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House Price Graph Explanation

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It averages the historical movements in price over the period the chart covers to show what the movement would have been if it were a straight line.

It shows two key things, firstly the deviation from the trend. The greater the deviation the greater the volatility of the market. Second it shows that prices have historically increased at a rate that outstrips inflation.

What it does not show is where prices will go in future. Future predictions are simply that - predictions. Continuing the line as it is is called extrapolation and is not a prediction. Extrapolation ignores any factors that affect the price. Extrapolating the UK population trend (as done recently in the press) gives 70 million people (or some other made up figure) but assumes people living to 100 (fat chance - pun intended).

The upward trend cannot continue for ever - fact. So you must use your personal judgement (and the debate on here) to guess where we go next.

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It averages the historical movements in price over the period the chart covers to show what the movement would have been if it were a straight line.

It shows two key things, firstly the deviation from the trend. The greater the deviation the greater the volatility of the market. Second it shows that prices have historically increased at a rate that outstrips inflation.

What it does not show is where prices will go in future. Future predictions are simply that - predictions. Continuing the line as it is is called extrapolation and is not a prediction. Extrapolation ignores any factors that affect the price. Extrapolating the UK population trend (as done recently in the press) gives 70 million people (or some other made up figure) but assumes people living to 100 (fat chance - pun intended).

The upward trend cannot continue for ever - fact. So you must use your personal judgement (and the debate on here) to guess where we go next.

Thanks for that, excellent explanation.

I have seen graphs where people have positioned a line quite a bit lower than this in an attempt to show the continual upward trend of house prices. Are these types of lines more likely to be cosmetic interpretations.

The reason I ask is that those sorts of lines generally arrive at a point not much lower than where we are at present! I'll see if I can find one.

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It averages the historical movements in price over the period the chart covers to show what the movement would have been if it were a straight line.

It shows two key things, firstly the deviation from the trend. The greater the deviation the greater the volatility of the market. Second it shows that prices have historically increased at a rate that outstrips inflation.

What it does not show is where prices will go in future. Future predictions are simply that - predictions. Continuing the line as it is is called extrapolation and is not a prediction. Extrapolation ignores any factors that affect the price. Extrapolating the UK population trend (as done recently in the press) gives 70 million people (or some other made up figure) but assumes people living to 100 (fat chance - pun intended).

The upward trend cannot continue for ever - fact. So you must use your personal judgement (and the debate on here) to guess where we go next.

The trend line is clearly not a straight line - put a straight edge up to your screen to see this for yourself. Up until Jan' 09 it looks more like an exponential fit. Strangely after this date, the red trend line has a lot more resolution (ie more sensitivity to changes in the data which is being trended). It's almost as if another trending calculation has been used - possibly a 'moving average'. If the person who maintains this graph reads this, could we please have some explanation and possibly the equation of the red trend line?

A straight (linear) trend would be a little more sustainable. Exponential growth in prices is a problem. For a guide to the exponential function you could try:

http://betterexplained.com/articles/an-intuitive-guide-to-exponential-functions-e/

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  • 149 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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