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apom

My Explanation Of The Last Few Decades..

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Mr King is nervous that homeowners may not realise that although low interest rates make mortgage repayments affordable, high inflation will not erode the value of their borrowing, as it did in the 1970s - and when they do catch on, house prices will plunge. (Early 2003 comment)

House prices are a matter of opinion, but debt is real..

and only for the second time in the house market will this be true..

It is different this time.

It all comes down to:

Affordability.

i:e The ability to buy and sell in the property market, on the national level, not the individual.

BEARS, bare with me.. Bulls.. see what you think..

The much lamented crash of the late 1980's early 1990''s can clearly show massive drops in the value of homes, but it has also been long talked about on this site that house prices have crashed many times since the war.

This graphs show's that to be incorrect.

http://www.housepricecrash.co.uk/forum/ind...pe=post&id=2281

There has been one price drop in records

I agree.

If it were that simple.

What has happened over time is that houses have become unaffordable and then affordable many more times then can be seen on the above chart.

So why should this actually be a terrifying and conclusive argument toward the Housing markets reliance on and effects to the economy at large.?

To see that we have to consider what apart from price drops could make price affordable again, and what evidence we have to show that house prices have become unaffordable many times more then the above chart shows. and then of course affordable again..

The next chart shows house prices over the same period but this time also measured against the average wage.

http://www.housepricecrash.co.uk/forum/ind...pe=post&id=2273

This chart has long been available on this site, but its true economic impact can not be judged fully without first referring to the first chart, the chart that shows only price rises until the 1989-2005 (ish) price realignment.

What can clearly be seen is that House prices rise against salary, but hit a peak which then falls back to the average affordability multiples, but each time it does this without dropping in price.

This shows that house prices have returned to affordability by driving massive and crippling periods of inflation against the economy at large. Money tied up into housing combined with an asset that can only hold a value related to affordability.

This makes sense as the market must be a fluid one, people need to sell and therefore they need people to sell them to.

The inflation periods can be seen, both charts together show that inflation drove salaries up to meet the inflated house prices.

This third chart can quash any ideas that wider economic turmoil's triggered the inflation, or certainly it shows that the recession periods followed the events I have referred to.

http://www.housepricecrash.co.uk/forum/ind...pe=post&id=2275

With speculation in the press currently suggesting that the counties debt level's may be reducing the population's spending level's to a level that could show a recession on the way.

Am I suggesting that house prices cause recessions?

I am not, look to the graph's and see what they say to you.

So what can be argued is that house prices swing between affordability and unaffordability throughout the periods in the graph.

This has to happen, as I have said before to have a value against an asset it must be an affordable asset.

In this case massive inflation also shows that the asset must be affordable not only to the individual buyer but the individual buyers debt burden must be affordable to the economy at large.

So why did house prices crash in the first half ot the nineties?

This is when the decisions was made to protect the economy from inflation.

Before the nineties crash each time house prices drove the economy to bring wages up to meet the affordability requirements of the market. This uses inflation. Hard times, but those struggling with debt find their debt eased with wage inflation.

Providing their company doesn't go splat as it struggles to pay the higher salaries and fails in the subsequent recession.

In the nineties inflation was stopped.

Houses became affordable as they must, but this time with economic policies preventing the crippling inflation of the previous adjustments.

This time the debt remained high. The re-sale value of the houses dropped and people were caught in negative equity.

A recession followed, but with the economy being protected from inflation it was not of the same impact as in previous adjustments.

a gentle recession....

This worked, but those in debt suffered.

those with savings didn't so much.

What is different this time?

Mr King has said that if wage inflation in the public sector outstrips 2.5% IR's will rise.

He has confirmed in that statement that inflation will not bring about the affordability to the housing market.

His job is to prevent inflation.

Only to prevent inflation.

Mr King is nervous that homeowners may not realise that although low interest rates make mortgage repayments affordable, high inflation will not erode the value of their borrowing, as it did in the 1970s - and when they do catch on, house prices will plunge. (Early 2003 comment)

You decide

Hell all I have given here are graphical representations

Edited by apom

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Mr King is nervous that homeowners may not realise that although low interest rates make mortgage repayments affordable, high inflation will not erode the value of their borrowing, as it did in the 1970s - and when they do catch on, house prices will plunge. (Early 2003 comment)

House prices are a matter of opinion, but debt is real..

and only for the second time in the house market will this be true..

It is different this time.

It all comes down to:

Affordability.

i:e The ability to buy and sell in the property market, on the national level, not the individual.

BEARS, bare with me.. Bulls.. see what you think..

The much lamented crash of the late 1980's early 1990''s can clearly show massive drops in the value of homes, but it has also been long talked about on this site that house prices have crashed many times since the war.

This graphs show's that to be incorrect.

http://www.housepricecrash.co.uk/forum/ind...pe=post&id=2281

There has been one price drop in records

I agree.

If it were that simple.

What has happened over time is that houses have become unaffordable and then affordable many more times then can be seen on the above chart.

So why should this actually be a terrifying and conclusive argument toward the Housing markets reliance on and effects to the economy at large.

To see that we have to consider what apart from price drops could make price affordable again, and what evidence we have to show that house prices have become unaffordable many times more then the above chart shows.

The next chart shows house prices over the same period but this time also measured against the average wage.

http://www.housepricecrash.co.uk/forum/ind...pe=post&id=2273

This chart has long been available on this site, but its true economic impact can not be judged fully without first referring to the first chart, the chart that shows only price rises until the 1989-2005 (ish) price realignment.

What can clearly be seen is that House prices rise against salary, but hit a peak which then falls back to the average affordability multiples, but each time it does this without dropping in price.

This shows that house prices have returned to affordability by driving massive and crippling periods of inflation against the economy at large. Money tied up into housing combined with an asset that can only hold a value related to affordability.

This makes sense as the market must be a fluid one, people need to sell and therefore they need people to sell them to.

The inflation periods can be seen, both charts together show that inflation drove salaries up to meet the inflated house prices.

This third chart can quash any ideas that wider economic turmoil's triggered the inflation, or certainly it shows that the recession periods followed the events I have referred to.

http://www.housepricecrash.co.uk/forum/ind...pe=post&id=2275

With speculation in the press currently suggesting that the counties debt level's may be reducing the population's spending level's to a level that could show a recession on the way.

Am I suggesting that house prices cause recessions?

I am not, look to the graph's and see what they say to you.

So what can be argued is that house prices swing between affordability and unaffordability throughout the periods in the graph.

This has to happen, as I have said before to have a value against an asset it must be an affordable asset.

In this case massive inflation also shows that the asset must be affordable not only to the individual buyer but the individual buyers debt burden must be affordable to the economy at large.

So why did house prices crash in the first half ot the nineties?

This is when the decisions was made to protect the economy from inflation.

Before the nineties crash each time house prices drove the economy to bring wages up to meet the affordability requirements of the market. This uses inflation. Hard times, but those struggling with debt find their debt eased with wage inflation.

Providing their company doesn't go splat as it struggles to pay the higher salaries and fails in the subsequent recession.

In the nineties inflation was stopped.

Houses became affordable as they must, but this time with economic policies preventing the crippling inflation of the previous adjustments.

This time the debt remained high. The re-sale value of the houses dropped and people were caught in negative equity.

A recession followed, but with the economy being protected from inflation it was not of the same impact as in previous adjustments.

a gentle recession....

This worked, but those in debt suffered.

those with savings didn't so much.

What is different this time?

Mr King is nervous that homeowners may not realise that although low interest rates make mortgage repayments affordable, high inflation will not erode the value of their borrowing, as it did in the 1970s - and when they do catch on, house prices will plunge. (Early 2003 comment)

You decide

Hell all I have given here are graphical representations

Great post again apom. And Riser's graph makes another appearance (truly the best of the last year for me along with the demographics/prices one showing the HP doom ahead 2010-2023!). Legend graph work recently guys.

I think apom must occupy more time per day in his head on HPC issues than any other person? Anyone disagree? Keep it up apom. If I ever flag (rare) I see one of your posts and common sense drags me back to my feet.

Edited by Tempest

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Great post again apom. And Riser's graph makes another appearance (truly the best of the last year for me along with the demographics/prices one showing the HP doom ahead 2010-2023!). Legend graph work recently guys.

I think apom must occupy more time per day in his head on HPC issues than any other person? Anyone disagree? Keep it up apom. If I ever flag (rare) I see one of your posts and common sense drags me back to my feet.

thank you... :)

the market terrified me.. but I see now that I have made the right choice.. as drops have ment that I have saved myself a fortune..

I steel all graphs.. and then try and work out what it means.. to me..

thank you for your graphs ... :)

Remember, most of us on here are not a bears through circumstance, we are bears through understanding..

After all a 9 times salary self certified Interest Only mortgage would be easy to get :)

Edited by apom

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thank you... :)

the market terrified me.. but I see now that I have made the right choice.. as drops have ment that I have saved myself a fortune..

I steel all graphs.. and then try and work out what it means.. to me..

thank you for your graphs ... :)

Remember, most of us on here are not a bears through circumstance, we are bears through understanding..

After all a 9 times salary self certified Interest Only mortgage would be easy to get :)

apom, go to bed. You will get to sleep honest. Just count the sheeple who have piled in recently to the HPI and dream of blue turtles. One day this year you will wake up untroubled by HPC my son. Someone here will say to you "you were right".

Edited by Tempest

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The only tool that will crash the housing market is Interest Rates.

I think interest rates will rise in 2007 to a level that will make most mortgages unafordable to those who think a fixed 2yr rate of 2% is realistic.

However that said, if the rates do not go up as I think they will then I'm afraid the madness will continue.

Yesterday the EU issued yet another warning to the UK telling Brown that he has overspent and should either raise taxes or reign in spending in the public sector. It is going to be interesting to see what type of economy the Labour party will hand over to the Conservatives in the next election after the Iran war.

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The only tool that will crash the housing market is Interest Rates.

I think interest rates will rise in 2007 to a level that will make most mortgages unafordable to those who think a fixed 2yr rate of 2% is realistic.

However that said, if the rates do not go up as I think they will then I'm afraid the madness will continue.

Yesterday the EU issued yet another warning to the UK telling Brown that he has overspent and should either raise taxes or reign in spending in the public sector. It is going to be interesting to see what type of economy the Labour party will hand over to the Conservatives in the next election after the Iran war.

there is no sipps now..

BTL new builds... not allowed anymore by the big lenders..

and FTB's..

Thats less then 7%..

IR's are high enough..

there just are not enough buyers..

:)

I sleep fine..

most of the time..

night all

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The only tool that will crash the housing market is Interest Rates.

I think interest rates will rise in 2007 to a level that will make most mortgages unafordable to those who think a fixed 2yr rate of 2% is realistic.

However that said, if the rates do not go up as I think they will then I'm afraid the madness will continue.

Yesterday the EU issued yet another warning to the UK telling Brown that he has overspent and should either raise taxes or reign in spending in the public sector. It is going to be interesting to see what type of economy the Labour party will hand over to the Conservatives in the next election after the Iran war.

Despite the many stealth taxes the public finances are a shambles......a public sector overspend of 3.5% of GDP would be quite understandable in the midst of a recession but where we are now ....at the turning point before the drop 3.5% is appalling.......and makes one wonder how big the deficit will be when we're in recession.

but at least the deficit on foreign trade (currently about 5.5% of GDP) will diminish :lol:

Edited by Michael

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...

So why did house prices crash in the first half ot the nineties?

This is when the decisions was made to protect the economy from inflation.

...

Great post apom. This might be the clue to future developments. In the 90s governments were afraid of inflation because of the 70s experience. However this fear has now disapated and they may choose an inflationary path. I think it's called the "regulatory cycle".

Another point comparing with the 70s is that debt levels were lower in the 70s but increasing as the fear of debt left by the great depression declined. Now there is no fear of debt and it seems everyone is maxed out so the only way to inflate is a currency devaluation (inflate or die).

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yes, it can't be stressed how much a low inflation and low IR environment transfers the burden of mortgage payments from the early part of the loan period to the latter.........................

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Will the BOE ignore their remit to keep inflation under 2%? I guess this is happening given what is included in the inflation basket.

Inflation will be very damaging to STR's and FTB'ers - but I guess everyones wages will increase together.

However won't many jobs be lost if bosses struggle to pay the increases?

The future doesn't look great - a recession looms that is for sure!!

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I think apom must occupy more time per day in his head on HPC issues than any other person? Anyone disagree? Keep it up apom. If I ever flag (rare) I see one of your posts and common sense drags me back to my feet.

Abd the style of his posts are almost poetic....

And yet....

And yet...

Out there..

There where the debt is..

Lingering.

Lingering.

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Why do we not buy now?

for house prices are not affordable.

an un-affordable price is not s sustainable price.

tha much is obvious.

It staggers me daily that it does not seem so abovious to all .

but as I said prices that are not affordable, so they will become so.

If I believed that inflation would hit as it did in the 70's I would buy... Why not, inflation would shrink my debt and I would just have to wait for my debt to become easier.. and looking at the trends shown above I would not have to wait many years.. Just hold on to a job.

But I have been told that the economy will be goverened and controlled to make inflation stay as low as they can keep it.

which would not reduce my debt.

Which means affordable housing would mean dropping prices

Which would leave me in negative equity with debt that is not getting any easier.

So I must be patient and believe that in this at least those that govern our lives have told true.

In saying that inflation will be held low we have been promised that prices will fall or remain unaffordable.

Two options.

Only one of which is possible.

Edited by apom

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If I believed that inflation would hit as it did in the 70's I would buy... Why not, inflation would shrink my debt and I would just have to wait for my debt to become easier.. and looking at the trends shown above I would not have to wait many years.. Just hold on to a job.

And that's the key point. If inflation lets rip, nobody necessarily fills up your company's bank account with compensatory money to cover the increasing staff wage demands. So you might not hold onto that job with high inflation...

(To all those homeowners who say "your salary will always go up")

Why do they wish potential redundancy on people?

:blink:

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  • 337 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%



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