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Is Housing A "giffen Good"?

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I have been musing recently about how consumer confidence can be down, unemployment up, spending down BUT house prices up and transactions up. I often am accused of thinking too much and being a bit of a Spock, but even a normal person should see that this does not add up. The only possible conclusion I can come to is that a portion of the general population has gone mad, addicted to housing. Like a 50 stone man who is gorging himself to death, or a smack addict who promises themselves one last hit, they are going against their instincts and doing it (buying) anyway.

Maybe I need to take the tin foil hat off and gorge on some drool inducing celebrity big brother. Maybe it is perfectly sensible to decide to cut a few quid off the credit card bill but then go out and spend 200 grand on a house....

Or maybe housing is a Giffen good, the higher the prices the more people cut back on other expenses so that they can afford to buy a house.

http://www.scoop.co.nz/stories/HL0204/S00060.htm

http://en.wikipedia.org/wiki/Giffen_good

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I have been musing recently about how consumer confidence can be down, unemployment up, spending down BUT house prices up and transactions up. I often am accused of thinking too much and being a bit of a Spock, but even a normal person should see that this does not add up. The only possible conclusion I can come to is that a portion of the general population has gone mad, addicted to housing. Like a 50 stone man who is gorging himself to death, or a smack addict who promises themselves one last hit, they are going against their instincts and doing it (buying) anyway.

Maybe I need to take the tin foil hat off and gorge on some drool inducing celebrity big brother. Maybe it is perfectly sensible to decide to cut a few quid off the credit card bill but then go out and spend 200 grand on a house....

Or maybe housing is a Giffen good, the higher the prices the more people cut back on other expenses so that they can afford to buy a house.

http://www.scoop.co.nz/stories/HL0204/S00060.htm

http://en.wikipedia.org/wiki/Giffen_good

think it's more akin to your "smack addict" personally.

....boy are they going to get screwed when the cold-turkey moment happens!

...does anyone remember the "heroin screws you up" pics with zammo mcguire on....maybe some artist among you would like to do a HP version!

Edited by oracle

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I have been musing recently about how consumer confidence can be down, unemployment up, spending down BUT house prices up and transactions up. I often am accused of thinking too much and being a bit of a Spock, but even a normal person should see that this does not add up. The only possible conclusion I can come to is that a portion of the general population has gone mad, addicted to housing. Like a 50 stone man who is gorging himself to death, or a smack addict who promises themselves one last hit, they are going against their instincts and doing it (buying) anyway.

Maybe I need to take the tin foil hat off and gorge on some drool inducing celebrity big brother. Maybe it is perfectly sensible to decide to cut a few quid off the credit card bill but then go out and spend 200 grand on a house....

Or maybe housing is a Giffen good, the higher the prices the more people cut back on other expenses so that they can afford to buy a house.

http://www.scoop.co.nz/stories/HL0204/S00060.htm

http://en.wikipedia.org/wiki/Giffen_good

Giffen goods: fascinating.

However, I don't think that houses would qualify. For house prices to be a Giffen good, a rise in house prices would have to create more demand for houses (presumably non-speculative demand).

When the Giffen good is something like bread in Victorian times, this works, because if the price of bread went up, people would cut back on vegetables (which were more expensive say), and replace those vegetables with more bread, so bread demand would go up.

Example.

You are a Victorian pauper with tuppence a day to spend on food. You must buy 7 units of food per day or starve.

To start with bread is a penny ha'penny a loaf (6 units). You spend six farthings on bread and ha'penny on a carrot (1 unit) as a special treat for teatime.

So, you buy one loaf of bread a day and one carrot. Total, 7 units.

Then, the price of bread goes up to a penny and three farthings for a loaf. You can no longer afford to include a carrot. The only way you can get your 7 units is to buy a loaf and then buy an extra bit of bread for a farthing.

So, even when the bread price goes up your bread demand has gone up.

Food glorious food!

frugalista

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I have been musing recently about how consumer confidence can be down, unemployment up, spending down BUT house prices up and transactions up.

consumer confidence = short term

unemployment = short term

spending = short term

Property = long term

The reason house prices are still high is because people see unemployment etc as being a 1-5 year issue, but housing is a long term issue.

I often am accused of thinking too much

careful, look what it did to Stephen Hawking

Edited by echo3

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You said "but even a normal person should see that this does not add up"

normal people in this country are stupid, if you think about things and use your head you are abnormal sad but true.

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In a debt-money economy built on consumer debt, if people really were 'cutting back' to pay that big mortgage in any great number, many of us would soon be out of a job as continual growth at all costs is essential to pay back the loans - more mind-numbing shopping, more pointless tat, more pointless transportation, more lawyers checking it all, more bean counters counting it all.

It's a game of musical chairs - only so many people can be debt free (the very rich and the super-frugal). There's no point Joe or Jolene Average being smug at how little debt he or she has, if their employment is in large part dependent on others being in debt.

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You said "but even a normal person should see that this does not add up"

normal people in this country are stupid, if you think about things and use your head you are abnormal sad but true.

So sad, but very very true.

The population of this country are nothing but mindless drones.

No thinking allowed.

Work, Work, Work.

Spend, Spend, Spend.

Borrow, Borrow, Borrow.

Die, Die, Die.

Its all getting a bit too '1984' for me :ph34r:

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  • 302 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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