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Timm

A Question For Bears

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IMHO, the Halifax is a flawed index.

http://www.lloydsban...halifax_hpi.asp

It overestimates the fall from peak at -16% and falsely presents prices as currently rising from an overly low base. However, its inflation adjusted and wage adjusted prices raise an interesting question:

If you accept that its data shows that prices adjusted for wages and/or inflation are currently at 2003 levels, and faced with the likelyhood of state intervention, how long will you hold off from buying in the current downturn? Bear in mind that the first bears set up this site in 2003, when prices first seemed to have diverged from the normal range, it seems to me that a narrow window of opportunity is about to open and that bears who hold off beyond the coming winter dip risk being swamped by inflationist based nominal rises.

Personaly, I'm looking to make lowball offers around Christmas and negotiate a reduction of around 15% from the 2010 peak bounce levels.

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If you are going to "adjust" home prices by anything, use average salaries, since I cannot see how rising prices for potatoes or candy bars is going to help people to buy property more easily.

I agree. My savings are for one use only to buy a house so the only inflation that matters is house price inflation. It's entirely irrelevant what a house costs in gold, silver, paper, back beans or whatever.

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I agree. My savings are for one use only to buy a house so the only inflation that matters is house price inflation. It's entirely irrelevant what a house costs in gold, silver, paper, back beans or whatever.

If your savings are 100% in sterling, then I agree. But that is a risky strategy - all eggs in one basket stuff. Safer to diversify.

I think this crash will be like the 2008-09 crash. It will be split into 2 crashes: HP and sterling. If you keep your deposit in a "basket" of foreign currencies, you should benefit from both. Otherwise, you will profit only partially, from just one of the 2 crashes.

(Inflation is a currency loosing value. It is not exactly everything else "going up". This is an illusion, caused by the currency being the "measuring tool".)

Edited by Tired of Waiting

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(...)

If you are going to "adjust" home prices by anything, use average salaries, since I cannot see how rising prices for potatoes or candy bars is going to help people to buy property more easily.

And what do you think is going to happen to average salaries over the next 2-3 years?

Good point.

Edit: However, if we keep having some 5% inflation per year in the next few years (3-5?), then the average salary could remain flat in nominal terms. Actually they could even grow a little bit, like 1 or 2%/year, and we would still be having real salary cuts.

Edited by Tired of Waiting

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IMHO, the Halifax is a flawed index.

http://www.lloydsban...halifax_hpi.asp

It overestimates the fall from peak at -16% and falsely presents prices as currently rising from an overly low base. However, its inflation adjusted and wage adjusted prices raise an interesting question:

If you accept that its data shows that prices adjusted for wages and/or inflation are currently at 2003 levels, and faced with the likelyhood of state intervention, how long will you hold off from buying in the current downturn? Bear in mind that the first bears set up this site in 2003, when prices first seemed to have diverged from the normal range, it seems to me that a narrow window of opportunity is about to open and that bears who hold off beyond the coming winter dip risk being swamped by inflationist based nominal rises.

Personaly, I'm looking to make lowball offers around Christmas and negotiate a reduction of around 15% from the 2010 peak bounce levels.

I agree with others that it should take a few more years to get to the HP bottom.

But there is one scenario that could justify buying this spring. If you think we will have high inflation, and that IRs will go very high, for many years, then it could be sensible to get a 10 years fixed rate this spring.

But the decision will depend on a lot of number crushing, and estimates, and forecasts.

But inflation and high IRs would bring many more and bigger bargains a few years later. Rationally, if you don't mind it, renting is still safer.

.

Edited by Tired of Waiting

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(...)

If you are going to "adjust" home prices by anything, use average salaries, since I cannot see how rising prices for potatoes or candy bars is going to help people to buy property more easily.

And what do you think is going to happen to average salaries over the next 2-3 years?

The Halifax show home prices adjusted by wages at 2003 levels. That is kinda my point.

Was 2003 affordability really that far from the norm?

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The Halifax show home prices adjusted by wages at 2003 levels. That is kinda my point.

Was 2003 affordability really that far from the norm?

This always bothers me as there are plenty of homeowners currently with no wage coming in and yet they are not included.

An average national income which includes state benefits or no incomers would be more appropriate IMO.

As unemployment rises wages are a less reliable indicator as less and less actually have a wage.

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This always bothers me as there are plenty of homeowners currently with no wage coming in and yet they are not included.

An average national income which includes state benefits or no incomers would be more appropriate IMO.

As unemployment rises wages are a less reliable indicator as less and less actually have a wage.

VERY good point GAW!

And it is so obvious that it is actually embarrassing not to have realised that before. :unsure:

Cheers!

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once the HPC starts for real, it will drag on for a long time... probably 5 years or more.

And it's only just started.

Throw in the forthcoming finacial appocolpse and I have no idea how far prices could fall, but falls in excess of 80% are not at all unlikely... look at Ireland... 50% already and no sign of slowing down... and they said it could never happen there either.

Before the elction there was nothing to support house prices apart from the hope that the next government would wave a magic wand. The BoE had already used all it ammunition... real interest rates have diverged from BoE rates, and it's now clear that the government is going to cut LHA, SMI and PS jobs. Inflation isn't inflating away house prices as wages are falling. House prices are toast.

We aren't going to have a soft landing we are going to have a complete economic implosion and house prices will take decades to recover.

It's going to be somewhere between the worst-case-scenario of the optimists and the worse-case-scenario of the TFHers.

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And what do you think is going to happen to average salaries over the next 2-3 years?

I guess the expected answer to that is 'nothing or drops'.

One thing bothers me - who is in trouble from the credit crunch? USA and Europe.

Who relies on USA and Europe to buy their exports - China, India, Asia, Brazil etc.

China is suffering high inflation at the moment. India too. If they carried on inflating at 8% when we (theoretically) are inflating at 2%, they'll start catching us up - in terms of wages and house prices - pretty quickly. Just for a laugh I looked at house prices in India the other day - when someone suggested UK IT people should go and work in India. Wow, big shock. High house prices in the cities - comparable with Western prices.

So .... given that a massive recession in the West is in no-one's interest - certainly not Chindia's or anyone else that relies on the West to buy their exports - maybe inflation of say 5% a year for 15 years is the way out of this global mess - for everyone.

Sure, wages will lag prices in the heavy deficit paying down stage, but, if recovery and growth are established - maybe wages will creep up too.

I'm beginning to think the idea of a crash is just wishful thinking. Don't get me wrong, I'd like to see one, it's just that 7 years of waiting for an over-valued housing market to correct means my rose tinted spectacles are clearing.

For every year that this continues, that's another £X billion the banks are 'in the housing market' for.

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Probably in about a year when the crash has really bitten, I shall be touring the local new developments (many of which have now resumed building full steam ahead after pausing during last years melt down) and offering 50% below asking price in cash. I'm pretty hopeful of getting a bite from someone looking to clear inventory. Or failing that perhaps getting a bargain at auction courtesy of a destitute mumsneter.

Edited by goldbug9999

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IMHO, the Halifax is a flawed index.

http://www.lloydsban...halifax_hpi.asp

It overestimates the fall from peak at -16% and falsely presents prices as currently rising from an overly low base. However, its inflation adjusted and wage adjusted prices raise an interesting question:

If you accept that its data shows that prices adjusted for wages and/or inflation are currently at 2003 levels, and faced with the likelyhood of state intervention, how long will you hold off from buying in the current downturn? Bear in mind that the first bears set up this site in 2003, when prices first seemed to have diverged from the normal range, it seems to me that a narrow window of opportunity is about to open and that bears who hold off beyond the coming winter dip risk being swamped by inflationist based nominal rises.

Personaly, I'm looking to make lowball offers around Christmas and negotiate a reduction of around 15% from the 2010 peak bounce levels.

You do raise something that it's useful to remember, namely that affordability is by now quite a lot less bad than it was during the utterly pathetic fools' gold months of summer 2007. That is more or less why, IMO, the '50% club' or whatever are almost certainly wrong.

Historically though even 4 is unmistakably a high price to earnings ratio, so 4.75 is clearly high. We've never spent any real time with the ratio consistently as high as that in the past, it was sustained for about a year in the boom of 88/89 and we whooshed up to it and then past it during the space of a few months during the public enthusiasm/greed phase of the noughties bubble. It feels horribly, horribly, high to me at a time of high unemployment. That's why I'd hope to see a reasonably meaty double digit percentage fall from here.

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IMHO, the Halifax is a flawed index.

http://www.lloydsban...halifax_hpi.asp

It overestimates the fall from peak at -16% and falsely presents prices as currently rising from an overly low base. However, its inflation adjusted and wage adjusted prices raise an interesting question:

If you accept that its data shows that prices adjusted for wages and/or inflation are currently at 2003 levels, and faced with the likelyhood of state intervention, how long will you hold off from buying in the current downturn? Bear in mind that the first bears set up this site in 2003, when prices first seemed to have diverged from the normal range, it seems to me that a narrow window of opportunity is about to open and that bears who hold off beyond the coming winter dip risk being swamped by inflationist based nominal rises.

Personaly, I'm looking to make lowball offers around Christmas and negotiate a reduction of around 15% from the 2010 peak bounce levels.

I am gearing up for a purchase sometime over the course of the next 6 months IF prices stay on their current track of declines. I am looking to spend about £225K for a house that would have sold for about £350-375k at peak. 40% off and I am good to go.

Around here, prices are falling nicely and the market has dropped an easy 10-15% so far this year. It never recoverd from the sharp drops in 2008. Thos peak £350-375k houses are sub-£300 now and I reckon by dead of winter there will be some rick pickins in the £225k ranage.

I also take into account the fact that I am getting fed up renting although my present rented gaff is very congenial.

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Housing market slumps seem to take quite a while to hit bottom. Historically about 6-7 years.

Given that the Govt has thrown the kitchen sink at the housing market it may take longer this time, so I would be looking for a bottom in "real" house prices in about 2014-15.

Still I will be looking to buy sometime in the next 12-18 months I expect as I will be ready to settle down an ride out any market movements for the next few years.

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I bought last year at around 15-20% under peak, shortly after which prices went back to peak. I got sick of renting and given how long the 'dead cat bounce' played out for it was the right decision for me.

Where I am, there's no sign of another crash - things are a bit slower, yes, but good quality family houses are selling after a couple of months, at around peak price.

I hope they do crash again for my kids' sakes, but after experiencing how hard it was to negotiate a decent reduction in the last crash (2007-2009), I don't hold out much hope for anything more than 10-15% below the 2009 bottom nominally, with perhaps inflation taking more off, but over a longer period.

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I am gearing up for a purchase sometime over the course of the next 6 months IF prices stay on their current track of declines. I am looking to spend about £225K for a house that would have sold for about £350-375k at peak. 40% off and I am good to go.

Around here, prices are falling nicely and the market has dropped an easy 10-15% so far this year. It never recoverd from the sharp drops in 2008. Thos peak £350-375k houses are sub-£300 now and I reckon by dead of winter there will be some rick pickins in the £225k ranage.

I also take into account the fact that I am getting fed up renting although my present rented gaff is very congenial.

Jesus Wept.... people need to get a grip of this.... IF prices slide massively (as you have suggested they will) and if in 6 months the falls are still coming thick and fast (and there isn't a leveling off) you wouldn't touch property with a barge pole - sentiment my dear, that's what it's about and you + Timm should knw it.

If however the indicies are leveling off after 6-8 months I could understand your point of view but it seems to me like many on here - you and Timm - are imagining a scenario which fits in with WHAT YOU WANT to happen.

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as a neutral id like to bring a bit of balance to the thread, earliest id buy in uk is sometime in 2013, might leave it longer, might not bother if Labour get back are back in power, my expectation is that prices will be at least 75% down in real/USD terms by then and at least 40% nominally

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If your savings are 100% in sterling, then I agree. But that is a risky strategy - all eggs in one basket stuff. Safer to diversify.

I think this crash will be like the 2008-09 crash. It will be split into 2 crashes: HP and sterling. If you keep your deposit in a "basket" of foreign currencies, you should benefit from both. Otherwise, you will profit only partially, from just one of the 2 crashes.

(Inflation is a currency loosing value. It is not exactly everything else "going up". This is an illusion, caused by the currency being the "measuring tool".)

Buy what though? There are agruments - very good ones - that suggest the Dollar is about to collapse or that the euro is on it's last legs. Other very good arguments that Gold is in a bubble or that it will fly! The FTSE / world markets could equally tank. I don't see less risk in the Dollar or Euro to be honest. So what does that leave?

THere are some good arguments to suggest just about everything is 50% overvalued!

I'd be happy to hear your thoughts on this.

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as a neutral id like to bring a bit of balance to the thread, earliest id buy in uk is sometime in 2013, might leave it longer, might not bother if Labour get back are back in power, my expectation is that prices will be at least 75% down in real/USD terms by then and at least 40% nominally

I would tend to agree but I might add a caveat that we could see the majority of the falls by 2012 and therefore if people are not worried about losing a bit more it wouldn't matter too much.

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I would tend to agree but I might add a caveat that we could see the majority of the falls by 2012 and therefore if people are not worried about losing a bit more it wouldn't matter too much.

personally i wouldnt worry about missing the bottom whenever it is because i think property will remain undervalued for eons once it falls because i think the fallout of this is going to be every tax and possible govt intervention, (rent controls , the lot) to make sure property is not speculated on again for decades.

Edited by Tamara De Lempicka

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Buy what though? There are agruments - very good ones - that suggest the Dollar is about to collapse or that the euro is on it's last legs. Other very good arguments that Gold is in a bubble or that it will fly! The FTSE / world markets could equally tank. I don't see less risk in the Dollar or Euro to be honest. So what does that leave?

THere are some good arguments to suggest just about everything is 50% overvalued!

I'd be happy to hear your thoughts on this.

Exactly. It is totally unpredictable! That is why the safest thing is to buy a little of everything, and you will guarantee staying on the average. You will not gain nor lose. Just stay in the middle. Which, now-a-days, is good enough for me! :( I don't want to gamble.

And because 100% of our household income is in sterling (unfortunately, and unavoidably, unfortunately again), we are already too heavy in sterling. Even if we saved 100% of our deposit in lots of other things.

I would tend to agree but I might add a caveat that we could see the majority of the falls by 2012 and therefore if people are not worried about losing a bit more it wouldn't matter too much.

Yes, we had similar thoughts here.

Edited by Tired of Waiting

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Which Flawed index should one use?

"Christmas"?

I presume you mean Chistmas 2012 or 2013?

Else you may be far too early. But, hey, its your money

If you are going to "adjust" home prices by anything, use average salaries, since I cannot see how rising prices for potatoes or candy bars is going to help people to buy property more easily.

And what do you think is going to happen to average salaries over the next 2-3 years?

Increase significantly............But not in real terms.

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Jesus Wept.... people need to get a grip of this.... IF prices slide massively (as you have suggested they will) and if in 6 months the falls are still coming thick and fast (and there isn't a leveling off) you wouldn't touch property with a barge pole - sentiment my dear, that's what it's about and you + Timm should knw it.

If however the indicies are leveling off after 6-8 months I could understand your point of view but it seems to me like many on here - you and Timm - are imagining a scenario which fits in with WHAT YOU WANT to happen.

What I want to happen.

Perhaps, but that misinterpretation is exactly what I am trying to avoid.

As an STR who thinks a double dip will lead to more QE to prop up asset prices*, I define myself as a neither with a bear VI. I almost bought back into my core target market (Oxford) in winter 2008 when I could, for the first time in 20 years have bought a basic 3 bedroom non XLA house, but I was seduced by the promise of further falls. In the event, a wave of money saw prices rise 10% in a matter of weeks and return to peak soon after. Since then Oxford has been surprisinly stable, but the surrounding environs never fully recovered and have now started to fall again. For an extra 15 minute commute I could now afford a 3 bedroom house with land. Not a smallholding, but enough to grow veg and keep chickens. I fully expect further falls, but how long should I hold on, bearing in mind I can buy more than I ever expected already?

personally i wouldnt worry about missing the bottom whenever it is because i think property will remain undervalued for eons once it falls because i think the fallout of this is going to be every tax and possible govt intervention, (rent controls , the lot) to make sure property is not speculated on again for decades.

That's what people said last time, but it's not what happened last time.

*QE money funded housing market support and was very effective, very fast.

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  • 140 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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