What Caused Your 'hpc Epiphany'?

[Rave]

I'm just interested really. It seems that a lot of people on this forum are experienced watchers of the various markets etc.

However, I am (or rather, I was) just an ignorant prole, doing a poorly paid job and getting indignant that house prices had spiraled way beyond the point where I could ever expect to be able to buy on my feeble income. Then, while out raiding the bins of my local charity shop (this is usually a profitable endeavour BTW, but that's beside the point), I came across this book. I opened the pages right at the point where he detailed the lurid excesses of society in Berlin during their period of hyperinflation in the early 20s and (I must admit) decided to read it purely out of prurience . However, after only the first couple of chapters (about Tulipomania and the South Sea Bubble), the scales fell from my eyes, and I recognised that our period of HPI showed all the classic symptoms of a bubble.

The book was released (as far as I can see) very shortly after the stock market crash in the late 80s and in advance of the early 90s house price crash- but even then (in the final chapter), Beckman was pointing out that it was stupid to buy a house when it was much cheaper to rent. Thus enlightened, I came across a link to this forum from the MoneySavingExpert forums (I think) and found a home .

What's your story?

P.S. as a noob, there's always the danger that this topic has been done once or many times before. Feel free to chastise me (and merge my post) as necessary.

Edited December 28, 2005 by Rave

[classixuk]

I'm just interested really. It seems that a lot of people on this forum are experienced watchers of the various markets etc.

However, I am (or rather, I was) just an ignorant prole, doing a poorly paid job and getting indignant that house prices had spiraled way beyond the point where I could ever expect to be able to buy on my feeble income. Then, while out raiding the bins of my local charity shop (this is usually a profitable endeavour BTW, but that's beside the point), I came across this book. I opened the pages right at the point where he detailed the lurid excesses of society in Berlin during their period of hyperinflation in the early 20s and (I must admit) decided to read it purely out of prurience . However, after only the first couple of chapters (about Tulipomania and the South Sea Bubble), the scales fell from my eyes, and I recognised that our period of HPI showed all the classic symptoms of a bubble.

The book was released (as far as I can see) very shortly after the stock market crash in the late 80s and in advance of the early 90s house price crash- but even then (in the final chapter), Beckman was pointing out that it was stupid to buy a house when it was much cheaper to rent. Thus enlightened, I came across a link to this forum from the MoneySavingExpert forums (I think) and found a home .

What's your story?

P.S. as a noob, there's always the danger that this topic has been done once or many times before. Feel free to chastise me (and merge my post) as necessary.

Well God bless you Noob!

My story isn't quite as thrilling. I thought one day back in 2004 that house prices were just getting way too high (based on the area I live in) and decided that it made common sense there would be a crash. It niggled me for a while and one night in early 2005 I remembered my fleeting thought and typed "Will there be a house price crash?" into Google.

The rest is history!

Welcome to the site, you'll like it here.

Edited December 28, 2005 by classixuk

[Rave]

Cheers mate. Been here a month and a half and I like it a lot already .

Now I just need to get off my backside and get myself into a position to take advantage of the crash. A job would be a start

Edited December 28, 2005 by Rave

[Mikael_Gorbachev]

I opened the pages right at the point where he detailed the lurid excesses of society in Berlin during their period of hyperinflation in the early 20s

You might like to read the book on the following link. Sorry might change your viewpoint on HPC but it is a great read. A bit long but highly recommended.

http://www.gutenberg.org/dirs/etext04/fiatm10.txt

MG

[Rave]

The third chapter of the book is about John Law and the Mississippi Bubble- so is it going to teach me anything I don't already know? The fourth chapter is about the prolonged period of malaise from the 1850s until the turn of the 20th century....Jay Gould etc.

I must admit that I still (even after reading the aforementioned book) slightly struggle with the concept of Fiat Money and that's a gap in my knowledge I should really plug forthwith.....

Edit: sorry, not trying to be rude, just asking. 3.30am in the morning is no time to be opening large PDFs and I really ought to spend tomorrow filling out job application forms....

Edited December 28, 2005 by Rave

[crudeFool]

When:

1. seeing neighbors driving brand new BMW's and wondering "how on earth can they afford that? - they work in a supermarket" (obviously before I knew about MEW'ing)
   
2. when my mothers council house was all I would be able to buy at 3.5x salary (and I'm on a good wage for Sunderland)
   

Since I've been reading this site (I've been reading it since it started, but only recently registered), I've become a bit of a doom merchant , but it's certainly educated me financially...

regards,

crude

[Shamus]

Originally we bought a flat in 1999 moving out in 2002 to a new area. Rented for 6 months then but got worried that prices looked to be rising. Instead of buying in the centre of town which looked top heavy at the time moved out to a quiet village within commuting distance. This year decided to move closer to Family which happens to be a dearer area by about £40k for similar properties so chose to sell and bank the equity and wait until we can afford the prices locally.

Evidence is that properties are very overpriced here in Dorset and lot's of new build's coming onto the market this year should have some effect. Main problem is that the coast area is very sought after by retirement folk so this may prolong any adjustment in prices.

PS - On another note there must be a lot of money about here still. Roads very busy yesterday and the sales in Poole very busy, difficult to move!!

[laughing_goat]

A number of things have done it for me;

1) House prices are now 5+ times the average salary where I live.

2) Individuals and couples who pay tax at 40%, hence considered to be getting paid very well, cannot afford to buy a home.

3) The over supply of rental properties driving profits downwards for BTL investors. Most of the BTLers I know personnally, 'pay' for the privledge of owning a BTL, rather than make money out of it. This is done in the hope that property prices will continue to rise (and they can continue to afford it). Something that was seen as easy money (rightly or wrongly) a few years ago, is now a money drain, but sadly the average person takes time to catch up on these things. Don't they always say, by the time you hear about the bandwagon, you've probably missed it! This band wagon left ages ago.

4) Goverment and Property business coming up with schemes to get FTBs on the property ladder. In my opinion these schemes may get people on the property ladder but they smell strongly of desperation and do not help the FTB. When they bring in the shared equity scheme (assuming they take off), people will buy the homes they want/need. Soon enough this will drive house prices even higher and the shared equity schemes will either have to become larger (you own 10%, bank/Gov own 90%) or House prices will crash. Also, I think banks will get cold feet, I believe the scheme is quiet small.

5) Sellers and EAs not keeping up with the market shifts, this is anecdotal but an important point. My mother in law was offered £10,000 less than the asking price for her place. The EA told the buyer, that Mrs Goat Snr was asking for the price she wanted, and this is what the property is worth (was quite short with the buyer by all accounts). When Mrs Goat Snr told me about it, she was actually laughing at the cheek of the man, I calmly told her she was making a big mistake not taking the offer seriously (it was about 5% off the asking price). It was too late though the buyer had already moved on. The house sold 5 months later for £22,000 under the asking price.

6) For a crash to happen there needs to be a trigger (IMO), we now have the possibility of several triggers. The stock market is very high, oil and gas prices will squeeze the consumer, possibility of tax rises (direct or indirect) is getting greater and everytime the BOE try and save another failing manufacturer with a rate cut and the Americans and Europeans increasing their base rate, we run the risk of the pound devaluing, to mention a few.

If there was just one possible trigger, then I would say the chances of a crash are low, but there aren't there are many. IMHO the chances of avoiding one of these triggers is very slim indeed.

EDIT: 7) DEBT, all 1 Trillion pounds of it!

Edited December 28, 2005 by laughing_goat

[WBFTB]

Well God bless you Noob!

My story isn't quite as thrilling. I thought one day back in 2004 that house prices were just getting way too high (based on the area I live in) and decided that it made common sense there would be a crash. It niggled me for a while and one night in early 2005 I remembered my fleeting thought and typed "Will there be a house price crash?" into Google.

The rest is history!

Welcome to the site, you'll like it here.

I typed EXACTLY the same thing into Google and found this site.

Me and the girlfriend were talking about buying and keeping our eye on the papers, agents, etc, but prices were just unaffordable. The numbers just didn't add up.

I was thinking a lot about how things might have gotten to the state they had. Then I started seeing minor price reductions, and the same properties advertised for months. That's when I typed the above in to Google and found this forum full of others seeing the same things, and lots of people who understood economics with explantions for what I was (and still am) seeing.

[Guest Bart of Darkness]

What Caused Your 'hpc Epiphany'?

(a) Wondering why prices were suddenly so high.

( Wondering how people in Sheffield could afford these sky high prices on 3.5 x salary (yes, I was very innocent back then).

Edited December 28, 2005 by Bart of Darkness

[Come On Down]

Despite ease of borrowing, and my salary doubling in the last 6 years (Along with my house price!) I cannot afford a worthwhile move for the vast amount of extra mortgage.

Nice link:

http://www.larouchepub.com/other/2005/3250brit_economy.html

[a j]

I travelled and worked abroad for a number of years. When I was back in the UK - first in mid 1999 until early 2001 then returning in September 2003 I found that prices had increased way above expectations. The South East had shot up - I thought prices were too high by late 2000 - so I thought about buying a property in my home town in Yorkshire. The choice was paying £150k for a terraced house in Reading or £30k in Huddersfield.

As it happened I got a job abroad (in the Netherlands) and never did buy - the £30K terraced houses in Hudderfield had increased to £90k in a very short space of time and I lost interest.

I'd had friends in both Singapore and Hong Kong who got burned by house price falls in the late 90's. I also remember the 1988 - 1993 crash well, so was probably less keen on tying up money in property than a lot of others. Of course I regret not buying when things were cheaper.

Anyone who doubts the impact of a relatively minor slowdown in the economy should look at the situation in Holland. I knew a few expats who bought there and have subsequently either lost their jobs, or had worked as contractors and found that the market dried up. The job market changed very quickly during 2001 and hasn't really picked up since. After time out of work they had to drop their prices to sell their property and wait around for buyers to appear. They had the skills to move elsewhere for work - In a very real sense, owning property meant putting their lives on hold.

[lewissheridan]

A number of things have done it for me;

1) House prices are now 5+ times the average salary where I live.

2) Individuals and couples who pay tax at 40%, hence considered to be getting paid very well, cannot afford to buy a home.

3) The over supply of rental properties driving profits downwards for BTL investors. Most of the BTLers I know personnally, 'pay' for the privledge of owning a BTL, rather than make money out of it. This is done in the hope that property prices will continue to rise (and they can continue to afford it). Something that was seen as easy money (rightly or wrongly) a few years ago, is now a money drain, but sadly the average person takes time to catch up on these things. Don't they always say, by the time you hear about the bandwagon, you've probably missed it! This band wagon left ages ago.

4) Goverment and Property business coming up with schemes to get FTBs on the property ladder. In my opinion these schemes may get people on the property ladder but they smell strongly of desperation and do not help the FTB. When they bring in the shared equity scheme (assuming they take off), people will buy the homes they want/need. Soon enough this will drive house prices even higher and the shared equity schemes will either have to become larger (you own 10%, bank/Gov own 90%) or House prices will crash. Also, I think banks will get cold feet, I believe the scheme is quiet small.

5) Sellers and EAs not keeping up with the market shifts, this is anecdotal but an important point. My mother in law was offered £10,000 less than the asking price for her place. The EA told the buyer, that Mrs Goat Snr was asking for the price she wanted, and this is what the property is worth (was quite short with the buyer by all accounts). When Mrs Goat Snr told me about it, she was actually laughing at the cheek of the man, I calmly told her she was making a big mistake not taking the offer seriously (it was about 5% off the asking price). It was too late though the buyer had already moved on. The house sold 5 months later for £22,000 under the asking price.

6) For a crash to happen there needs to be a trigger (IMO), we now have the possibility of several triggers. The stock market is very high, oil and gas prices will squeeze the consumer, possibility of tax rises (direct or indirect) is getting greater and everytime the BOE try and save another failing manufacturer with a rate cut and the Americans and Europeans increasing their base rate, we run the risk of the pound devaluing, to mention a few.

If there was just one possible trigger, then I would say the chances of a crash are low, but there aren't there are many. IMHO the chances of avoiding one of these triggers is very slim indeed.

EDIT: 7) DEBT, all 1 Trillion pounds of it!

Laughing goat pretty much answered it and summed it all up for me. Although the initial research came from just 10% of that information, and my colleague constantly saying why don't you buy? etc. etc. I don't purchase anything without doing my homework as it were, and with the biggest purchase of my life, my education was done here.

[New Bear]

I was looking to buy in mid-2005, having moved to the Midlands from Scotland. I was aware that there was a market slowdown going on in this part of England and was expecting a buyers market. I was certainly leapt upon by EAs but it was soon apparent that the stuff they were showing me was simply not worth the asking price - or anywhere near it. One day I overheard a conversation between an EA and a client in which the former explained to the latter that the reason her house was not selling was that "this is the worst summer we've had for 15 years". In these circumstances I was not surprised to find so many houses for sale but I was suprised to find prices still so sky high and, most surprising of all, so sticky. I'd been looking at various websites (Nationwide, Halifax and RICS) to try and get a picture of the housing market but these didn't seem to accord with what I was experiencing. Around this time I came across the Economist issue on the housing bubble and began to see the bigger picture. All this made me think I needed to dig a bit deeper so I Googled something like "house price trends UK" - and HPC came up fairly high on the list of returns. I've lived through two house price crashes and the arguments on HPC made immediate sense. I certainly know that house prices can go down as well as up. From there on the more I have read the more convinced I have become that UK houses as an asset class are over-valued at the moment. Equally I think the world economy is clearly heading for, and probably already is in, serious trouble of a deflationary kind.

Overall "what HPC has done for me" is pull together the observations I was making myself into a more coherent set of arguments and strands of analysis - helping me to form an overall narrative about what is going on and why. I try and keep an open mind about the evidence but for me the great strengths of the site have been both the detailed analyses of the particularities of the UK housing market (like the SIPPS issue, the role of MEWing in mortage volume figures, the strengths and weaknesses of various house price indices etc.) and the "back story" about the UK and world economy (such as trade imbalances, the role of central banks in credit creation, economic cycles etc.). I think it is this combination that is so powerful and, for me, persuasive. One thing I notice about the (increasingly desperate?) views of the housing bulls especcially is that they tend to take the housing market in relative isolation from questtions about the direction of the global economy. Their big mistake is to be too concerned with just one part of the economic picture. But that would be a mistake for housing bears too. It's one of the things that makes both sides of the debate, but especially the bulls, sometimes too susceptible to the ups and downs of the latest figures about the UK housing market. It's only in the overall picture that these can be given a realistic significance. I may be wrong and only time will tell but I think we we will look back at the first five years of the twentieth century as something of a fools paradise.

[paradox]

I am in the same boat as AJ, was abroad and "missed the boat" as they say. My story is on another post so no need to bore you with it all again.

Now we are looking to bugger off again in 2006.

Happy New Year to all.

[slater14]

I ran some figures and realised that some of my properties would make me more in interest if I sold them than if I continuerd to rent them out.......THAT was the moment I realised the game was up and started selling. I sold what I wanted to sell in 2004....the last sale I just about got out by the skin of my teeth in March 2005!!! after the sale dragged on and on.

I Googled 'House prices'.....and the rest is history.

[right_freds_dead]

i was at a chinese banquet for housing planning and provision for the local PFI bids in burnley, when this website address was presented to me within a fortune cookie. i nipped out to a local internet cafe before the ice cream came out and have been posting with gusto ever since.

i have no idea what happened to the PFI meeting, my collegues or the bill for lunch.

i sleep here at night and shop online from tesco direct for sustinance.

[Rave]

LOL r_f_d . Cheers everyone else .

[Guest]

During the viewing, I think it was the sight of the young lass (30ish) sat on her sofa, and barely stifling a grin. "Oh it will be such a shame to leave!", she said, "I'm moving in with my boyfriend." A quick check revealed she bought in may 2002 for £75K, and this was february 2005. Asking price? £127K.

The price appreciation on her house in just those couple of years was equal to my six years of savings. I doubted that there would be potential for me to 'gain' that over the next two years.

It was about that time that I decided to take the RED pill, and see how deep the rabbit hole goes...

She did sell, six months later, for £119K. It was one of the nicer properties in the area. I do have some taste, you know!

[red]

I spend thousands doing up a house bought for 67K in 1988, only to have to accept 60K for it 6 years later!

So there's no epiphany for me; just bitter experience and the knowledge that the same is happening again...

[Shooter McGavin]

I was sent a link by a mate on msn messenger as he was looking to relocate to Reading (where I had been living a couple of months earlier) to a thread in this forum about housing there. As I had just moved back to my home town, I was looking to purchase a property as I'd been told by all and sundry about renting being "dead money" I thought I'd take a better look through this site as even on a good salary for the area, the thought of buying something at what I considered to be a ridiculous price just made me feel squeamish.

The views and arguments on this site have helped me make my mind up that renting for the medium term is the right thing to do....if only to get together a bigger deposit for when I do take the plunge (if ever based on the current market conditions!!).

[khali]

Well, I had for many years assumed that I would never be able to live a life equivalent to that of my parents. And so time has proved!

However, the extent of my assumptions was that I would never be able to own my own home.

Until, that is, a chance conversation with a friend. At this time (around 1997-8), property was cheap in many areas. Conversation went roughly as follows:

Friend; "You know, you can pick up a decent terrace in North Wales for less than 30 grand........if a couple are working at even low paid jobs, earning 10,000 each, you can live on one wage, and pay off the mortgage in 3 years with the other......"

Me; "Hmm, don't want to live in North Wales, partner's still studying so only 1 wage coming in but good point.........I'll start saving."

I paid what debts I had off and saved. Partner was not interested in being partner in property, so I purchased on my own in 1999. Adapting the theory my friend had outlined, I worked a lot, earning the equivalent of two very crap wages and used one solely for mortgage overpayments. Result was that I paid off my mortgage around Easter 2005. Nice feeling. Took longer than 3 years, but a lot less than 25.

Trouble is, I can't pull the same trick twice. Not with prices the way they are now, and my earning potential being how it is. I just can't save enough to move up the ladder to the kind of property I would be happy living in for - say 20 years, without accepting that I have to take on the full 25+ years worth of debt that is mortgage repayments.

I'm in no mood to accept that I have to put myself into the kind of debt demanded by todays prices, and I am happy to save and stay where I am until such time that average house prices accurately reflect average incomes.