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House Price Crash Forum

What's the literacy rate?


Gavin
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Speaking to a friend the other night, I was a little suprised to listen to his views on the market following my brief flirt with the media.

I had always considered him to be more interested in everything other than houses, yet he was talking about lifetime mortgages coming out of Japan etc etc to support his mildly bullish view.

Do you think we have become arrogant that only us look at prices, patterns and understand the rent/price (dis)equilibrium. In short, are we flattering ourselves that people are ignorant or illinformed, when infact they have a good grasps of the facts yet simply dissagree with us?

Any examples of mass delusions?

p.s. Anyone going to the v festival in Chelmsford this weekend? I am camping, but not in the style of John Inman.

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There's a vast amount of very well-informed, literate and knowledgeable people out there, including genuine "property experts" who most of the bears on here would obviously disagree with though still respect, so yes "in fact they have a good grasp of the facts yet simply disagree with us?" I'd go along with that.

However, a good many such people are misusing or mis-applying their knowledge. Reading the market is often a matter of gut feeling and commonsense rather than an analysis of facts which might be partly irrelevant anyway. Loads of people on this site have commented that the market is driven by sentiment and hype, I personally am of the opinion that it's also driven by practical reasons such as rising base costs and quality of life, and it's a matter of opinion how important these are in relation to economics. People often also like to believe what they want to happen; then there's also the vested interest which comes into play as does herd instinct. Some people, including knowledgeable ones, even believe TV propaganda.

The financially astute and knowledgeable people who advised people to invest in the stock market in 2000 (I didn't) obviously know a lot more than the average member of the public yet still got it wrong.

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Guest wrongmove

I don't think it helps that that even the "quality" media use some pretty strange languauge.

e.g Mortgage lending reaches record heights in yesterday's Gaurdian:

"Mortgage approvals, loans agreed but not completed, were also up in July, suggesting buyers have not yet been completely put off by reports of a market slowdown. "

Surely if buyers had been completely put off then mortgage approval would have stopped ! Shouldn't that read

""Mortgage approvals, loans agreed but not completed, were also up in July, suggesting buyers are somewhat encorouged by reports of a market slowdown. " ?

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Does it matter? Even the most informed experts are unable to time markets. A well known adage:

"There is no price so high that it can't go higher, no price so low it can't go lower"

exists in stockmarket circles. Property is no different. Central london £10m flats show the former, Welsh valley pit terraces the latter.

Whether posters recognise it or not, this site is devoted to market timing. Fact is I see little more than fundamental analysis. But as a market timing tool FA is FA use.

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In my opinion the majority of people in this country are ignorant and illinformed When it comes to property they live in a fantasy land and seem to have no recollection of the late eighties/early nineties crash.

As an example, last night I was having a drink with a friend who together with her father own 6 BTL's in London, she has no intention to sell them (even though they are mainly ex-council and will soon be worthless) and in fact said if she could lay her hands on any money she wouldnt hesitate to buy some more!

This is exactly why the crash this time round will be horrendous - BTL fools, and following yesterday's figures its obviously already started in London.

PS I gave up trying to reason with her over a year ago.

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Nicely put hra. It has been entirely possible to read completely contradictory views on this topic from 'respected' sources and any number of economic experts within days of each other's headlines. The answer is nobody knows.

A lot of well argued points have been posted over the past few weeks on this website based on economic principles. But as you say houses are not about sensible economic decisions, they are lifestyle and emotional decisions and no economist can gainsay that (or indeed people's gullibility). It's all about the fundamental need of most to have their own space. And despite the well argued points that rent is not dead money, that only works if the difference between renting and buying is monthly invested. Of course it never is and mortgage payments can be seen as enforced saving - you're not going to miss that payment unless you are stupid or in trouble. At the end of 25 years your family have got a real asset. The poor renters haven't.

All the more important that a downturn will flush out a lot of BTLs and free up properties for people who are desperate not to be contributing to a richer individual's pension scheme.

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Gavin

I can understand what your saying, I do at times think have I might have got this wrong, but thats a perfectly normal thing to think when you have put yourself in our position.

I think with pretty much everything in life you can come up with an argument to support your stance. I could come up with an argument that supports a bull position but that doesn't mean on consideration I believe it to be more likely than my current bear state of mind.

I think one thing you would find is people and that includes us will look at as much evidence that it takes to support our views, however in our position we have had to do more looking to support it (or more likely not destroy it). Your firends position is supported in the media day in day out by people with a vested interest such as the building societies and estate agents. So all he really has to do is watch TV and his argument is supported.

It does get a little difficult to discuss with people when they simply respond with statements like "but there was a 2% increase in property last month it was on the TV".

We on the other hand have possibly looked at many more sources to search out our information. What I have found is plenty of people in a bullish position giving less than detailed reason for a continued grow, normally just a single line of property being a good long term investment and no real substance.

Another thing is that all the time people are in a comfortable position they don't want to rock the boat. If your making 20% each year on your property why both to look at why, your just happy with the fact its doing that.

I was speaking to somebody the other day about this, I would'nt have said he was a bull but he has a property which he got at just the right time. He just simply hasn't thought about the market. He simply didn't believe I was going to move back into London to start renting, he like most of the population have the "renting is dead money attitude". But with just a few minutes of explanation he agreed that what I was doing was a good idea.

So in essence I think what I'm saying is that its not that people are ignorant but that they are simply spoon fed information by the media and thats what they base thier judgments on. Because there is no interest in a crash from big buisness only small individuals then the media do not report it. As most people are not interested in a crash, then information that says one won't happen is enough to satisfy them.

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