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Nationwide Trend Reanalysis


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If this is the real house prices, shouldn't the trend be flat?

Well if the data were "House Prices adjusted for House Price Inflation," yes, it would be flat.

But these are "House Prices adjusted for Inflation," which most of the time excludes house prices as TPTB deem them to be an insignificant household spend. Hence not flat.

An alternative perspective would be that house prices are indeed flat, and that this graph shows that all other purchases are falling in value against house prices. But that's too philosophical for 08:30.

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I don't think it does.

Cost to service is a function of the level of debt and the interest rate charged.

As debt has grown, interest rates have fallen over the last 2-3 decades....it takes much smaller changes to effect monetary policy through the transmission mechanism of the Bank rate.

So the trend has been rising (and more affordable) debt, hence the apparent gravity defying trend up in house prices.

Check out the first post on the "your favourite charts" thread, or if you have time dig out some ONS earnings data and try it yourself. This was my effort a couple of years ago:

housesgdpearnings.png

I think the earnings were some ONS "Average Earnings Index" and house prices were Nationwide. Was an HPC newbie at the time and didn't write them down.

Edited by Dorkins
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Same treatment as last month, updated for June.

Trends added to peaks and troughs using the same method that NW apply it to the whole set

data from here

nwjunnarrower.gif

[edit to make it fit better on smaller displays]

This desperately needs replotting with a log scale.

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Same treatment as last month, updated for June.

Trends added to peaks and troughs using the same method that NW apply it to the whole set

data from here

nwjunnarrower.gif

[edit to make it fit better on smaller displays]

You need to change the vertical axis to log scale.

It's silly looking at a 30 yr period with that scale and calling it 'exponential'. It isn't, it just appears that way because you've drawn it that way.

Edit: Apols to Van who has made exactly the same point (didn't see it as was over the page).

Also, you need to replot it to remove the real trend growth of 2.9% (or whatever youy deem it to be) so it makes it easier to see the bubble entry and bubble exit points.

1. Log scale

3. Normalised for real trend growth

Hope that helps.

Edited by Red Karma
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Um .. £75k in 1975? What's the basis for that calculation?

That's the same data series that has been on the front page of HPC for years, top right corner. Link is given in the OP. Definition is

House Prices adjusted for retail prices. This uses the Office for National Statistics Retail Price Index (RPI) to convert nominal prices to current prices

For example, a typical property in 2005 Q1 would, on average, have cost £152,790 at the time.

The buy this amount of 'retail goods' today would require c£189,374

Nationwide

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You need to change the vertical axis to log scale.

It's silly looking at a 30 yr period with that scale and calling it 'exponential'. It isn't, it just appears that way because you've drawn it that way.

Edit: Apols to Van who has made exactly the same point (didn't see it as was over the page).

Also, you need to replot it to remove the real trend growth of 2.9% (or whatever youy deem it to be) so it makes it easier to see the bubble entry and bubble exit points.

1. Log scale

3. Normalised for real trend growth

Hope that helps.

nwjun11normtotrend.gif

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nwjun11normtotrend.gif

Reminds me of metal fatigue.

Steve Keen has a theory that the cycles will get bigger and bigger until the system breaks. I fully expect Merv and his central banking chums to keep yanking the monetary lever wildly back and forth until it comes off in their hands and they can do nothing but stare at it, horrified.

Edited by Dorkins
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Thanks for doing that, a new way of looking at things.

I bought Q3 1997, thought houses were a good deal then.

Sold mid 2003, thought it was getting silly.

Bought Dec 2011, cant wait any longer.

Whether the graphs means anything or not, I feel better.

Please can I borrow your time machine?

I have a cunning plan...

PS, very interesting graphs BTF - thanks.

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  • 439 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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