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VeryMeanReversion

House Price Heat Map

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I came across these articles, don't remember seeing them on HPC before. June 2015. It's just a different way of looking at things some of you may be interested in,

http://www.ukvalueinvestor.com/2015/06/uk-housing-market-valuation-and-forecast-june-2015.html/

http://www.ukvalueinvestor.com/2015/06/uk-housing-market-valuation-and-forecast-2.html/

It is the first time I've seen UK houses prices done as a "heat map".

UK-House-Price-to-Average-Earnings-Ratio

I've done OK over the years, I first bought in '97 (dark green), sold '03 (dark orange), bought Dec' 2010 (yellow). No plans to buy/sell in the future.

I guess we are back in the dark orange/red range now but the return to green could easily take 5+ years looking at the rate of change over the previous 30+ years.

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House price/earnings ratios are an indication of current credit availability, not long term value.

We had the liar loan/MBS peak in 2007, and are just approaching the BTL peak. As credit conditions tighten for BTL, the ratio will come down over the next 5 years.

Where they end up will depend on the confidence of the banks when underwriting loans, not some long term trend.

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Interesting that for the first 20 years the ratio was never in the red zone and rapidly recoiled after touching orange once in 88/89.

Since 02/03 it's hardly ever been out of the orange/red zone.

Some might say the real crash hasn't even started - and when it does expect prices to maybe halve.

Edited by billybong

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Interesting that for the first 20 years the ratio was never in the red zone and rapidly recoiled after touching orange once in 88/89.

Since 02/03 it's hardly ever been out of the orange/red zone.

Some might say the real crash hasn't even started - and when it does expect prices to maybe halve.

Basically since 9/11

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By my rather approximate calculations, BTL buyers have been able to leverage the same monthly income to get a loan around 20% larger than those buying on a repayment mortgage.

Since there has been a net transfer of property from owner occupation to the PRS, these are the buyers setting the marginal prices. Because of this, the "normal" HP/income ratio should be around 20% higher than it was before this net transfer started in around 02/03.

This will of course come down again due to changes in taxation and risk weighting, though not necessarily with a crash. GO really wants a soft landing and an increase in home ownership or he's out of a job.

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That chart partly reflects the change from 3x main income in 1998 to 4.5x joint income now.

If enough people are prepared to sign to increasingly higher lending multiples over ever longer mortgage terms, in some cases for just part of a house, you get high house prices.

If people want cheaper houses, they should do what their parents did, 3x main income and a maximum 25 year term for a whole house.

Just because more women work, it doesn't mean they have to hand over what should be disposable income to bankers.

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Just because more women work, it doesn't mean they have to hand over what should be disposable income to bankers.

That's really it, isn't it?

House are sold for what you can get. In the past it would be 3x man's income. Since the women entered the workforce, second hand home dealers and banksters just looked on with glee

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By my rather approximate calculations, BTL buyers have been able to leverage the same monthly income to get a loan around 20% larger than those buying on a repayment mortgage.

Since there has been a net transfer of property from owner occupation to the PRS, these are the buyers setting the marginal prices. Because of this, the "normal" HP/income ratio should be around 20% higher than it was before this net transfer started in around 02/03.

This will of course come down again due to changes in taxation and risk weighting, though not necessarily with a crash. GO really wants a soft landing and an increase in home ownership or he's out of a job.

I calculate it to be 26% if you assume access to the same interest rates. But I think BTL work on short term, low fixed rates and don't really expect to have to go onto a standard rate at any point or the numbers just don't stack up.

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That's really it, isn't it?

House are sold for what you can get. In the past it would be 3x man's income. Since the women entered the workforce, second hand home dealers and banksters just looked on with glee

Before women's lib we couldn't tax half the population.

So who is rumoured to have sponsored it:

https://sites.google.com/site/themattprather/Reading/aaron-russo/reflections-and-warnings-full-transcript

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