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pyewackitt

How Far Must Prices Fall Before You Buy?

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So hi all,

Quite a few of us feel there is significant evidence that prices are slipping in many parts of the country.

The real question is how far must prices fall in percent from peak before you buy?

What do you think?

Where will be the bottom of the HPC curve in this cycle?

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I Posted 40% because I believe prices in my area (West Midlands) are already down 10%. I think this crash will see 50% down from the top. If "The Chart" on the home page is right prices could drop 60% as historically speaking the dip is always (not sometimes) about 50% of the preceding rise and prices went up more than 120%.

Whatever the current crash turns out to be, it will not be unpleasant for FTBs, STRs and others wanting to buy. Anyone who buys now is committing folly, utter folly!

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I have not voted, but will give this answer: when it becomes cheaper (not the same) to buy than to rent. As someone who wants the most for my money, that is the only time when I will consider it. To buy before this would be to rob myself of the opportunity of investing my money elsewhere for better returns.

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After 22 votes

20% [ 2 ] [9.09%]

25% [ 4 ] [18.18%]

30% [ 3 ] [13.64%]

40% [ 8 ] [36.36%]

50% [ 4 ] [18.18%]

Over 50% [ 1 ] [4.55%]

Stats:

Min: 20%

Max: Over 50%

Average: 37%

Median: 40%

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I said 40% since looking at house prices in my area and comparing them to those in 2000/2001 I can see prices have more then doubled. I don't expect them to go as low as that again but I think they will be close.

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So hi all,

Quite a few of us feel there is significant evidence that prices are slipping in many parts of the country.

The real question is how far must prices fall in percent from peak before you buy?

What do you think?

Where will be the bottom of the HPC curve in this cycle?

How`s things?

http://firstrung.co.uk/casestudies.asp?pag...&casestudykey=9

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LOL!

Nice one Lurker!

I'm no mug... the lease was set out on very poor terms for me and it would have been an awful deal... so no go and I pulled out.

Lost a little money but would rather do that and carry on renting than get ripped off and mortgage my life on a poor investment.

Have much to thank HPC for. Really started looking at the economy from first principles and didn't like what i saw one bit.

Now firmly waiting for the crash....

I now say 40%

After 40 responses:

10% [ 1 ] [2.50%]

15% [ 2 ] [5.00%]

20% [ 5 ] [12.50%]

25% [ 5 ] [12.50%]

30% [ 6 ] [15.00%]

40% [ 14 ] [35.00%]

50% [ 5 ] [12.50%]

Over 50% [ 2 ] [5.00%]

Stats:

Min: 10%

Max: Over 50%

Average: 34%

Median: 40%

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After 50 responses:

10% [ 1 ] [2.00%]

15% [ 2 ] [4.00%]

20% [ 7 ] [14.00%]

25% [ 5 ] [10.00%]

30% [ 9 ] [18.00%]

40% [ 15 ] [30.00%]

50% [ 8 ] [16.00%]

Over 50% [ 3 ] [6.00%]

Stats:

Min: 10%

Max: Over 50%

Average: 35%

Median: 40%

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So, to summarise after 51 votes.

80% won't buy unless the market goes down by 25% or more.

That'll be reassuring for the landlords amongst us, since any correction is unlikely to be more than 10% nominal.

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So, to summarise after 51 votes.

80% won't buy unless the market goes down by 25% or more.

That'll be reassuring for the landlords amongst us, since any correction is unlikely to be more than 10% nominal.

We are already 10% down in my area over the past 12 months (Nationwide)--West Midlands/Stratford. 40% more to go and I will probably buy.

Unemployment is growing in this area and there is nothing to hold prices up other than opinion whereas locals have been mewing as much as the rest of the country and their debt is just as real. Shops are closing, new builds stand empty despite discounts of at least 10%, EA windows are full of properties with new prices and reductions, few are optimistic about 2006.

If history repeats we should see a drop of 50% from the last peak. For the UK, that's 50% of roughly 130%. 10% down is just a downpayment on the full correction.

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After 70 responses:

5% [ 1 ] [1.43%]

10% [ 1 ] [1.43%]

15% [ 2 ] [2.86%]

20% [ 8 ] [11.43%]

25% [ 7 ] [10.00%]

30% [ 17 ] [24.29%]

40% [ 18 ] [25.71%]

50% [ 12 ] [17.14%]

Over 50% [ 4 ] [5.71%]

Stats:

Min: 5%

Max: Over 50%

Average: 35% (exactly)

Median: 40%

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A few facts might help;

The House Price index reached a peak of 125.2 in Q3 1989

It then fell to 100.1 by Q1 1993

It bobbled around just above that level until Q1 1996

and has now risen to 316 as of Q4 2005

A similar fall would see average prices go from £158K to around £126K - significant but hardly life changing!

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prices could drop 60% as historically speaking the dip is always (not sometimes) about 50% of the preceding rise and prices went up more than 120%. ... If history repeats we should see a drop of 50% from the last peak. For the UK, that's 50% of roughly 130%

It’s important to be realistic and maintain a proper sense of historical perspective on this, and not just throw large numbers about because they sound good. :) There really isn’t that much evidence for these 50—60% falls during 1990—1995 in the West-Midlands, see graph based on HBOS historical post town data.

n51ov8.jpg

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It's important to be realistic and maintain a proper sense of historical perspective on this, and not just throw large numbers about because they sound good. :) There really isn't that much evidence for these 50—60% falls during 1990—1995 in the West-Midlands, see graph based on HBOS historical post town data.

Looking at the graph, there has been an unprecedented rise. Would it be foolish to assume that the correction will be as equally unprecedented?

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Looking at the graph, there has been an unprecedented rise. Would it be foolish to assume that the correction will be as equally unprecedented?

Yup, up about 3x in nine years, a huge amount, but having debated this over several years on HPC we now know that all of the rise up to about 2002—2003 can be explained by then rather mundane and unexciting "affordability" argument operating on the back of a protracted fall in interest rates from around 1992 onwards and the continued growth in earnings (confirmed by numerical modelling, see links given above) leaving only the last bit as the speculative bubble.

Deflating the bubble over the next five years takes off about 15—20%, but any more requires a reversal of the interest rate “affordability” mechanism – i.e. requires an unwinding of the rate cycle back to pre-1992 levels (clearly possible, but not automatic).

Edited by spline

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If the average wage is 28K, then an average house needs to be ideally would be between 3 or 4 times that.

4x wage = 112k

Currently the average house price is ~= 186k, therefore to return to the limit of sensible historic levels requires a 40% drop (down to 111.6k).

Sometimes I think this isn't possible.. but 5 years ago I wouldn't have though prices could tripple in my area!

At the moment I still haven't worked out if we are going down the Japnese route, or the fast crash overshoot.. Either way when I fully rationalise my thoughts I expect it to happen.

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After 103 votes - the scores stand:

5% [ 3 ] [2.91%]

10% [ 1 ] [0.97%]

15% [ 3 ] [2.91%]

20% [ 19 ] [18.45%]

25% [ 10 ] [9.71%]

30% [ 25 ] [24.27%]

40% [ 26 ] [25.24%]

50% [ 12 ] [11.65%]

Over 50% [ 4 ] [3.88%]

Stats:

Min: 5%

Max: Over 50%

Average: 32.3%

Median: 40%

Comments so far:

The median value was 30% for the first time throughout much of the last 33 votes (70-103)

The average expected fall (currently 32.3%) has reduced from the first 50 responses.

In short it seems those holding back to invest (i.e. us HPC'ers) feel that that house prices are typically one third overvalued.

This means the following reductions should be expected (before the bears get back in the market):

UK Average

£186,431 at 32.3% reduction = £126,213

London

£270,029 at 32.3% reduction = £182,809

Source (ODPM November statistics)

http://www.odpm.gov.uk/pub/627/A2Mixedadju...b_id1161627.xls

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And at 125 voters we have:

5% [ 3 ] [2.40%]

10% [ 1 ] [0.80%]

15% [ 3 ] [2.40%]

20% [ 24 ] [19.20%]

25% [ 11 ] [8.80%]

30% [ 36 ] [28.80%]

40% [ 28 ] [22.40%]

50% [ 14 ] [11.20%]

Over 50% [ 5 ] [4.00%]

Stats:

Min: 5%

Max: Over 50%

Average: 32.3%

Median: 30%

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Guest consa

Spline -

Whilst your mathematical analysis is good it still has some missing elements, such as:-

You need to factor in Council tax/Petrol/Gas/Electric rise as a percentage of what an equivalent increase in % terms would equate to the same amount of an average mortgage payment from a particular point in time, if you know what I mean, these are relevant and shouldn't be ignored as the government do when calculating inflation, <_<

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  • 335 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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