Jump to content
House Price Crash Forum
Sign in to follow this  
Being_Patient

Comparison With Last Crash

Recommended Posts

An idle trawl through the net led me to this article. Which, although meant as a school boy/girl academic exercise, I thought would be useful to inform those too young to remember the last HPC. I used their solution (link at bottom of the page) to build an excel graph, which I converted to a JPEG to include here.

Last_HPC_Chart.jpg

Interestingly the figures don't show massive negative percentages -5.6% in '92 (-9.3% real) was the lowest it got to. Yet we know that prices dropped by as much as 40% in many places. Why isn't that reflected in the figures, or have I interpreted them incorrectly?

Can some of you experts take a look and draw comparisons with the current cycle?

Happy new year.

BP

post-3607-1135853783_thumb.jpg

Share this post


Link to post
Share on other sites

The real HP (i.e. adjusted for inflation) shows drops of upto 10% per annum. Over the course of time this is what adds up to 40% drop, its the area under the curve.

Share this post


Link to post
Share on other sites

The real HP (i.e. adjusted for inflation) shows drops of upto 10% per annum. Over the course of time this is what adds up to 40% drop, its the area under the curve.

Thanks for the reply - the penny drops - I think, but the area under the graph below the zero line is very small in comparison to that above the line!?

And I meant to add that "it will be different this time because of low inflation". So real % changes will look bigger when positive and smaller when negative?

Share this post


Link to post
Share on other sites

Imagine you bought an average house in 1988, then had to sell it at the -5% point. Forget real prices, focus on nominal.

You would have made a 27.5% loss, roughly.

Now consider my friend who bought in 1987, then got divorced sometime around 93-94. He didn't have an average house. He had a flash 5 bed georgian house that skyrocketed in value. He tells me that the house lost approx 40% of its highest valuation (higher than his actual purchase price) and his ex-wife bought him out on favourable terms.

He lives in a 2 bed flat with his new wife and child and is now in his mid 40's.

Edited by 2MeterBear

Share this post


Link to post
Share on other sites

Imagine you bought an average house in 1988, then had to sell it at the -5% point. Forget real prices, focus on nominal.

You would have made a 27.5% loss, roughly.

Now consider my friend who bought in 1987, then got divorced sometime around 93-94. He didn't have an average house. He had a flash 5 bed georgian house that skyrocketed in value. He tells me that the house lost approx 40% of its highest valuation (higher than his actual purchase price) and his ex-wife bought him out on favourable terms.

He lives in a 2 bed flat with his new wife and child and is now in his mid 40's.

I was there, bought naively in early '89 and saw the property decline by around 40% over the next 3 years, even wound up in negative equity, despite a decent deposit (it was my 3rd house). Now older and wiser I am waiting before getting back in the market.

Share this post


Link to post
Share on other sites

Interestingly the figures don't show massive negative percentages -5.6% in '92 (-9.3% real) was the lowest it got to. Yet we know that prices dropped by as much as 40% in many places. Why isn't that reflected in the figures, or have I interpreted them incorrectly?

The average reveals and yet conceals. Yes there were falls of 40-50% in some parts of the country and those dramatic cases attracted the most attention, whereas cases of stagnation were not dramatic and so didn't get a mention. What gets the news is what is topical. This creates distorted impressions. This is the curse of anecdote versus what the facts show. Anecdote is based on the extreme events that attract attention and get talked about, not a fair summary of the evidence. This is why it is a big error to listen to anecdote, although in practice most people do form their ideas this way: "Smoking can't kill me, my Aunt Mazie smoked like a chimney and lived to ninety - and she died in her sleep!"

For instance, in Scotland, prices continued to rise right through the last "HPC". I believe there are parts of London that have never seen a fall in property values. Prices in Lincoln collapsed, however.

That is why I would caution you not to be impressed by posts on this site of "falls of 40% around me". Maybe they're right for that area, or maybe not, but it's still only one little wafer of the big picture. Trying to get good data is always the basic problem, be it HPC, Global Warming, road safety, oil depletion, whatever.

Share this post


Link to post
Share on other sites

Were there ads in the paper from employment solicitors for people worried about redundencys? I've just spotted one as I was lighting the fire :)

I don't recall, but it makes me wonder what else we can expect to start seeing (or disappearing). Also will the Internet have any bearing on the outcome, ie more information available for those who can be bothered to look for it?

Share this post


Link to post
Share on other sites

Also will the Internet have any bearing on the outcome, ie more information available for those who can be bothered to look for it?

Interesting.

We now have ‘Land Registry’ so we can see what price was paid recently.

We will be getting 'HIP' with HCR so we don’t have to spend on the property

to get some basic facts first.

Estate agents will have to join a 'professional body' making them accountable.

Big players will be joining the estate agency business. (Tesco and Daily Mail)

I personally see many many years of stagnation.

Those that bought at peak better like where they live...

ballandchain0ys.png

because it will be a long time before they will be able to sell again.

Share this post


Link to post
Share on other sites

An idle trawl through the net led me to this article. Which, although meant as a school boy/girl academic exercise, I thought would be useful to inform those too young to remember the last HPC. I used their solution (link at bottom of the page) to build an excel graph, which I converted to a JPEG to include here.

Last_HPC_Chart.jpg

Interestingly the figures don't show massive negative percentages -5.6% in '92 (-9.3% real) was the lowest it got to. Yet we know that prices dropped by as much as 40% in many places. Why isn't that reflected in the figures, or have I interpreted them incorrectly?

Can some of you experts take a look and draw comparisons with the current cycle?

Happy new year.

BP

sure,nice graph,BP

...if you look at the rate of house price GROWTH you can pretty much say for certain we are at DEC1989/JAN 1990 on the chart.

the comparison is striking...in 1989 price growth slowed by almost exectly the same amount(the down-slope on th Right of the peak)....and then we had the undershoot period for 4 years.

4% rises are looking SERIOUSLY optimistic if history is repeating itself.I think 5% falls will be reported....it might be more as inflation was running at about 5% in the last crash

looks like 2007 will be the year it all goes REALLY tits-up!!......10%+ falls!!!

Edited by oracle

Share this post


Link to post
Share on other sites

As I've said elsewhere 2006 is IMHO going to be the pivotal year...

I think when we look back in a few years time 2005 may be seen as the pivotal year, 2006 will be the year in which the wider public sees the full picture and panic sets in.

Share this post


Link to post
Share on other sites

The average reveals and yet conceals. Yes there were falls of 40-50% in some parts of the country and those dramatic cases attracted the most attention, whereas cases of stagnation were not dramatic and so didn't get a mention. What gets the news is what is topical. This creates distorted impressions. This is the curse of anecdote versus what the facts show. Anecdote is based on the extreme events that attract attention and get talked about, not a fair summary of the evidence. This is why it is a big error to listen to anecdote, although in practice most people do form their ideas this way: "Smoking can't kill me, my Aunt Mazie smoked like a chimney and lived to ninety - and she died in her sleep!"

For instance, in Scotland, prices continued to rise right through the last "HPC". I believe there are parts of London that have never seen a fall in property values. Prices in Lincoln collapsed, however.

Does anyone have data regarding the nominal price falls in different parts of the country during the last crash? My recollection, which may be entirely incorrect as I was in my teens at the time, was that a lot of areas in the North and Scotland hadn't had large increases during the boom and nominal prices didn't fall by much during the crash.

Edited by a j

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...
Sign in to follow this  

  • 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.