Ben from Dover Posted March 30, 2010 Share Posted March 30, 2010 http://blogs.thisismoney.co.uk/2010/03/house-prices-are-already-back-to-normal.html From the front page Surely people working for a money publication should be smart enough to realize that a massive bubble also raises the trend line and therefore the basis for the whole article is stupid ignorance. Any 'return to trend', will be a return to trend in income ratios. As this happens the trend line will sink again back to the long term trend for the trend line, if that makes sense. Quote Link to comment Share on other sites More sharing options...
@contradevian Posted March 30, 2010 Share Posted March 30, 2010 http://blogs.thisism...-to-normal.html From the front page Surely people working for a money publication should be smart enough to realize that a massive bubble also raises the trend line and therefore the basis for the whole article is stupid ignorance. We have discussed this before on HPC. The trend line is wrong /distorted and needs adjusting as you say. But this is thisismoney.co.uk aka The London Evening Standard, which in London anyway is the Property Rampers Gazette! Quote Link to comment Share on other sites More sharing options...
Pent Up Posted March 30, 2010 Share Posted March 30, 2010 Makes perfect sense to me. What they have is a moving average line. In technical analysis these tend to create support/ resistance levels so you would expect a rally here before it breaks through. Quote Link to comment Share on other sites More sharing options...
sharpe Posted March 30, 2010 Share Posted March 30, 2010 Makes perfect sense to me. What they have is a moving average line. In technical analysis these tend to create support/ resistance levels so you would expect a rally here before it breaks through. If I understood correctly, it is an exponential trend line, which is a little odd. Quote Link to comment Share on other sites More sharing options...
D.C. Posted March 30, 2010 Share Posted March 30, 2010 I wonder if by 'back to normal' they mean house prices will now inflate 5 times faster than wage rises despite the fact no FTB's can get a mortgage of any size? Quote Link to comment Share on other sites More sharing options...
Analysis Posted March 30, 2010 Share Posted March 30, 2010 Makes perfect sense to me. What they have is a moving average line. In technical analysis these tend to create support/ resistance levels so you would expect a rally here before it breaks through. Now look at the chart next to this on the Nationwide report, and you will see that house prices in relation to earnings are about 30-35% over the long term average. Earnings growth is currently minimal and many people are in part time work. The long term average price is a bit irrelevant when you would expect to be way above this in boom times and way below it in bad times. This is the nature of most systems - they are prone to overshoot the mean in each direction. In every recession in the past house prices have returned to below the long term norm. I think we are all amazed that house prices actually seemed to go up last year against that backdrop. Supply is now outstripping supply (by 25% since January in my bit of the South East according to Rightmove) and EAs are telling me they're advising lots of new vendors to market after the Easter school holidays - a second influx of new houses on the market. I think buying now is a pretty big gamble personally, as I find it hard to see where sufficient sellers will come from to meet that supply. Quote Link to comment Share on other sites More sharing options...
Dr Renter Posted March 30, 2010 Share Posted March 30, 2010 If I understood correctly, it is an exponential trend line, which is a little odd. Absolutely. The trend line is just bollix. As you say, it's exponential and by definition the rate of rise continues to increase. Totally unrealistic unless you live in HPI VI land. Quote Link to comment Share on other sites More sharing options...
Ben from Dover Posted March 30, 2010 Author Share Posted March 30, 2010 I wonder if by 'back to normal' they mean house prices will now inflate 5 times faster than wage rises despite the fact no FTB's can get a mortgage of any size? Quote Link to comment Share on other sites More sharing options...
@contradevian Posted March 30, 2010 Share Posted March 30, 2010 Is it not mathematically correct? if the assumption is 2.9% per annum - when compounded it will generate an exponential curve. Yes but thats not how I was taught to draw a trend line when I learned statistics a few years ago. It had to be based on the real data. If you drew a trend a line for say your company sales turnover, you couldn't just compound a hypothetical growth rate, even though sales were falling! Quote Link to comment Share on other sites More sharing options...
Lock and load Posted March 30, 2010 Share Posted March 30, 2010 [only 1 in 10 people can afford to buy a house,I will start buying houses again when they look cheap and feel cheap.....that graph is ******,late 2010 I recon the fun starts again,recon we are back in the danger zone of people popping back in the property game, Quote Link to comment Share on other sites More sharing options...
non frog Posted March 30, 2010 Share Posted March 30, 2010 How people think they ever will ever be smart enough to buy a house when they don't know what the words "trend" and "exponential" mean I don't know. Some of the dumbest posts I've seen on here outside of the wingnut posts on the EU and AGW. ROTFLMAO Quote Link to comment Share on other sites More sharing options...
plummet expert Posted March 30, 2010 Share Posted March 30, 2010 Don't worry. Inflation is in the system and interest rates will rise gradually. When that happens and keeps on happening, the property market will fail. At the moment the burst bubble has been filled with hot air by the govt. If they allow this 'recovery' and continue to support it, then the bust will be even harsher in the future. People's incomes cannot justify present prices. If you knocked on a hundred home owner's front doors and asked if they could afford to buy their own house with a 10% deposit on their current income, you would find a large number could not. If incomes rise 80% from 1996 to now and house prices rise about 300 to 350% there must be a problem. The SE is worst on these measures. There has been no time in history when the house price to income ratio has not returned to 3x (and below in or after recession). The graph produced by Nationwide is interesting but does look at prices against income, just their own trend line. Not the same. Quote Link to comment Share on other sites More sharing options...
libspero Posted March 30, 2010 Share Posted March 30, 2010 (edited) Funny how this bounce is almost identical to the one in 91, right on the [current] trend line. Edited March 30, 2010 by libspero Quote Link to comment Share on other sites More sharing options...
Ben from Dover Posted March 30, 2010 Author Share Posted March 30, 2010 [only 1 in 10 people can afford to buy a house,I will start buying houses again when they look cheap and feel cheap.....that graph is ******,late 2010 I recon the fun starts again,recon we are back in the danger zone of people popping back in the property game, 100% agree Houses are so ridiculously expensive that any idiot should be able to predict a crash. They are so out of touch with what would represent good value it is comical Quote Link to comment Share on other sites More sharing options...
Ben from Dover Posted March 30, 2010 Author Share Posted March 30, 2010 How people think they ever will ever be smart enough to buy a house when they don't know what the words "trend" and "exponential" mean I don't know. Some of the dumbest posts I've seen on here outside of the wingnut posts on the EU and AGW. ROTFLMAO Care to enlighten the general trend of the thread with your exponential knowledge? Quote Link to comment Share on other sites More sharing options...
Lock and load Posted March 30, 2010 Share Posted March 30, 2010 Don't worry. Inflation is in the system and interest rates will rise gradually. When that happens and keeps on happening, the property market will fail. At the moment the burst bubble has been filled with hot air by the govt. If they allow this 'recovery' and continue to support it, then the bust will be even harsher in the future. People's incomes cannot justify present prices. If you knocked on a hundred home owner's front doors and asked if they could afford to buy their own house with a 10% deposit on their current income, you would find a large number could not. If incomes rise 80% from 1996 to now and house prices rise about 300 to 350% there must be a problem. The SE is worst on these measures. There has been no time in history when the house price to income ratio has not returned to 3x (and below in or after recession). The graph produced by Nationwide is interesting but does look at prices against income, just their own trend line. Not the same. A men to that spot on.I remember the last crash,my Dad saying he couldn't afford to buy his house,nor anyone else up our road,they all had reasonably paid jobs.........2 years later they all could!!!!!!!!!!!!!! Quote Link to comment Share on other sites More sharing options...
neon tetra Posted March 30, 2010 Share Posted March 30, 2010 The logic of the 2.9% exponential trendline: Currenlt about 30% of income goes on morgage costs, so... Year Income House price2010 100 30.002011 100 30.872012 100 31.772013 100 32.692014 100 33.632015 100 34.612016 100 35.612017 100 36.652018 100 37.712019 100 38.802020 100 39.932021 100 41.092022 100 42.282023 100 43.502024 100 44.762025 100 46.062026 100 47.402027 100 48.772028 100 50.192029 100 51.642030 100 53.142031 100 54.682032 100 56.272033 100 57.902034 100 59.582035 100 61.312036 100 63.082037 100 64.912038 100 66.802039 100 68.732040 100 70.732041 100 72.782042 100 74.892043 100 77.062044 100 79.292045 100 81.592046 100 83.962047 100 86.402048 100 88.902049 100 91.482050 100 94.132051 100 96.862052 100 99.672053 100 102.56 So, by 2053 (just about in my lifetime, fingers crossed), I will need to pay 102% of my income on a morgage.... Yes, please! Quote Link to comment Share on other sites More sharing options...
lulu Posted March 30, 2010 Share Posted March 30, 2010 How people think they ever will ever be smart enough to buy a house when they don't know what the words "trend" and "exponential" mean I don't know. Some of the dumbest posts I've seen on here outside of the wingnut posts on the EU and AGW. ROTFLMAO I think over the past few years that not knowing anything about maths or economics has been the driving force behind the housing market. like an ex work collegue who got an IO mortgage 'because it was cheaper' she used to buy food on her credit card so had never any plans to save the money to repay the capital;. Quote Link to comment Share on other sites More sharing options...
we the sheeple Posted March 30, 2010 Share Posted March 30, 2010 A men to that spot on.I remember the last crash,my Dad saying he couldn't afford to buy his house,nor anyone else up our road,they all had reasonably paid jobs.........2 years later they all could!!!!!!!!!!!!!! Big inflation allied to big wage increases. Debtors best friends. Low interest rates with low inflation keep you in debt for much longer Quote Link to comment Share on other sites More sharing options...
dnjc Posted March 30, 2010 Share Posted March 30, 2010 We have been considering buying for a while and very nearly took the plunge last week. But after a weekend away and time to reflect we realised that earning 100k a year and with 100k+ in the bank we should be able to afford more than a tini tiny small 2 bed flat even in London. So we said swivel and lets stick with our cheap rent until prices get sensible. House prices are not normal. Quote Link to comment Share on other sites More sharing options...
erranta Posted March 30, 2010 Share Posted March 30, 2010 If I understood correctly, it is an exponential trend line, which is a little odd. If we are in the worst recession since the 30's - should it not have a 30's house price reference line? Quote Link to comment Share on other sites More sharing options...
@contradevian Posted March 30, 2010 Share Posted March 30, 2010 We have been considering buying for a while and very nearly took the plunge last week. But after a weekend away and time to reflect we realised that earning 100k a year and with 100k+ in the bank we should be able to afford more than a tini tiny small 2 bed flat even in London. So we said swivel and lets stick with our cheap rent until prices get sensible. House prices are not normal. Was looking around my old stomping grounds of London E16 over the weekend. A one bedroom slave box in Felixstowe Court in E16 is around £160k. Its amazing what that buys up North, but I agree, House Prices are not "sensible." Quote Link to comment Share on other sites More sharing options...
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