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richardfoster

Is The Market Really Going To Crash?

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I have just had a very heated debate with two of my well educated work colleagues regarding house prices. I stood my ground with my newly obtained knowledge from this forum and other web sites.

My boss who has argued the three factors, interest rates, inflation and unemployment are all low. Hence an all out crash is not possible because of the solid state of our economy.

I argued the debt / MEW / BTL case and that house prices are 6 times the average salary, FTBs being priced out the market and also the volatility if interest rates changed. Response being people can afford to pay it off so it's not a problem, and the economy is stable so interest rates will not change.

With regard to FTBs the response was they are building more affordable housing, although I said building 60k flats on land fill sites did nothing to close the gap.

Also house are not selling gave the response 'three houses in my street have sold for there asking price in the past six weeks - depends on the location'

Agreeing to disagree it still begs the question - the economy is in much better shape than before the previous crashes - and with the 'golden' three factors all so low, ignoring previous cyclical trend, is it possible that there will be a small correction, or do recent statistics confirm a crash is inevitable?

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A couple of weeks ago the people of New Orleans were enjoying high house prices, things change.

The trouble with 100-200k mortgages taken on by 'ordinary' workers is that they are playing high finance games and are very exposed to global events but they dont realise it...YET !

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A couple of weeks ago the people of New Orleans were enjoying high house prices, things change.

The trouble with 100-200k mortgages taken on by 'ordinary' workers is that they are playing high finance games and are very exposed to global events but they dont realise it...YET !

So true - and the illusion of wealth has been an easy one to create with prices rising; I feel the next 6 months to be crucial in this respect. Sentiment will change enormously... ;)

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So true - and the illusion of wealth has been an easy one to create with prices rising; I feel the next 6 months to be crucial in this respect. Sentiment will change enormously... ;)

Ditto for the illusion of poverty that many people on this site suffer from because they cant afford to "own" a house......

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the question is how will sentiment respond when it widely ACCEPTED and REPORTED that house prices are down 10% year on year?

that cannot be answered until it happens and happen it will.

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I have just had a very heated debate with two of my well educated work colleagues regarding house prices. I stood my ground with my newly obtained knowledge from this forum and other web sites.

My boss who has argued the three factors, interest rates, inflation and unemployment are all low. Hence an all out crash is not possible because of the solid state of our economy.

I argued the debt / MEW / BTL case and that house prices are 6 times the average salary, FTBs being priced out the market and also the volatility if interest rates changed. Response being people can afford to pay it off so it's not a problem, and the economy is stable so interest rates will not change.

With regard to FTBs the response was they are building more affordable housing, although I said building 60k flats on land fill sites did nothing to close the gap.

Also house are not selling gave the response 'three houses in my street have sold for there asking price in the past six weeks - depends on the location'

Agreeing to disagree it still begs the question - the economy is in much better shape than before the previous crashes - and with the 'golden' three factors all so low, ignoring previous cyclical trend, is it possible that there will be a small correction, or do recent statistics confirm a crash is inevitable?

The golden three factors are very important and until one or more goes awry the most people will see no reason for a crash. Hence they will see no reason to price aggressively, and prices will for a period at least appear to be stagnating.

There is a very real chance that prices will drift much like the in the fifties.

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Guest Bart of Darkness
the economy is in much better shape than before the previous crashes

The economy appears (superficially) to be in better shape, but just look at the headlines in today's blog alone.

FT.Com: Britain’s vacant shop space increases by 45%

Reuters: August consumer confidence slumps despite rate cut

SkyNews: CONSUMER CONFIDENCE DIPS

Independent: Mortgage lending hits a three-year low

TimesOnline: Hurricane 'will force consumers to reduce fuel use'

And that's just part of today's blog.

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the question is how will sentiment respond when it widely ACCEPTED and REPORTED that house prices are down 10% year on year?

that cannot be answered until it happens and happen it will.

If I knew you I'd be happy to bet £100 that you won't see a 10% YOY fall reported in the next 3 years.

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Ditto for the illusion of poverty that many people on this site suffer from because they cant afford to "own" a house......

The illusion of poverty will become a stark reality when they get old and no longer have an income or any means to rent a decent property.

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the economy is in much better shape than before the previous crashes - and with the 'golden' three factors all so low, ignoring previous cyclical trend, is it possible that there will be a small correction, or do recent statistics confirm a crash is inevitable?

my response to the 'golden 3' arguement is simple and consistent. When things are the 'best they can be', there's only one way for them to go in the future. It's simply a question of when it will happen.

Recent news blogs suggest it's starting now on the employment front. And that's without any 'shocks' such as Katrina, or terrorists attacks etc.

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My boss who has argued the three factors, interest rates, inflation and unemployment are all low. Hence an all out crash is not possible because of the solid state of our economy.

A market crash happens because of perception, sentiment and expectation,

not because of arithmetic.

If buyers as a whole are convinced that prices are falling, they simply

will NOT buy at a high price.... and the price falls further..... and sentiment

gets worse..... and prices fall even lower.

It is not a matter of surrounding economics ... it is all to do with the outlook

of buyers.

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I have just had a very heated debate with two of my well educated work colleagues regarding house prices. I stood my ground with my newly obtained knowledge from this forum and other web sites.

My boss who has argued the three factors, interest rates, inflation and unemployment are all low. Hence an all out crash is not possible because of the solid state of our economy.

I argued the debt / MEW / BTL case and that house prices are 6 times the average salary, FTBs being priced out the market and also the volatility if interest rates changed. Response being people can afford to pay it off so it's not a problem, and the economy is stable so interest rates will not change.

With regard to FTBs the response was they are building more affordable housing, although I said building 60k flats on land fill sites did nothing to close the gap.

Also house are not selling gave the response 'three houses in my street have sold for there asking price in the past six weeks - depends on the location'

Agreeing to disagree it still begs the question - the economy is in much better shape than before the previous crashes - and with the 'golden' three factors all so low, ignoring previous cyclical trend, is it possible that there will be a small correction, or do recent statistics confirm a crash is inevitable?

'Crash' is an emotive word, like a car 'crash' which you tend not to have very often and want to forget about rather rapidly (oddly enough the brain sometimes blocks the memory of the actual event as it is painful to recall - strange parallel)

However: which way are prices currently going, up or down?

If the argument is reduced to this, you could then go on to hypothesise quite when and why house prices will start going back up again (someone else started a similar thread recently) and thus turn the argument on its' head.

Location is indeed key as are the properties themselves. One bed flats above shops stand every chance of being literally worthless in a few years.

Someone will always want a nice 4 bed detached in a good location. Having said that I can see a dozen from my window which have been for sale for a year now, one vendor has given up altogether after trying 3 EAs over 18 months.

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  • 301 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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