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Buyers Don’t Care About House Prices


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Go away; you've been booted once, it will happen again

I thought this was a forum about house prices and the economy, not "big brother" Pete trying to silence ideas that he does not agree with. Most posts to this thread felt that I had a valid point. Why do you not make a proper contribution? BTW, what do you mean by 'booted'?

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I thought this was a forum about house prices and the economy, not "big brother" Pete trying to silence ideas that he does not agree with. Most posts to this thread felt that I had a valid point. Why do you not make a proper contribution? BTW, what do you mean by 'booted'?

Yes, innocent Mr Punter, just arrived, been lurking all this time, not a multi-signing up, multi-ID, multi-banned troll

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Yes, innocent Mr Punter, just arrived, been lurking all this time, not a multi-signing up, multi-ID, multi-banned troll

Um.. Correct! Perhaps you could (if it is possible) check my IP address and see if it matches any of your suspect! Pete: just because you may not share my views on some aspects of the housing market, does not make me a troll. Other than your intervention, I have kept to this this thread topic, you have not. Who is the troll?

Why not make a topic related point? I could well be wrong in my analysis; I am not an expert. I am genuinely interested in why what I have said offends you.

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at the end of the day, people will borrow whatever the banks will let them borrow.

with respect to affordability - the banks also thought people could afford their mortgages. they got it wrong. both buyer and lender got it wrong. and quite badly too.

look what happened.

the only way house prices go up again to previous levels is if they lend again as previous levels.

is that going to happen again? not after the collapse weve had.

besides, the talk now is all about the exit strategy of the government, the stimulus will be ending soon and the discussion is about how will the government reverse what theyve done. i.e put the toxic loans back onto the balance sheet of banks.

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Yes, innocent Mr Punter, just arrived, been lurking all this time, not a multi-signing up, multi-ID, multi-banned troll

Pete,

I don't really care what you put in your sig, although I do think it constitutes trolling.

A couple of points I'd make :

i) It's really difficult to write in a different style to the one you're used to. Especially if you write long posts. People use the same phases, terminology and make the same mistakes. Sometimes they don't use an apostrophe when they should, other times it's a consistent spelling mistake. I'd be interested to know who you think I "am".

ii) I registered from a company emal address, my company, a .com address, not an especially made up yahoo or hotmail account. Maybe you can ask the mods to confirm this.

Finally, I would say that ocassionally I post things that may wind people up. But only because they are being dogmatic and irrational (IMHO).

I'd hope that I make a positive contribution to this site, if not I'd like the mods to transfer me to troll status so I can get the message and go somewhere where I am more welcome.

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Nice work Steve, you're well on your way to getting yourself off my Trollwatch hitlist. You have to understand here at Trollwatch HQ we have many people monitoring the signups in the aftermath of the great cull of Summer '09. We certainly don't have any particular issues with alternative and bullish viewpoints well argued.

The posting styles you speak of are how I've successfully stalked Columbo the trolling, boomer, pwoperty flipping scumbag across these here internets, and how I've managed to out him this time around as well as his period stinking up this place as Rinoa.

<holsters PDA>

<checks wifi strength indicator>

My quest goes on.

<doffs TFH at Steve and walks into the sunset>

Edited by pete.hpc
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Buyers Don’t Care About House Prices - well that counts me out, as I really do care.

I am no expert but know an awful lot more than I did 4 years ago mainly thanks to this site and its not a case of cannot afford to I choose not to pay the current prices as houses really are not that important to me. I have pretty much what I want when I want without credit, less than 1/3 of my wages is spent on rent, so whats the point buying and not being able to live the life you want (within ones means) - you are only hear once.

Stuff your HPI up your ar5e I'm off to catch Theo Parrish @ Plastic People Sat night - could I do that if I bought a house? Answer unlikely.

As I have said before the UK is a mainly a service sector economy the nation needs to have plenty of disposable income otherwise mass unemployment - what is happening now? Eventual outcome nouse prices down by 50% from peak 07.

Housing is a basic human requirement - HPI Merchants = filthy scum

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Although lots of people on this forum focus on house price and analyse things like house prices to earnings ratio and historical house price data, it is my contention that buyers don’t care about house prices, just whether they think they can afford it.

While economic factors do influence the decision to buy or sell, the primary force that sets the price is affordability, followed by the secondary force of sentiment (fear / greed).

Very few purchasers will save enough to buy a house outright and so the decision on affordability is mostly related to the loan cost. I suggest that even if the price for an average house were to increase to £400k and it was available with finance at 0.5% fixed interest only there would be plenty of takers. At £2000 a year interest, most would be tempted.

The chart below plots the inflation adjusted cost of loan servicing on the average house price against the (famous) Nationwide house price chart. The loan payments are based on 80% of the prevailing average house price, 2% over base, payment over 25 years. I have entered the current base at 2.5% because 4.5% is more typical current deals. The chart also shows a trendline for loan costs with error bars at +-20%. Too much time spent north of the upper line means real discomfort, while time spent south of the line tends to be the fuel for the next bubble.

Note the contrast between the 1989 house price peak, with loan costs rising to 86% above trend and remaining high for 2 years to the 2007 peak, where loan costs were 52% above trend for but fell to trend levels within 12 months. In the early 90s property was being repossessed not primarily because of unemployment but because of high interest rates. This time round the quick cut to low interest rates mean that the flood of early 90s style forced sellers is not going to happen.

While I can see that stricter lending may have some effect on demand, I feel that there are enough people who meet the stricter criteria to take up the limited supply. If we see a fall of more than 15% over the next five years I will be very surprised.

untitled.JPG

So house prices don't matter?! I'm a potential buyer, and I say twit. I buy when the market bottoms <snigger> to do so before is a waste of a massive, massive amount of money. Buyers certainly know this, now more than ever before. Perhaps in the past they were blinkered by a mania. Now they're not, and I don't know anyone at all who thinks otherwise.

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Yet another one who must think Sterling is invincible & denies QE .

Depends if you think QE is just a piss in the ocean or not.

Sterling is not invincible - that is why it is currently extremely weak. Sterling's bottom was partiy with the euro which was quite frankly a little bit silly

The Euro ministers were extremely unhappy with parity as it gave the UK a huge competitive advantage over them. How much weaker can we go.

I also happen to believe that everything positive being reported just now is the exact opposite of the truth.

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:rolleyes:

Pete, I've been here longer than 2 months but have a low post count. You'd better put me on your "Troll Watch" list, I think I might be one.

Anyway back to the relevant topic at hand....

It's an interesting take on things; I'd like to be sure your figures that make up the graph are all kosher though.

In many ways it does make sense, everything is about affordability/means/value is it not? If we all earned $150k a year then current prices would not seem high. Similarly if the cost of the loan is "low" then again prices do not seem as high.

Of course you have to factor in possible future circumstances and be prudent which unfortunately has been severely lacking in the past few years as we all know.

I wonder what the graph would like like today if the IR was at the same value as the 90's.

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Guest Parry aka GOD
Sensible post

The mortgage market and the deals available control houseprices

It has been more expensive in the past to buy a property (costs more in your pay packet each month), and low IRs has reduced the pain. People think about the here and now, they don't plan further than the end of there noses. Just look at shared equity deals for the evidence.

If inflation rises the costs go up for a while but the inflationary effects will eventually make property more affordable.

Which inflationary efects? Wage inflation? Not going to happen. This crunch coincides with the transfer of capital and means of production from West to East. Globalisation . . . well sort of. It would be if the East weren't so protectionist and your politicians saw sense and raised their game (Mandelson, trade minister, Europe etc).

Poor countries are poor because people can't afford stuff, especially adequate housing. The old 3x salary rule of thumb is gone for good in the UK. So I say yes, falls are likely, but only matched if not exceeded by falls in income. Affordability is going to get worse.

Edited by Parry aka GOD
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it is my contention that buyers don’t care about house prices, just whether they think they can afford it.

untitled.JPG

I agree with this although I think it is much more subtle. Saying they don't care sounds a bit like they know the facts but have chosen to ignore them. In reality 'they don't care' should be amended 'their ability to care has been suppressed'.

It is only the sentiment that fosters the idea that a profit will be made that nullifies any chance of understanding the dynamics and implications of HPI on society.

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Guest Steve Cook
Although lots of people on this forum focus on house price and analyse things like house prices to earnings ratio and historical house price data, it is my contention that buyers don’t care about house prices, just whether they think they can afford it.

While economic factors do influence the decision to buy or sell, the primary force that sets the price is affordability, followed by the secondary force of sentiment (fear / greed).

Very few purchasers will save enough to buy a house outright and so the decision on affordability is mostly related to the loan cost. I suggest that even if the price for an average house were to increase to £400k and it was available with finance at 0.5% fixed interest only there would be plenty of takers. At £2000 a year interest, most would be tempted.

The chart below plots the inflation adjusted cost of loan servicing on the average house price against the (famous) Nationwide house price chart. The loan payments are based on 80% of the prevailing average house price, 2% over base, payment over 25 years. I have entered the current base at 2.5% because 4.5% is more typical current deals. The chart also shows a trendline for loan costs with error bars at +-20%. Too much time spent north of the upper line means real discomfort, while time spent south of the line tends to be the fuel for the next bubble.

Note the contrast between the 1989 house price peak, with loan costs rising to 86% above trend and remaining high for 2 years to the 2007 peak, where loan costs were 52% above trend for but fell to trend levels within 12 months. In the early 90s property was being repossessed not primarily because of unemployment but because of high interest rates. This time round the quick cut to low interest rates mean that the flood of early 90s style forced sellers is not going to happen.

While I can see that stricter lending may have some effect on demand, I feel that there are enough people who meet the stricter criteria to take up the limited supply. If we see a fall of more than 15% over the next five years I will be very surprised.

untitled.JPG

I agree that, for most people, the issue of affordability is primarily one of the cost of paying the loan down from month to month.

However, the above analysis won't stop house prices falling any further because it rests on the assumption that interest rates and unemployment will remain low. When both of these rise far enough (and they will) the month to month costs will become unbearable for millions of mortgagees.

Indeed, we have already seen significant price falls on the back of the drying up of confidence and credit alone. The only thing that has arrested the slide for now is the short term effects of low interest rates. This will end soon enough....

Edited by Steve Cook
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I think the original poster has an extremely valid point

We HPC'ers might not believe the price is irrelevant but we are not myopic sheep like everyone else.

I did similar research in 2004 and found that as soon as interest rates are lowered, debt levels went up. People spend the same on interest per month as before, rather than spend less on mortgages and enjoy other things.

My current research says it's the same in the US - when maturity of loans were extended people snap them up and pay the same monthly amount just over a longer time

Now I think this is stupid as how are you supposed to pay off your debts when you're retired? But most people view property as something that can only rise in price - so it's a ponzi finance scheme

For what it's worth I've reluctantly jumped back on the property market for fear of more reckless QE (and have a baby on the way and don't want landlord issues)

I've been on here since 2004 but originally had a different log in and I'm also a contributor to other areas of this site.

I can understand the frustration of people who haven't been able to get on the property ladder. But I am getting disappointed with the negative attitude of a lot of posters.

You can flame me or call me a troll if you like. But I just like interesting ideas and debate and thought the original poster's work was very interesting.

Thanks

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I agree that, for most people, the issue of affordability is primarily one of the cost of paying the loan down from month to month.

however, the abo ve analysis won't stop house prices falling any further becasue it rests on thge assumption that interest rates will reamin low and that unemployment will not rise. when both of these rise far enough (and they will) the month to month costs will become unbearable for millions of mortgagees.

Indeed, we have already seen significant price falls on the back of the drying up of confidence and credit alone. The only thing that has stopped the slide for now is the short term effects of low interest rates. This will end soon enough....

that's why i think the boe wil be very very slow to raise rates.. i think we're like the US in 2003 now, people on very low ARMS and if they BOE gradually raise rates we'll probably have another recession in 2012/13. In particular we think the world economy will be almost back to normal by end 2011 so rates will have to rise to offset imported inflation, particularly of oil

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that's why i think the boe wil be very very slow to raise rates.. i think we're like the US in 2003 now, people on very low ARMS and if they BOE gradually raise rates we'll probably have another recession in 2012/13. In particular we think the world economy will be almost back to normal by end 2011 so rates will have to rise to offset imported inflation, particularly of oil

I have to say I agree with you 2011 will be the year of significant rate changes. ;)

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  • 433 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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