The Saturday Stunner

[classixuk]

When you look at this image you wonder how on earth stagnation was ever an option!

I should add that Burnt Before posted this image in a topic that ended up in the troll sub-forum! Perhaps one of the moderators needed more coffee that morning?

What do you guys think of the graph? Will stagnation ever be an option?

[Its time to buy]

stagnation could be a an option lots of people go back in on the dips - banks continue to lend out even more money via new financial products.

Though as HPCers we d be on tender hooks - will there be a crash, wont there, will there, wont there, wont there, will there, wont there, will there, wont there, will there, wont there, will there, wont there, will there, wont there, will there, wont there, will there, wont there, will there, wont there, will there, wont there, will there, wont there, will there, wont there, will there???!!!By then we d be really old and saved a huge deposit. But at least we d always have a good nights sleep and have money in the bank

Edited February 18, 2006 by notanewmember

[Casual Observer]

Though as HPCers we d be on tender hooks -

"Tender hooks" I love that, it conjures up all kinds of crazy images! Abu Hamza in a nice, caring mood?

The phrase is tenterhooks!

http://www.worldwidewords.org/qa/qa-ont1.htm

Edited February 18, 2006 by Casual Observer

[Badger]

That's 'tenter hooks', though we are, on the whole, gentle souls.

[Guest The_Oldie]

I should add that Burnt Before posted this image in a topic that ended up in the troll sub-forum! Perhaps one of the moderators needed more coffee that morning?

The log doesn't show it as having been moved, it looks like it was originally posted in the troll sub forum .

[IMupNorth]

Stagnation can't go on 4 ever, times change and thats a fundamental that no one can get away from.

All we can have a good chance at predicting is the near term. The most likely outcome, taking everything into account is that stagnation will continue for at least another 2 years. The market might go down a few % but then it'll probably go back up a few %. I think it will wobble around a little, but with a flat trend.

The longer it continues its soft landing and hence the nearer it gets to its trend line, the less marked the crash is going to be, such that it is highly likely that you won't even really see the benefit.

Good luck to all you long timers, cos you are going to need it.

[FollowTheBear]

Oh give over, ImUpNorth. What your saying may be true if interest rates fall, unemployment falls, government spending keeps booming, banks keep lending, consumers keep spending, IT jobs are insourced back to Britain and pigs evolve wings and start flying.

Edited February 18, 2006 by FollowTheBear

[Without_a_Paddle]

The graph looks to be 'adjusted' for inflation.

So if prices stagnate in terms of pound notes then the graph will show a fall.

The flat line you have drawn would imply that house prices will continue to rise (assuming we get '+ve' inflation)

[Flick]

I'm really beggining to think that we have been placing to much faith in that graph, of house prices adjusted for inflation. Sorry to piss on your parade as believe me I want a HPC more than most.

If someone would be kind enough to stick up a graph of unadjusted nominal house prices and I think you will see that stagnation in nominal terms is a real option. - most those dips just didnt really happen in nominal terms - the prices stuck.

The inflation measure is fudged beyond belief, and the doubling in supply of paper money has just meant that real, finite assets such as oil, gold & houses have predictably doubled (or more) in their paper-value worth.

Losing the faith.

[Golden Shower]

The graph is adjusted for inflation. How is it going to help bears who expect a drop in nominal prices? In fact what you see on the graph may well happen but many could be left disappointed if prices don't drop in nominal terms. How many could have bought and seen inflation erode their debt?

Edit: Ahhh, Flick made the point I was trying to. A good point though, could we see a graph of nominal prices? I bet it wouldn't be as dramatic as one of real prices.

Edited February 18, 2006 by Golden Shower

[Guest muttley]

Stagnation can't go on 4 ever, times change and thats a fundamental that no one can get away from.

All we can have a good chance at predicting is the near term. The most likely outcome, taking everything into account is that stagnation will continue for at least another 2 years. The market might go down a few % but then it'll probably go back up a few %. I think it will wobble around a little, but with a flat trend.

The longer it continues its soft landing and hence the nearer it gets to its trend line, the less marked the crash is going to be, such that it is highly likely that you won't even really see the benefit.

Good luck to all you long timers, cos you are going to need it.

You start with "Stagnation can't go on 4 ever" and the rest of your post is about how stagnation will be the trend for the foreseeable future.

[Scipio_Africanus]

classixuk,

I think your projection is being rather optimistic - are you really suggest a GSD to just below the mean? Newtonian mechanics suggests that each reaction must create an opposite one, and I would therefore see prices as going below the mean by a similar proportion to that which they went above it. I am therefore of the opinion that when property prices do crash, it'll be massive, and prices will go back to down to something like Q1 1999 levels. Look back at earlier falls - you don't stop on the trend line. Similar to any asset bubble when it pops - after the dotcom bubble people were able to make so much money in 2003 because tech shares were hammered to unrealistically low levels. Yes, I am of the opinion the most UK property is going to halve in value in the next five years.

[war]

classixuk,

I think your projection is being rather optimistic - are you really suggest a GSD to just below the mean? Newtonian mechanics suggests that each reaction must create an opposite one, and I would therefore see prices as going below the mean by a similar proportion to that which they went above it. I am therefore of the opinion that when property prices do crash, it'll be massive, and prices will go back to down to something like Q1 1999 levels. Look back at earlier falls - you don't stop on the trend line. Similar to any asset bubble when it pops - after the dotcom bubble people were able to make so much money in 2003 because tech shares were hammered to unrealistically low levels. Yes, I am of the opinion the most UK property is going to halve in value in the next five years.

Economics need not behave like Newtonian mechanics. Saying that, I have to agree that prices are too high and unaffordable, the high prices are maintained only by amateurs and speculators.

[Elizabeth]

Stagnation can't go on 4 ever, times change and thats a fundamental that no one can get away from.

All we can have a good chance at predicting is the near term. The most likely outcome, taking everything into account is that stagnation will continue for at least another 2 years. The market might go down a few % but then it'll probably go back up a few %. I think it will wobble around a little, but with a flat trend.

The longer it continues its soft landing and hence the nearer it gets to its trend line, the less marked the crash is going to be, such that it is highly likely that you won't even really see the benefit.

Good luck to all you long timers, cos you are going to need it.

Might I point out to you that it has been in "soft landing" mode for... realistically all of 6 months as best. It was still undergoing rises in July last year and the mood was still unequivocally positive on all but this site. And the "soft landing" is starting to look like actually falls except in Londinium (centre of the dark empire). Hence it is unlikely to get anywhere near the trend line anytime soon. It is if you note around 1/3 to 3/5ths above the trend line. I'm looking at a plummet and I won't be buying until it is 10% below the long term trend line. If that means I never have a house, I'm fed up, I've wanted a house for 30 years (I grew up in crappy goverment rental) so at this stage I am prepared to conceed it to lost dreams.

[Flick]

"stick up a graph of unadjusted nominal house prices and I think you will see that stagnation in nominal terms is a real option. - most those dips just didnt really happen in nominal terms - the prices stuck"

You need to think more deeply:

+ House prices have NEVER been so high in rklation to incomes

+ Inflation is low now, so it will not bail us out thru rising incomes,

+ If inflation rise, so will interest rates, and that will crash many overgeared property investors

vs

Best I could find at short notice I'm afraid - though unadjusted one only goes to2003.

It doesnt look quite so dramatic.

Is inflation really that low? Yes our measure of inflation is low, but I beg to differ that inflation is low.

Goddamit I dont want to be a bull.. whats happening to me ?????? Mother, help me !

Edited February 18, 2006 by Flick

[Guest wrongmove]

If someone would be kind enough to stick up a graph of unadjusted nominal house prices and I think you will see that stagnation in nominal terms is a real option. - most those dips just didnt really happen in nominal terms - the prices stuck.

Here is that graph, and you are correct. The two 70s "crashes" involved RISING prices, not even flat.

[Elizabeth]

Goddamit I dont want to be a bull.. whats happening to me ?????? Mother, help me !

I think I pretty much have turned into a bull. Thats why I have given up hope of ever having a house. Its a loose / loose position.

EDIT:

Catch 22

I am an FTB bull who can't afford the bottom of the price range therefore the market will crash... (or I will co-buy. NOT)

Edited February 18, 2006 by Elizabeth

[Without_a_Paddle]

You need to think more deeply:

+ House prices have NEVER been so high in rklation to incomes

+ Inflation is low now, so it will not bail us out thru rising incomes,

+ If inflation rise, so will interest rates, and that will crash many overgeared property investors

Don't forget we have a chancellor who wants to be PM and a Govt that wants to win a 4th term in office...

To win the next election will require there to be NO HPC between now and the election.

Do you not think (deeply?) that Gordon Brown will do what ever he can to postpone any chance of a HPC as long as possible?

The sh!t might start to hit the fan after the election, but that is many years away.

[Guest muttley]

Don't forget we have a chancellor who wants to be PM and a Govt that wants to win a 4th term in office...

To win the next election will require there to be NO HPC between now and the election.

Gordon will want a second term as well,so he will simply put off an economic down turn indefinitely or forever,which ever comes first.

[Flick]

Gordon will want a second term as well,so he will simply put off an economic down turn indefinitely or forever,which ever comes first.

I we get another ir cut, I'm buying with a 10 yr fix

[FrozenOut]

Lets cut to the chase here.

Before Augusts rate cut, the market was busted, in freefall with no signs of letting up - we were heading down the freeway to hell for a very HARD landing of catastrophic proportions.

Then we had the .25% off rates and things have been picking up again, big deal! This is jus a mopping up of the final few fools left with no sense.

The world dictates that rates rise now, so we can only keep this going for so long. Drop rates and we import inflation from all over the world and THEN the rates will need to go back up to stop stearling falling through the floor thus rejoining the freeway as described in my first paragraph.

Or we can start keeping pace with the rest of the world by raising rates, and thus as I've said rejoining the freeway to hell!

Lets understand something here.

Wage inflation isn't going to save us now, so what, we have sqewed on to a tangent, we'll be rejoining the freeway at some point as both roads lead to the same end.

The only way this can be averted is by wage inflation - that's quite simply not going to happen.

[spline]

This graph gives a long term ‘unadjusted’ view of the usual culprits. And it’s very clear that house prices tend to follow earnings, not prices in general as reflected by the RPI, so that as earnings appear to have consistently outpaced RPI so have house prices. This explains why ‘real’ house prices as deflated by RPI in classixuk’s graph appear to be more ‘amplified’ on the right hand side. Also interesting that the current situation of low inflation and, particularly, low interest rates has allowed people to chase up the price of houses on the back of easy and low-cost credit. Reversing this process, as Dr Bubb says, requires either a growth spurt (earnings, inflation) that would carry a sting of higher interest rates and almost guarantee a crash, or prices fall back during a crash of sorts. Stagnation is certainly a possible outcome, but a perfect stagnation it would have to ‘stick’ for decade or two to recover the imbalance.

[bazzzzzzz]

First time I've considered the difference between nominal prices and prices adjusted for inflation. Interesting points raised.

Having thought 'more deeply':

Which of he graphs more accurately represents price changes: nominal prices, or prices adjusted for inflation?

If it's the nominal price graphs, then would not the inflation adjusted graphs be no more than bear spin?

[Without_a_Paddle]

Lets cut to the chase here.

Before Augusts rate cut, the market was busted, in freefall with no signs of letting up - we were heading down the freeway to hell for a very HARD landing of catastrophic proportions.

Then we had the .25% off rates and things have been picking up again, big deal! This is jus a mopping up of the final few fools left with no sense.

The world dictates that rates rise now, so we can only keep this going for so long. Drop rates and we import inflation from all over the world and THEN the rates will need to go back up to stop stearling falling through the floor thus rejoining the freeway as described in my first paragraph.

Or we can start keeping pace with the rest of the world by raising rates, and thus as I've said rejoining the freeway to hell!

Lets understand something here.

Wage inflation isn't going to save us now, so what, we have sqewed on to a tangent, we'll be rejoining the freeway at some point as both roads lead to the same end.

The only way this can be averted is by wage inflation - that's quite simply not going to happen.

Gordon's Golden Rule about borrowing comes to the end of its economic cycle in 2006.

So Gordon can rewrite the rules.

Expect to see Govt borrowing on the increase and even more public spending to prop up the economy until the election.

Right now the primary function of NuLAB is to stay in power. Everything else comes second.

I wonder if the original poster expected this Saturday Stunner post would turn out this way?

[boom_and_bust]

Stagnation can't go on 4 ever, times change and thats a fundamental that no one can get away from.

All we can have a good chance at predicting is the near term. The most likely outcome, taking everything into account is that stagnation will continue for at least another 2 years. The market might go down a few % but then it'll probably go back up a few %. I think it will wobble around a little, but with a flat trend.

The longer it continues its soft landing and hence the nearer it gets to its trend line, the less marked the crash is going to be, such that it is highly likely that you won't even really see the benefit.

Good luck to all you long timers, cos you are going to need it.

Hi,

What's you're "everything into account"? The flat trend, if predicted within the long term trend posted, would be coming out at around 20 years of stagnation. Sounds a bit like the last gasp days of the soviet block countries and they didn't seem to care much for that. The things I take into account is that every historical reference to inflation surges (houses here), high personal, international and trade indebtness and wildly beyond trend house prices have always lead to dire, wider economic and sometimes social consequences, whether that be deep recession-depressions, out-and out HPC (the most common) or social-political upheaval (town planning and land-rights reforms, inner city rioting etc., usually with knock on economic consequences).

You're up North. Yorkshire? Land registry showed a nice 12% fall last year. That's a big saving! Let's say, £36K on a 300K house plus all the setup costs and the extra costs compared to renting a better property at a lower costs that the mortgage interest rent you would be paying to the bank. Shall we say £50-60K? That's a successful year already!