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Dave Beans

House Prices Falling £40 A Day As Most Of The Gains In The Last 12 Months Are Wiped Out

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http://www.dailymail.co.uk/news/article-1334612/House-prices-fall-wiping-gains-year.html

The recent run of house price falls have wiped out most of the gains seen to property values during the past year, figures showed today. The average cost of a home dropped by a further 0.3 per cent during November - around £40 a day for the average house - following a 0.7 per cent slide in October. Nationwide said activity in the housing market 'remained subdued'.

The typical house now costs £163,398, just 0.4 per cent higher than a year ago, after prices fell or remained unchanged every month for the past six months. The figures, which come just days after the Bank of England reported a further fall in the number of mortgages approved for house purchase, are likely to stoke concerns among economists that house prices will suffer a double-digit drop during 2011.

But Nationwide said there was no reason to expect the rate at which prices are dropping to accelerate, adding that an anticipated fall in the number of people selling their homes in the coming months was likely to offer some support to prices. The group also pointed out that its quarter-on-quarter index, which is generally seen as a smoother indicator of market trends, actually improved slightly during the month. House prices fell by 1.3 per cent during the three months to the end of November, compared with a 1.5 per cent slide during the previous three-month period.

Martin Gahbauer, Nationwide's chief economist, said: 'There is little evidence to suggest that house price declines are likely to accelerate in the months ahead. 'Much of the weakness in property values since the spring has been driven by a return of sellers to the market, following unusually low levels of property for sale in 2009 and early 2010.

'However, there is little to indicate that these sellers need to achieve a sale urgently for financial or economic reasons, which means that the downward pressure on house prices is only modest.'

He added that there were early indications that the number of new properties being put up for sale may be slowing down, as recent price falls put potential sellers off marketing their home.

The current housing market downturn has been triggered by a mismatch between supply and demand, as sellers have continued to come to the market but buyers have sat on their hands until the outlook for both house prices and the wider economy becomes clearer. The Bank of England said earlier this week that mortgage approvals for house purchase had fallen for the sixth consecutive month to just 47,185, well below the 70,000 to 80,000 approvals a month which are considered to be consistent with a stable housing market.

Edited by Dave Beans

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Not sure about the maths there. £40 a day times 30 days = £1200. £1200 is 0.3% of £400k. The average house does not cost £400k (thankfully).

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Not sure about the maths there. £40 a day times 30 days = £1200. £1200 is 0.3% of £400k. The average house does not cost £400k (thankfully).

The missing piece of the jigsaw here is that nominally the fall is -0.6% but in their wisdom Nationwide has decided to seasonally adjust that to -0.3%.

Don't recall seeing the reverse of that effect - ie, a 0.3% fall is seasonally altered and given out as a headline figure of -0.6%. Am happy to be shown evidence of this.

Edited by rantnrave

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Well I have done done the maths, below are the numbers ...

2007 - SA= -0.8% whilst nominal was -1.104% a difference of 0.304%

2008 - SA= -0.4% whilst nominal was -0.271% a difference of -0.129%

2009 - SA= 0.5% whilst nominal was 0.448% a difference of 0.052%

2010 - SA = -0.3% whilst nominal is -0.598% a difference of 0.298%

How the hell do they work out the seasonal numbers??

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Well I have done done the maths, below are the numbers ...

2007 - SA= -0.8% whilst nominal was -1.104% a difference of 0.304%

2008 - SA= -0.4% whilst nominal was -0.271% a difference of -0.129%

2009 - SA= 0.5% whilst nominal was 0.448% a difference of 0.052%

2010 - SA = -0.3% whilst nominal is -0.598% a difference of 0.298%

How the hell do they work out the seasonal numbers??

Now you've done it. You weren't meant to do that calculation. Please report to the Soylent Green manufacturing plant for, err, reeducation immediately.

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The missing piece of the jigsaw here is that nominally the fall is -0.6% but in their wisdom Nationwide has decided to seasonally adjust that to -0.3%.

Don't recall seeing the reverse of that effect - ie, a 0.3% fall is seasonally altered and given out as a headline figure of -0.6%. Am happy to be shown evidence of this.

Actually seasonal adjustment is reasonable, but ideally it would be applied by an independent body rather than a VI.

Sadly the general populace have no appetite for the 'bad news' of more affordable homes.

Eventually though a big adjustment will have to be made to re-align to reality.

If my experience of large insurers is anything to go by, the VIs will get together and agree a period during which to 'get the bad news out of the way'.

I half expect a couple of months of severe drops at some point where Haliwide not only re-align but overshoot on the downside so that they can subsequently announce a glorious recovery.

Insurers occasionally do something like this: defer Y1 losses into Y2, bring forward Y3 losses into Y2. Shove a lot of cash into reserves at end of Y1 and announce huge losses in Y2, increase premiums and announce big profits in Y3 whiles maintaining the higher premiums.

After all they've got dividends, directors bonuses, contractor fees and pensions to pay you know. ;)

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I love articles like this. I remeber reading, at the height of the madness, a smiliar article but the other way around. It was basically saying that people were making more money from HPI than they were earning in their jobs (on an average house price to average wage comparison).

People will be sitting over their cornflakes thinking....$hit, i am losing £280 a week on this (not far from an average net weekly income I reckon)

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£40 a day. whoop-de-doo

That's £40 I never have to borrow, repayable with interest over 25 years which typically doubles it. My rent is about £15 a day.

Still, bring on the 1% m-o-m falls!

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Unlike shares etc, these "investors" are now going to discover that this is one declining asset that is difficult to offload with a 2 min call to the broker ;)

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Well I have done done the maths, below are the numbers ...

2007 - SA= -0.8% whilst nominal was -1.104% a difference of 0.304%

2008 - SA= -0.4% whilst nominal was -0.271% a difference of -0.129%

2009 - SA= 0.5% whilst nominal was 0.448% a difference of 0.052%

2010 - SA = -0.3% whilst nominal is -0.598% a difference of 0.298%

How the hell do they work out the seasonal numbers??

As long as they balance over the year, any damn way they want to.

PS. I think a lot of the difference in the numbers above is "smoothing", not SA.

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But Nationwide said there was no reason to expect the rate at which prices are dropping to accelerate, adding that an anticipated fall in the number of people selling their homes in the coming months was likely to offer some support to prices. The group also pointed out that its quarter-on-quarter index, which is generally seen as a smoother indicator of market trends, actually improved slightly during the month. House prices fell by 1.3 per cent during the three months to the end of November, compared with a 1.5 per cent slide during the previous three-month period.

Martin Gahbauer, Nationwide's chief economist, said: 'There is little evidence to suggest that house price declines are likely to accelerate in the months ahead. 'Much of the weakness in property values since the spring has been driven by a return of sellers to the market, following unusually low levels of property for sale in 2009 and early 2010.

'However, there is little to indicate that these sellers need to achieve a sale urgently for financial or economic reasons, which means that the downward pressure on house prices is only modest.'

He added that there were early indications that the number of new properties being put up for sale may be slowing down, as recent price falls put potential sellers off marketing their home.

Hmm

With a 0.5% UK base rate it seems they are saying prices will only fall modestly over the coming months.

I think they are right, but what do they mean by modestly?

I would suggest (as my other posts) prices are/will fall at a rate of around 0.4% a month (5% annum) in nominal terms whilst the situation stays as it is. I do not think the limited proposed cuts in government spending will have much impact but will help maintain this current rate of falls. The reason I think we will see a significant fall in prices during 2011 is down to rises in interest rates. I believe rates must rise and I am still under the opinion base rate will be over 3% by 2012. So overall rate of falls could easily get to 2008 levels. A 20% fall in house prices during 2011 is quite realistic and likely.

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The reason I think we will see a significant fall in prices during 2011 is down to rises in interest rates. I believe rates must rise and I am still under the opinion base rate will be over 3% by 2012. So overall rate of falls could easily get to 2008 levels. A 20% fall in house prices during 2011 is quite realistic and likely.

I think King will have to be forced kicking and screaming at a MPC meeting to agree to even a 0.25% rise in the base rate.

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So at what point does the psychology of HPI go into reverse and all the 'house is my pension' brigade make a rush for the exits?

Most VI's seem to think that some kind of gentle decline is in order, but surely the same fear of being left behind on the way up will kick in on the way down?

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Hmm

With a 0.5% UK base rate it seems they are saying prices will only fall modestly over the coming months.

I think they are right, but what do they mean by modestly?

I would suggest (as my other posts) prices are/will fall at a rate of around 0.4% a month (5% annum) in nominal terms whilst the situation stays as it is. I do not think the limited proposed cuts in government spending will have much impact but will help maintain this current rate of falls. The reason I think we will see a significant fall in prices during 2011 is down to rises in interest rates. I believe rates must rise and I am still under the opinion base rate will be over 3% by 2012. So overall rate of falls could easily get to 2008 levels. A 20% fall in house prices during 2011 is quite realistic and likely.

Wait until inflation goes mental....and these "historically low" interest rates starts to climb.... Good job that $147 barrel oil (due to speculators) isn't back!

Sure you can demand to be paid more by your employer...but if there is a 17% unemployed workforce gagging to do you job at 1/2 the price the odds of getting a pay rise might be slim.

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So at what point does the psychology of HPI go into reverse and all the 'house is my pension' brigade make a rush for the exits?

Most VI's seem to think that some kind of gentle decline is in order, but surely the same fear of being left behind on the way up will kick in on the way down?

If (when) interest rates go up substantially higher...

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  • 312 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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