at-nothing, massive mind-f*ck* machine working against the inevitable & you are working against it.

Please be careful.

*Sorry to swear but this US expression suits like no other

EDIT:- Forgot to say thxs for a great link

Edited by Laura

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Very interesting study I did not realize the correlation would be so strong.. .81 correlation is an incredibly strong correlation. One might even move beyond correlation into causation with that high of a score.

We are losing jobs at the rate of 280,000 every 3 months. Which to put it in perspective the active duty UK armed forces is 202,000 people.

Edited by aa3

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Very interesting study I did not realize the correlation would be so strong.. .81 correlation is an incredibly strong correlation. One might even move beyond correlation into causation with that high of a score.

We are losing jobs at the rate of 280,000 every 3 months. Which to put it in perspective the active duty UK armed forces is 202,000 people.

You forgot to mention that we need to print more money - no slacking off now ;)

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Very interesting study I did not realize the correlation would be so strong.. .81 correlation is an incredibly strong correlation. One might even move beyond correlation into causation with that high of a score.

We are losing jobs at the rate of 280,000 every 3 months. Which to put it in perspective the active duty UK armed forces is 202,000 people.

Are you suggesting the unemployed should be sent to fight the Taliban?

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You forgot to mention that we need to print more money - no slacking off now ;)

:lol: You know I am converting people to my pro-QE thinking.

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Are you suggesting the unemployed should be sent to fight the Taliban?

Several people on another forum suggested exactly that. Or culling.

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Are you suggesting the unemployed should be sent to fight the Taliban?

:lol: Maybe subconciously I am.. You know throughout time I believe leaders have dealt with problems like we now face by getting a big war going. The goal is to massacre a large percentage of the young men in society. For the surviving young men good jobs and women are plentiful, and there is serenity among the young men, and happiness with the society.

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absolute rubbish !!

The correlation is no whether near this within a 12 month period. As with the ecomony it is fueled by "talking down" and fear.

The natural unemplyment rate is 5-6% this will go up to 10% in 2010. 9 in 10 jobs are not affected.

The green shoots are there and those who can afford a property as a long term family investment should be seriously consider buying soon.

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absolute rubbish !!

The correlation is no whether near this within a 12 month period. As with the ecomony it is fueled by "talking down" and fear.

The natural unemplyment rate is 5-6% this will go up to 10% in 2010. 9 in 10 jobs are not affected.

The green shoots are there and those who can afford a property as a long term family investment should be seriously consider buying soon.

Whew, glad we got that sorted out, thanks v much for the tip...

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The natural unemplyment rate is 5-6% this will go up to 10% in 2010. 9 in 10 jobs are not affected.

So ... during boom times unemployment 'naturally' kept 5-6% of the demand suppressed? So if you suppress demand by (up to) 5% *more* than during boom times then house prices will continue to rise at rates that continue to outstrip any other productive investment for the FTB'ers time/money ...?

I don't get it, sorry.

The house prices went crazy for so many reasons (disproportionate bank risk taking/deliberate government interference in rent vs mortgage pricing [read: mindless throwing of cash at BTLers]/liar loans/and so much more). Numerous of those reasons have had sufficient media coverage as to expose them as fraudulent models (at least in part anyway). House prices did not go crazy simply because unemployment was at or below the 'natural' low you suggest.

And how is honesty about what house prices need to do to stop being absolutely stupid 'fear-mongering'? Is it fear-mongering because it suggests that BTLers and MEWers will have to end their Bovey-esque lifestyles go out and actually create something by working for a living as opposed to sitting on the top of a fat pile of mortgage-drivel based cards?

As for the 'buying a house to live in' actor in the market ... how much do you think their entry into the market would continue to maintain (or raise) prices? What proportion of the market is just such 'genuine' demand? And, indeed, what proportion of the folks you suggest exist in a state of such 'genuine' demand can afford (or justify) such lemming-like slave-box purchasing behaviour?

And besides: unemployment and underemployment are not the same thing! The unemployment figure you are suggesting as only really going to get to 10% (ever the optimist are we?) has no adjustment in it for all the folks (by example at BA) who are taking hand-over-fist pay cuts.

And don't be fooled. A drop of 5% in demand in a good can often mean more than a drop of 5% in prices.

Absolute rubbish !!

Aidanapword

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And the collapse will not stop at 3.81m unemployed.....try 10m +.

House prices are well done melba toast.

Good on you RB, you will be able to buy your 6 bedroom country mansion for one hundred weight of quality coal. ;)

Edited by Charlie The Tramp Returns

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http://uk.biz.yahoo.com/21072009/389/job-l...use-prices.html

Cliff "Clifford" d'Arcy

..../

To find the correlation coefficient we need, I compared the quarterly unemployment data from the Office for National Statistics with house-price data from Nationwide BS, over the past 26 years.

The result: one goes up, the other goes down

According to my nifty spreadsheet, the correlation coefficient in my example was -0.81.

In other words, when unemployment rose, house prices dropped 81% of the time , and vice versa. This is quite a strongly negative relationship..../

And the collapse will not stop at 3.81m unemployed.....try 10m +.

House prices are well done melba toast.

Hence why the goal posts are always moved, try being a "Self Employed" contractor and claiming benefits! Ignore the £7K saving limit, if your a contractor you will get very little help and not appear on government figures!

Many I know in the building trade are taking huge wage cuts (50%+) just to try and keep their heads above water, this with at the same time as historically low base rates.

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Very interesting study I did not realize the correlation would be so strong.. 0.81 correlation is an incredibly strong correlation. One might even move beyond correlation into causation with that high of a score.

Whoah, hang on.... Mathematically I have to take issue with the fact that "0.81 correlation is an incredibly strong correlation".

0.81 might or might not mean a strong correlation. It depends on the number of pieces of data being considered...

Hear me out....

If I have 2 pieces of data to compare, and they come out with a 0.81 correlation, this says basically nothing.

If I have 10 pieces of data to compare, and they come out with a 0.81 correlation, then this says a little.

If I have 100 pieces of data to compare, and they come out with a 0.81 correlation, then this says a very large amount.

Now, I suspect that the article writer took 26 years of monthly data (at a guess), and so had 312 pieces of bivariate data (unemployment, house prices).

Therefore the -0.81 is very strong evidence indeed that the two are negatively correlated.

(see: http://physics.mercer.edu/Younce/pearson.html )

In fact, if there were just 100 pieces of data, then a correlation of just -0.254 would be enough to say with 99% certainty that they were negatively correlated.

With 312 pieces of data, and a value of -0.81, the probability that there is negative correlation is 0.999999 (to six significant figures) i.e. definite.

So, to the poster who said there isn't correlation between the two: :P:P:P

Signed.... A. Mathematician

(By the way, the original article writer's "when unemployment rose, house prices dropped 81% of the time , and vice versa" makes absolutely no sense - it is a complete misunderstanding of correlation. Basically it's trotting out the tripe that's taught in GCSE Geography)

(And as rightly noted, correlation doesn't automatically mean causation. For example, there is strong correlation between number of ice-creams sold in New York in a week and the number of Homicides....)

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absolute rubbish !!

The correlation is no whether near this within a 12 month period. As with the ecomony it is fueled by "talking down" and fear.

The natural unemplyment rate is 5-6% this will go up to 10% in 2010. 9 in 10 jobs are not affected.

The green shoots are there and those who can afford a property as a long term family investment should be seriously consider buying soon.

Sounds good to me; can I consider this accurate financial advice? Thing is, i'm waiting to buy a reasonably priced family home though I can't guarantee my long-term job security. So what you're saying is that it's different this time and now is a good time to buy?

Interesting.

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When unemployment rises demand drops and house prices drop. When you add a credit bubble to the mix a cautious man thinks this has a way to run. Why anyone thinks the worst is over is beyond me - a large part of the economy is built on the public sector - that sector of the economy is only beginning to feel the effects of the recession.

I have no idea why anybody even bothered to argue with McTavish.

absolute rubbish !!

The correlation is no whether near this within a 12 month period. As with the ecomony it is fueled by "talking down" and fear.

The natural unemplyment rate is 5-6% this will go up to 10% in 2010. 9 in 10 jobs are not affected.

The green shoots are there and those who can afford a property as a long term family investment should be seriously consider buying soon.

Yeah it's not the 9 in 10 jobs unaffected, it's the one in ten that are. Green shoots are an absolute joke. Housing market, frozen. Twenty percent knocked off already. Lending not going back to 'normal' in the next ten years. Economy contracting. Oooh look, a small uptick in the indexes in the normal busy time for house buying. These people were still buying houses twenty percent cheaper than 2007. Lending up seventeen percent in June, Wow if it rises some more, it might creep back up to half of what it was precrash!

Look at the American market. They are a year/eighteen months ahead of us.

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