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2ndtb83

When you buy affects when you sell: BOE

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Interesting blog by BOE staffer:  When someone bought a house turns out to be an important factor in predicting whether the house will be sold again soon, and at what price. People who bought during a boom aim at achieving higher prices when they sell and, as a consequence, move less often. https://bankunderground.co.uk/2017/01/20/history-dependence-in-the-housing-market/#more-2516

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Quite I guess no one likes to loose money on a house. It's like questioning their intellect and decision making sine "everyone wins with property" of course they don't and if people just saw it as a home to live in then it wouldn't be a problem.

 

I guess a bit is also to do with interest only mortgages in the past If you brought in a boom you couldn't sell in a bust as the bank won't let you because you couldn't clear the mortgage.

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1 hour ago, 2ndtb83 said:

Interesting blog by BOE staffer:  When someone bought a house turns out to be an important factor in predicting whether the house will be sold again soon, and at what price. People who bought during a boom aim at achieving higher prices when they sell and, as a consequence, move less often. https://bankunderground.co.uk/2017/01/20/history-dependence-in-the-housing-market/#more-2516

Good find.  If and when the speculative bubble pops, late entrants will hold on to their assets the longest and lose the most.  Seems reasonable.

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About

Bank Underground is a new blog written by staff at the Bank of England. Our goal is to bring more of our thinking into the public domain and to showcase our analytical and research output. We hope to contribute to the wider debate on areas that are relevant to the Bank’s work.

 

If you want to get in touch, please email us at bankunderground@bankofengland.co.uk

Edited by 200p

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People who bought during a boom aim at achieving higher prices when they sell and, as a consequence, move less often.

In a bull market, the easiest option is relist at higher and higher prices as soon as there is a "bite" on the hook. There is a transaction cost with buying and selling.

Edited by 200p

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"A possible interpretation of the results is the notion of anchoring or reference dependence: in estimating the current value of their house, owners tend to give excessive weight to the price they paid (vis-à-vis the market evolution of prices); if they bought at high prices, this will lead to higher advertised prices and lower selling probability. A competing explanation is the so-called down-payment effect: for home movers, a large percentage of their deposit comes from the sale of their previous home."

A third interpretation is they could never afford the property, were allowed to lend beyond their means in the midst of a bubble facilitated by the Bank, were provided with almost-zero rates by the Bank since the price correction to avoid excessive defaults, correctly view the Bank and government as doing everything within their powers to maintain another bubble, and so expect to recoup the original sum they couldn't afford to use as leverage for another loan.

There's no sense appealing to rational or even behavioural economics when you're the people distorting the market beyond recognition.

But yeah, maybe it's what they said.

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There is no ladder.....When prices so high, interest rates are on the floor and growth is stagnant in both wages for the majority above the rate of going inflation....and growth in what are prepared to spend, what is available that can be bought that is different or inovative enough that will improve anyone's living experience in any way that is noticeable enough that would want to buy into it.;)

Edited by winkie

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Hardly a revelation - its the same with shares...folks hold if they can rather than sell for less than they paid.  A common mistake...all the evidence may point to selling now being the logical course of action but this evidence will be ignored and the purchase price looms large.  'Dead loss' - important concept to understand.

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I wonder if the causality can be the other way around.

 

Your level of innumeracy influences when you buy.

 

Ie a hpi addict buys at peak following sentiment, and then upgrades to a bigger house at the next peak thinking they've cleverly let the market recover, not realising that the cost to upgrade is greater as a result.

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2 minutes ago, Wayward said:

Hardly a revelation - its the same with shares...folks hold if they can rather than sell for less than they paid.  A common mistake...all the evidence may point to selling now being the logical course of action but this evidence will be ignored and the purchase price looms large.  'Dead loss' - important concept to understand.

Yes

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I don't know of anyone watches that programme on TV called the tipping point, but when you see that people who win a lot of money/counters in one particular section will often stick to that section with not a lot going for it rather than opting for another section that has a higher probability of collecting more money/counters.....Says it all really, I made from it this time so it must be good/always be like that.......people.;)

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On 1/20/2017 at 0:04 PM, 200p said:

How can an individual turn £100 into £1m please?

What a strange question. Just put it into a savings account. Compound interest will eventually (over 150 years or so) turn your 100 into 1M. I dislike the expression but "simples innit".

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On 1/20/2017 at 0:41 PM, Noallegiance said:

Someone please put together a coherent and intelligent email together to ask for a blog explaining every major point continually discussed in the BoE clueless thread.

Yes, I'm sure we could all help draft a letter with key questions and evidence. I'm sure our input will be sane compared with any 118-BTL style rantings.

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On 20/01/2017 at 0:04 PM, 200p said:

How can an individual turn £100 into £1m please?

Ok, smarty pants.

Let me rephrase it, how can an individual legally turn £100 into £1m, in one year, with little effort, little risk, and with each £unit have at least or more spending power at the start!

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On 1/22/2017 at 7:08 PM, 200p said:

Ok, smarty pants.

Let me rephrase it, how can an individual legally turn £100 into £1m, in one year, with little effort, little risk, and with each £unit have at least or more spending power at the start!

OK, I admit I don't know, but I really like to find out! 

I am thinking the only way would be inverting something that replaces oil or some other sort of modern day alchemy.

 

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1 hour ago, Stateless said:

OK, I admit I don't know, but I really like to find out! 

I am thinking the only way would be inverting something that replaces oil or some other sort of modern day alchemy.

 

Bitcoins.. If one had bought and sold some 20 times in the bitcoin era... $1 would become $71,705,000 between July 2010 and March 2016. .

Now, where can I buy a DeLorean? 

 

bitcoins_if_only_.png

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On 20/01/2017 at 11:38 AM, Bear Hug said:

Good find.  If and when the speculative bubble pops, late entrants will hold on to their assets the longest and lose the most.  Seems reasonable.

Indeed, which is why the best deals are from people who need to sell, DDD and also developers with excess stock or left holding part exchanges. Owner occupiers are usually the worst for sticking to a made up telephone number price.

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