Jump to content
House Price Crash Forum
spot5050

"crash" Is The Wrong Word

Recommended Posts

"Crash" implies something which happens on the timescale of a car accident. But housing "crashes" take years.

In 2003 I read a bbc online article written by a very smug-sounding gentlemen bragging about how he had just sold his "portfolio" (eww, get him) of properties and how everyone else should do the same lest they lose their shirts.

The thing I remember about his comments was not what he wrote exactly, but his tone - his absolute certainty that he had sold at or around the peak of prices. His confidence was due to monthly house price inflation falling from over 2.5% to less than 1%. If he'd waited until monthly inflation was zero, he would have sold at the actual peak. With the benefit of hindsight, he missed out on about a 20% rise in property prices.

At the time I believed what he wrote, but didn't sell because I didn't have the courage of his convictions. Now I'm 20% better off through laziness, not cleverness. House prices rise and fall on a completely different timescale to say share prices. A stock market "crash" may occasionally lose 10% in a day; a housing market "crash" may be a 10% decline per anum. So why use the same word?

Using the word "crash" in relation to the property market is scaremongering. A 10% "crash" in proprty prices over one year is not scary because you can get out at any time along the way. How may car crashes have you been been in where you've been able to say "hmm, I don't like the way this crash is going - I'm getting out now".

Edited by spot5050

Share this post


Link to post
Share on other sites

Using the word "crash" in relation to the property market is scaremongering. A 10% "crash" in proprty prices over one year is not scary because you can get out at any time along the way. How may car crashes have you been been in where you've been able to say "hmm, I don't like the way this crash is going - I'm getting out now".

You can't necessarily get out, as property markets have very low liquidity. In fact, crashes in the housing market happen much faster than you think, if you're looking at the price that the average buyer is prepared to pay. But in the stock market, the sellers' prices move to match the buyers immediately, whereas in the housing market it takes months if not years for selling prices to come into line with buying prices, and so what you see at the beginning of a crash is a sharp reduction in transaction volumes, not in prices. Prices don't go down much, but most people simply can't sell for that kind of price, as there aren't many buyers prepared to pay those prices. This is what we saw happening in Q4 2004 and Q1 2005, and that could have been the beginning of a crash, if the market hadn't recovered somewhat in Q2.

Edited by zorn

Share this post


Link to post
Share on other sites

Using the word "crash" in relation to the property market is scaremongering.

Use "correction" then.

I tell you what I am fed up of though - uses of the term "doom monger", "doomster" or "scaremongers" to describe the people who just want house prices to come back to sensible levels.

The REAL doom mongers are those who want house prices to stay where they are, and lock out an entire generation of young people from affordable housing.

Share this post


Link to post
Share on other sites

Use "correction" then.

I tell you what I am fed up of though - uses of the term "doom monger", "doomster" or "scaremongers" to describe the people who just want house prices to come back to sensible levels.

The REAL doom mongers are those who want house prices to stay where they are, and lock out an entire generation of young people from affordable housing.

Well said - and it's those same people who don't think about how they will finance their own childrens' futures if HPI continues unabated. Mind you, they probably don't care... ;)

Share this post


Link to post
Share on other sites

A crash by any other name is still a crash.

It can take a supertanker miles and miles to stop, if you dropped something in its way, you would know that you were going to hit it even if its around 6pm just after you had your dinner, there would be nothing you can do about it though. You would be on it until it stopped.

I see what your saying about the terminology and how some people take it to imply sudden and sharp but of course relative and sharp has to be put into context.

A motorbike hitting a wall or a supertanker hitting an iceberg - both are crashes, but there is a massive time difference.

Share this post


Link to post
Share on other sites

I like CRASH - it helps remind people (or should!) of the mistakes of the past. The VIs have it bad enough as it is without us all referring to the last property price "correction" in 70s and 80s. That makes it sound as though things were just slightly off the norm when in fact they were crazy and speculative.

A crash is a crash just depends on your timeframe - the housing timeframe is measured in months and years not seconds or minutes - the 1929 Dow collapse was a crash but it took years to bottom out after the initial big falls.

Once upon a time, India "crashed" into Asia and created the Himalayas - that took tens of millions of years. It was a crash though. A "very, very slow collision" wouldn't really get across the enormity or scale of the thing would it.

And it is a fallacy that you can get out "along the way" at an interim price level. People and the market doesn't work like that on the way down. If prices in an area decrease 12% in a year say at 1% a month and you put your house on the market in month 4 you will not be able to sell at a 4% discount you will need to price at 10% or whatever to sell it to get out ahead of others (ie you have a 10% retreat in a few months not a year!). Prices move down in round numbers or round percentages - only when these are averaged do you get figures like 2% or 3%.

Edited by Tempest

Share this post


Link to post
Share on other sites

"Crash" implies something which happens on the timescale of a car accident. But housing "crashes" take years.

In 2003 I read a bbc online article written by a very smug-sounding gentlemen bragging about how he had just sold his "portfolio" (eww, get him) of properties and how everyone else should do the same lest they lose their shirts.

The thing I remember about his comments was not what he wrote exactly, but his tone - his absolute certainty that he had sold at or around the peak of prices. His confidence was due to monthly house price inflation falling from over 2.5% to less than 1%. If he'd waited until monthly inflation was zero, he would have sold at the actual peak. With the benefit of hindsight, he missed out on about a 20% rise in property prices.

That very much depends where his portfolio was. If it was in London and the South East he got out right at the peak. Property round here has fallen since 2003.

At the time I believed what he wrote, but didn't sell because I didn't have the courage of his convictions. Now I'm 20% better off through laziness, not cleverness. House prices rise and fall on a completely different timescale to say share prices. A stock market "crash" may occasionally lose 10% in a day; a housing market "crash" may be a 10% decline per anum. So why use the same word?

Using the word "crash" in relation to the property market is scaremongering. A 10% "crash" in proprty prices over one year is not scary because you can get out at any time along the way. How may car crashes have you been been in where you've been able to say "hmm, I don't like the way this crash is going - I'm getting out now".

Share this post


Link to post
Share on other sites

"Crash" implies something which happens on the timescale of a car accident. But housing "crashes" take years.

In 2003 I read a bbc online article written by a very smug-sounding gentlemen bragging about how he had just sold his "portfolio" (eww, get him) of properties and how everyone else should do the same lest they lose their shirts.

The thing I remember about his comments was not what he wrote exactly, but his tone - his absolute certainty that he had sold at or around the peak of prices. His confidence was due to monthly house price inflation falling from over 2.5% to less than 1%. If he'd waited until monthly inflation was zero, he would have sold at the actual peak. With the benefit of hindsight, he missed out on about a 20% rise in property prices.

At the time I believed what he wrote, but didn't sell because I didn't have the courage of his convictions. Now I'm 20% better off through laziness, not cleverness. House prices rise and fall on a completely different timescale to say share prices. A stock market "crash" may occasionally lose 10% in a day; a housing market "crash" may be a 10% decline per anum. So why use the same word?

Using the word "crash" in relation to the property market is scaremongering. A 10% "crash" in proprty prices over one year is not scary because you can get out at any time along the way. How may car crashes have you been been in where you've been able to say "hmm, I don't like the way this crash is going - I'm getting out now".

What a load of tosh both of you talk.

Selling prices don't fall by 10% in a day because it takes more than a day to sell a house. Offer prices however can easily fall by 10% in a day and especially at times like this.

The peak of a housing market is a statistical thing and it does not mean that you will get the maximum price on that date. The best price you can get is based on such factors such as the type and quality of the property, its location and luck. If a big employer closes down near you, this can decimate local prices.

Also, you cannot say you have made an extra 20% until you have sold. If you have not yet sold, you have almost certainly missed the boat. These days, buyers are hacking prices down ruthlessly.

Share this post


Link to post
Share on other sites

My definition of a crash:

"Property prices 20% lower than they were 2 years before".

FWIW - I think we're currently in the very early stages of an "Ignorant Steve defined" crash.

Share this post


Link to post
Share on other sites

My definition of a crash:

"Property prices 20% lower than they were 2 years before".

FWIW - I think we're currently in the very early stages of an "Ignorant Steve defined" crash.

Although I suspect that in hindsight the term "Ignorant Steve defined crash" will not be on the lips of the nation...... :P

Share this post


Link to post
Share on other sites

Although I suspect that in hindsight the term "Ignorant Steve defined crash" will not be on the lips of the nation...... :P

Oh I don't know. It has a certain ring to it. Wouldn't you say?

Share this post


Link to post
Share on other sites

Use "correction" then.

I tell you what I am fed up of though - uses of the term "doom monger", "doomster" or "scaremongers" to describe the people who just want house prices to come back to sensible levels.

The REAL doom mongers are those who want house prices to stay where they are, and lock out an entire generation of young people from affordable housing.

I TOTALLY agree with that. The only doom that is happening is that houses absorb such a ridiculous portion of national income, as opposed to it being invested in something that provides wealth and real benefits to people. Houses aren't getting any better. They are still just houses. It's not like some gadget becoming more expensive because it suddenly gets more functionality.

The doom mongers are the ones predicting further rises in the already preposterous cost of housing in my view.

Share this post


Link to post
Share on other sites

Use "correction" then.

The REAL doom mongers are those who want house prices to stay where they are, and lock out an entire generation of young people from affordable housing.

Shouldn't these people be termed 'boom mongers'?

I'll get me coat...

Share this post


Link to post
Share on other sites

I think it's more of a decline than a crash - a crash is something that happens instantly and violently - I don't think that's likely to happen ( unless there's an asteroid on the way !)

Share this post


Link to post
Share on other sites

Without wishing to get all uppity on you, it's been broadly agreed for well over a year on this board that a crash is a slow fall of house prices rather than an overnight slump. You aren't telling us anything new, spot5050. As for your friend calling the top a couple of years early, that's a lot better than a couple of years late. It can be hard to sell on the way down without undercutting what conventional wisdom says is the market rate.

Share this post


Link to post
Share on other sites

Without wishing to get all uppity on you, it's been broadly agreed for well over a year on this board that a crash is a slow fall of house prices rather than an overnight slump.

Great.

So why is this site called www.housepricecrash.co.uk not www.housePriceSlowFall.co.uk?

Share this post


Link to post
Share on other sites

i suggest we swap the crash for GASH.

a house price GASH.

hairy moments for some.

this guy 'split' in time and feathered his 'nest'. he noticed a massive 'hole' in his portfolio and he 'plugged' it. his contemporarys will be bleeding from a giant 'axe wound'. if i was him id be like a 'man in a boat' paddling as fast as i could to get out of there. a close shaven haven.

Share this post


Link to post
Share on other sites

i suggest we swap the crash for GASH.

a house price GASH.

hairy moments for some.

this guy 'split' in time and feathered his 'nest'. he noticed a massive 'hole' in his portfolio and he 'plugged' it. his contemporarys will be bleeding from a giant 'axe wound'. if i was him id be like a 'man in a boat' paddling as fast as i could to get out of there. a close shaven haven.

careful - dalek is watching - she'll get yer!

Share this post


Link to post
Share on other sites

Is it a crash? It is a question on semantics.

Prices are far above equilibrium and they will gradually be restored.

However, I agree with Dr. Bubb and expect the time required for price decline to equilibrium will be LONG.

The reason? The driving force are real nterest rates that I expect to stay low. The assumption is that debt will be deflated through further monetary expansion. Thus, the decline should be slow, erratic,and may sometimes give the impression that prices are rising. Even the 1989-1995 crash, driven by high interest rates was not clear at the time and there were many false calls that the market has turned. Japan

is an example of gradually declining house prices in a low interest environment.

After a long period of time, I expect real losses for property investors (after inflation) to be substantial and then it will feel like a crash.

I expect rising inflation, wages and interest rates, static or slightly falling nominal prices, for years to come.

However, the peak in inflation/rates may be smaller this time due to the effect of globalization.

In the meanwhile, property is not best choice for investment. Inflation protected securities should be best choice.

Conclusion? It seems time wating and futile to scrutinize montlh-to-month variations for evidence of a crash. It is best to form a judgment on the big picture, rent happily and be patient.

Share this post


Link to post
Share on other sites

If he'd waited until monthly inflation was zero, he would have sold at the actual peak. With the benefit of hindsight, he missed out on about a 20% rise in property prices.

If he had a London/South East portfolio containing apartments then he is probably 10-15% better off. Whatever the LR figures say, prices have not budged down here since the end of 2003. I had an offer on my house in Nov 2002 for 225k, I used this as a valuation for my divorce, and my wife bought me out. It has now been on th emarket with two agents for k218 for five months, that is Rochester Kent. Things in Brighton (where I now live) are the same. The prices of apartments in my block have fallen in the last year, and new builds are not selling at all.

The numbers just don't add up, anyone who STR'd in the South East after 2003 did the right thing, and the next few years require a steady nerve to see that strategy bare fruit.

Share this post


Link to post
Share on other sites

I TOTALLY agree with that. The only doom that is happening is that houses absorb such a ridiculous portion of national income, as opposed to it being invested in something that provides wealth and real benefits to people. Houses aren't getting any better. They are still just houses. It's not like some gadget becoming more expensive because it suddenly gets more functionality.

The doom mongers are the ones predicting further rises in the already preposterous cost of housing in my view.

Houses arent getting any better?

Really...?

actually I agree..

and you talk about a 20% drop in two years..

Well modern new builds should loose about that value anyway in a healthy market as that appears to be the speed at which the flimsy pieces of cr*p fall apart..

I digress though..:)

A crash.. its all going to be a hindsight thing.. and we are seeing the start now..

What is scary is that it is a worldwide thing..

What I can't wait to see are the morrons here in the UK who are trading in properties in eastern block countries, drawing up the prices there to western levels through mere speculation..

I want to see some **** who has priced some poor sod on £20 a week out of his entire region.. Having to sell his small apartment that he paid £80,000 for back to the guy for £3000..

Using a favourable exchange rate to cripple people in a another country and convice yourself that you are an astute business man?? are you??

Have you stopped... just for a second... and thought about this...?

Well I hope you loose everything.. everything..

For that is nothing but sheer evil and gread.

luckily people do forget that speculation always has its mark..

just don't let yourself be the mark.

Share this post


Link to post
Share on other sites

Once upon a time, India "crashed" into Asia and created the Himalayas - that took tens of millions of years. It was a crash though. A "very, very slow collision" wouldn't really get across the enormity or scale of the thing would it.

Once upon a time? It's still in progress. What do you think caused the recent earthquake in Kashmir?

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.