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One Of The Key Reasons Why I Think Hpc May Not Happen For Ages

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The more I think about it, the more I become convinced that one of the main reasons why house prices are high, and why they may not crash or drop for ages, is that the feedback loop connecting action and result with respect to house purchases is very long. What I mean is, one of the primary problems, if not THE problem with paying too much for housing now is that one is left impoverished, or at least much worse off in 30 or 40 years, upon reaching retirement. But the time for that to filter through and have an effect on people's behaviour is just too long. Nobody is seeing people retiring in poverty after having spent their entire salaried life paying off the millstone mortgage. Because people can't see it, they aren't reacting to it. The downsides are all pushed way off into the future, far beyond most people's range of vision. In a country where people buy a load of consumer tat on tick and then think they'll worry about where the money is going to come from to pay it at some vague date off in the future, what chance is there that they will be able to do the calculation of how their personal finances will end up in 30 years time?

If people suddenly started paying £1000 for washing up clothes, they'd very soon see that they weren't getting value for money, when they had to throw them out 3 days later. But they can't see that they're not getting value for money by overpaying to buy houses. It's beyond them.

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People are feeling the pinch now. Bankruptcy is up, repossessions are up, FTBs are down, low rental yield...you know the stuff. In short people are struggling and impoverished now.

All it will take is a trigger - eg. an IR hike - or time: and not too much more time IMHO.

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People are feeling the pinch now. Bankruptcy is up, repossessions are up, FTBs are down, low rental yield...you know the stuff. In short people are struggling and impoverished now.

All it will take is a trigger - eg. an IR hike - or time: and not too much more time IMHO.

..or higher unemployment which is happening

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Moneyweek mentioned this in their column on F.rung this morning

http://firstrung.co.uk/articles.asp?pageid...articlekey=1659

It's all there in black and white

The Times reports that corporate profitability in the UK has fallen to its lowest in two and a half years

Unemployment only going one way from here. And every time someone buys a house and takes out a massive mortgage - that's less money to be spent on other items and drive the economy, money sucked up out of the economy by debt repayments.

People seem to be totally focused on IR's. In the last crash it was the recession, rising unemployment and resulting repossesions that drove prices down.

Edited by munimula

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It's all there in black and white

Unemployment only going one way from here. And every time someone buys a house and takes out a massive mortgage - that's less money to be spent on other items and drive the economy, money sucked up out of the economy by debt repayments.

People seem to be totally focused on IR's. In the last crash it was the recession, rising unemployment and resulting repossesions that drove prices down.

It`s been mentioned before so many times but we never hear of "ABC Co. ltd coming to the UK to create 600 jobs in former mining community" Where the F%&!K are the new jobs coming from? At this rate forget house prices falling due to their own potty valuations, we`ll all be fighting on the docks for the tally from the tally man :blink:

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The more I think about it, the more I become convinced that one of the main reasons why house prices are high, and why they may not crash or drop for ages, is that the feedback loop connecting action and result with respect to house purchases is very long.

Very good point and I agree the whole things is going to take a long time before a number of people realise they are fecked. Low interest rates and globalisation will also ensure that its all happening in super slow motion. I can see economic case studies and research being done on the global property boom of the early 21st century, hopefully we wont have colonised Mars or living under the sea by the time these are written.

However Im also getting an inkling that unless borrowing more than 75% of the value, the financial impact of buying as opposed to waiting for a crash will be minimal when weighed up against other factors that are important to someone such as sanity, relationships with other half etc. Knowing about potential overpricing and retirement planning etc as against MEWing till sick should offset the risk of falling prices IMO.

Edited by Mr_Sminty

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The more I think about it, the more I become convinced that one of the main reasons why house prices are high, and why they may not crash or drop for ages, is that the feedback loop connecting action and result with respect to house purchases is very long. What I mean is, one of the primary problems, if not THE problem with paying too much for housing now is that one is left impoverished, or at least much worse off in 30 or 40 years, upon reaching retirement. But the time for that to filter through and have an effect on people's behaviour is just too long. Nobody is seeing people retiring in poverty after having spent their entire salaried life paying off the millstone mortgage. Because people can't see it, they aren't reacting to it. The downsides are all pushed way off into the future, far beyond most people's range of vision. In a country where people buy a load of consumer tat on tick and then think they'll worry about where the money is going to come from to pay it at some vague date off in the future, what chance is there that they will be able to do the calculation of how their personal finances will end up in 30 years time?

If people suddenly started paying £1000 for washing up clothes, they'd very soon see that they weren't getting value for money, when they had to throw them out 3 days later. But they can't see that they're not getting value for money by overpaying to buy houses. It's beyond them.

The downside for the economy is visible now. People buy into overpriced houses, and don't have enough to spend on a host of other things. Cars, going out, DIY, consumer electronics, the list goes on. And if people lose their jobs because of a downturn in their industry, then they can't pay the mortgage...

Bllly Shears

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The more I think about it, the more I become convinced that one of the main reasons why house prices are high, and why they may not crash or drop for ages, is that the feedback loop connecting action and result with respect to house purchases is very long. What I mean is, one of the primary problems, if not THE problem with paying too much for housing now is that one is left impoverished, or at least much worse off in 30 or 40 years, upon reaching retirement. But the time for that to filter through and have an effect on people's behaviour is just too long. Nobody is seeing people retiring in poverty after having spent their entire salaried life paying off the millstone mortgage. Because people can't see it, they aren't reacting to it. The downsides are all pushed way off into the future, far beyond most people's range of vision. In a country where people buy a load of consumer tat on tick and then think they'll worry about where the money is going to come from to pay it at some vague date off in the future, what chance is there that they will be able to do the calculation of how their personal finances will end up in 30 years time?

If people suddenly started paying £1000 for washing up clothes, they'd very soon see that they weren't getting value for money, when they had to throw them out 3 days later. But they can't see that they're not getting value for money by overpaying to buy houses. It's beyond them.

I think you're right, but I think it's down to several things - do you want to know my theory? (you're getting it anyway :P ) I think it's because money has gone virtual in everyday life - just over the past 10 years or so. Very different to the last crash, or to the situation 30 years ago.

I think people are less educated about basic financial terminology, because wealth and credit insulate them from having to know about it. My parents' generation all know basic stuff like what inflation means and how mortgages work because they *had* to think about that kind of thing in the 70s. Why? Not because they were cleverer or better educated. More because they had to know how to handle PHYSICAL money. In the 1970s if you needed money for the weekend, you had to go to the bank on Friday lunchtime and take it out - in cash. You couldn't get it out of the ATM when the bank was shut; you coulnd't go for a pub lunch and use a credit card to pay - if you didn't have enough cash to see you through the weekend you were stumped. (I asked my mum what people used to do if they forgot to withdraw enough or needed more cash - she said "we had to go and borrow some off the neighbours"). You had to make sure you budgeted, because you had to pay for things in cash - you were used to handling and thinking about money in physical, positive terms (added to that the fact that few people routinely used credit cards). You really needed to KNOW how money worked, or you were screwed.

Now we have a different kind of way of understanding money that's based on a sort of virtual concept of how it all works - people think of it just as a kind of virtual credit ebb and flow. When I was a student people knew exactly which shops they could still use their switch card in even when their card had been stopped at the end of the term - they could always "get" money even if there was literally no money, even if the bank had stopped their credit! They didn't have to know how money works because they didn't think of it as a physical commodity. If you never see or physically *handle* many of your financial transactions, and you're never in a position where you could literally have no money and nowhere to get some (there's some always available virtually somewhere - on credit or swicth or overdraft or whatever) you don't think about it in the same way. Of course this is a result of lax lending criteria too - you couldn't routinely GET thousands of pounds' worth of credit in the 70s. But equally I think it's because people don't literally see and touch money as much any more - the difference between "money" and "no money" or "negative money" isn't as marked when you can use a card to pay for almost anything. Hence low savings - the concept of money building up in the bank is much more foreign than the idea of your house creating you virtual money out of nowhere - because all money seems virtual nowadays.

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I think you're right, but I think it's down to several things - do you want to know my theory? (you're getting it anyway :P ) I think it's because money has gone virtual in everyday life - just over the past 10 years or so. Very different to the last crash, or to the situation 30 years ago.

superb post, thank you

i remember reading that some people (probably all too rare these days) whenever tempted to buy "stuff" will actually take the money out of the bank first. often this would bring them to realise exactly how much they are spending and therefore would go back to the bank, put the money back in and live without whatever purchase they were contemplating. :)

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The more I think about it, the more I become convinced that one of the main reasons why house prices are high, and why they may not crash or drop for ages, is that the feedback loop connecting action and result with respect to house purchases is very long.

It seems to be happening fast in the US

But they seem to have less VI bulls*%t there.

Edited by jp1

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superb post, thank you

i remember reading that some people (probably all too rare these days) whenever tempted to buy "stuff" will actually take the money out of the bank first. often this would bring them to realise exactly how much they are spending and therefore would go back to the bank, put the money back in and live without whatever purchase they were contemplating. :)

Yes it is a good post, I also see so many in the finance markets that appear to relate to money as mere digits in a pc game

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It seems to be happening fast in the US

But they seem to have less VI bulls*%t there.

I think people in the US are much more realistic about money and finances - maybe it's a cultural thing. Whenever I'm in the States I really notice how even the wealthy middle classes are very focused on buying plain stuff cheaply - getting a good bargain, low prices, no-frills food and clothes, and so on. They don't seem to have that weird class thing that we have in the Uk (and in continental Europe a bit too) where certain types of people feel it's demeaning to shop at certain stores - you know all that obsession we Europeans have about "I'm at this level of income so I shop in Sainbury's rather than Asda - when I'm a bit richer I'll shop in Waitrose" - all that "It's not just food, it's M&S food" and all that. There seems to be much less of an obsession with branding and presentation and consumer snobbery - "Finest" ranges and lovely design and packaging and so on - in the US. You have to get to a seriously high income level in the States before people start giving a damn about how "upscale" or nicely-packaged their supermarket food is, for example, which is very different from here :)

I think this attitude makes a difference in their financial products too - people are more clued-up about money and about getting a good deal there. In the UK people will pay a "snob premium" for many products that they actually KNOW are not justified by the price, but they are knowingly paying more becuase they want to be the kind of person who buys that Karen Millen dress or that M&S chocolate pudding. I think this is less prevalent in the US (excepting New York and California perhaps :)) - people are less concerned about their "image".

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I completely agree with all of that except for the part about the M&S chocolate puddings - if you know of a cheaper and equally nice substitute for their melting middle ones I shall hail you as a financial genius.

I'm sort of doing an experiment on myself at the moment. I used to routinely use credit card for most purchases over about €10 or so and rarely carried much cash. I did pay off my card every month religiously (not that stupid) but I was always amazed the way things added up - suddenly you're looking at a huge balance after thinking you've been quite good for the month and then putting your card statement into a spreadsheet because you don't think the bank have added it up correctly :)

So I cancelled the card (I mainly did this because I wanted to switch to a reward card) so am enjoying a credit card free existence for the first time in 6 years. No debit card either so it does have to be physical cash everywhere.

It really does hurt more handing over real money for stuff. It's sort of because you can see the amount in your pocket being eroded away and a reminder that now you have less to buy with. It's a reinforcement of the opportunity cost of buying goods really. And paying for anything large is quite agonizing. You do think twice. Plus, you do have to have the cash in your pocket, which requires having taken it out first, so it's more awkward generally.

As well as that you have the state of your financial affairs spelled out more clearly. It's the number in the current account, not the rather more comforting current account minus card balance (comforting as long as you don't look at the card balance, that is). No fooling yourself there.

I think this could prove to be the route to financial nirvana (lots of money going into the savings each month) - I may just keep the new card for interweb shopping exclusively.

One unrelated thought - possible reason people in the US are a bit more on the ball is that they tend to pay all bills via a cheque, whereas most here probably use standing orders and direct debits for most bills. Banks there are not terribly understanding about bounced cheques either (to say the least) so you need to pay attention to these things. It's surprising how many people never check the balances or statements of their accounts - head completely in the sand.

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I completely agree with all of that except for the part about the M&S chocolate puddings - if you know of a cheaper and equally nice substitute for their melting middle ones I shall hail you as a financial genius.

I'm sort of doing an experiment on myself at the moment. I used to routinely use credit card for most purchases over about €10 or so and rarely carried much cash. I did pay off my card every month religiously (not that stupid) but I was always amazed the way things added up - suddenly you're looking at a huge balance after thinking you've been quite good for the month and then putting your card statement into a spreadsheet because you don't think the bank have added it up correctly :)

So I cancelled the card (I mainly did this because I wanted to switch to a reward card) so am enjoying a credit card free existence for the first time in 6 years. No debit card either so it does have to be physical cash everywhere.

It really does hurt more handing over real money for stuff. It's sort of because you can see the amount in your pocket being eroded away and a reminder that now you have less to buy with. It's a reinforcement of the opportunity cost of buying goods really. And paying for anything large is quite agonizing. You do think twice. Plus, you do have to have the cash in your pocket, which requires having taken it out first, so it's more awkward generally.

As well as that you have the state of your financial affairs spelled out more clearly. It's the number in the current account, not the rather more comforting current account minus card balance (comforting as long as you don't look at the card balance, that is). No fooling yourself there.

I think this could prove to be the route to financial nirvana (lots of money going into the savings each month) - I may just keep the new card for interweb shopping exclusively.

One unrelated thought - possible reason people in the US are a bit more on the ball is that they tend to pay all bills via a cheque, whereas most here probably use standing orders and direct debits for most bills. Banks there are not terribly understanding about bounced cheques either (to say the least) so you need to pay attention to these things. It's surprising how many people never check the balances or statements of their accounts - head completely in the sand.

OK, I'll concede the chocolate puds - they really are nice! :) Though when I was a kid my mum used to make (shock, horror! :P) something similar herself that she called "chocolate up and over pudding". As far as I recall it was a chocolate sponge with a thick chocolate sauce poured on top. When it cooked and the sponge rose, it rose up through the chocolate sauce, which ended up settling all melty in the middle. Mmmmmmm! B)

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OK, I'll concede the chocolate puds - they really are nice! :) Though when I was a kid my mum used to make (shock, horror! :P) something similar herself that she called "chocolate up and over pudding". As far as I recall it was a chocolate sponge with a thick chocolate sauce poured on top. When it cooked and the sponge rose, it rose up through the chocolate sauce, which ended up settling all melty in the middle. Mmmmmmm! B)

Mm. Making stuff. I remember that too! My granny told me a story once...

It'll come back in the recession though, don't worry.

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I think people in the US are much more realistic about money and finances - maybe it's a cultural thing. Whenever I'm in the States I really notice how even the wealthy middle classes are very focused on buying plain stuff cheaply - getting a good bargain, low prices, no-frills food and clothes, and so on. They don't seem to have that weird class thing that we have in the Uk (and in continental Europe a bit too) where certain types of people feel it's demeaning to shop at certain stores - you know all that obsession we Europeans have about "I'm at this level of income so I shop in Sainbury's rather than Asda - when I'm a bit richer I'll shop in Waitrose" - all that "It's not just food, it's M&S food" and all that. There seems to be much less of an obsession with branding and presentation and consumer snobbery - "Finest" ranges and lovely design and packaging and so on - in the US. You have to get to a seriously high income level in the States before people start giving a damn about how "upscale" or nicely-packaged their supermarket food is, for example, which is very different from here :)

I think this attitude makes a difference in their financial products too - people are more clued-up about money and about getting a good deal there. In the UK people will pay a "snob premium" for many products that they actually KNOW are not justified by the price, but they are knowingly paying more becuase they want to be the kind of person who buys that Karen Millen dress or that M&S chocolate pudding. I think this is less prevalent in the US (excepting New York and California perhaps :)) - people are less concerned about their "image".

I very much agree with your point about 'virtualisation' of money and easy debt, but you're way off the mark on the yanks. I live in CA, have done for 7 years, and they're just as clueless, if not moreso, than the Brits when it comes to money and finance.

The middle-class shop at WalMart because they have to, not because they are thrifty - the MC has taken a battering here over the last few years. Stagnant wages, but double digit cost rises in energy, education, food, fuel etc and what you miss in the UK - huge increases in medical costs. The medical is a killer - I'm young, healthy - no illnesses or any longterm needs, but just the few things you need every year plus your medical insurance payments run several thousand $. Try having kids or getting older or sick and you get into 5 figure territory easily.

The MC here are shopping at Walmart because they've got no money to spend. Savings rate went negative last year - they spend more than they earn. They've taken out equity from their house and bought a Hummer and a speedboat but their bank account reads zero (no overdrafts here).

The American MC has no money because they live 50 miles from work and it's a 45 minute drive to get a pizza, and the SUV they bought gets 9 mpg. It's an American made SUV so they have it fixed every 3 months and there's no public transport to take its place. Their suburban house has no insulation and when it gets cold, they turn on the heat, and it is badly designed so it cooks in the summer and they have to use the AC. They don't have time to spend with their kids because they're working 60 hours a week for 40 hours pay, and then an hour each way in the car. They buy the kids big gifts instead to buy their love and show they care. They buy the kids cars too because they live in the middle of nowhere. The cost of their lifestyle and transport is a hidden tax.

I lie actually. They don't buy cars, they lease them - that way they can drive a $60,000 car on a $60,000 wage. Pity they never own it. I drive a second hand car that's now 12 years old. When I'd paid it off initially after 2 years the question I always got was 'Oh - what are you going to buy next then?'

The American MC has no money because they've either paid for private schools for the kids or paid primo prices for a house in a good school district because the bad schools here are really awful, and most of the rest are 'inadequate'. They're also paying off their college tuition bills well into their 30s and somethimes 40s.

My wife shops from the 75% off rack and seconds stores, and we're in the top few % of earners here - and we get funny looks when we say this. A lot of the shops we're in, I don't see a lot of MC people, just 'working people' (which around here means Hispanic). The American MC is in no better position than the British, and in many ways is worse.

EDIT: Here's a statistic I forgot. Time magazine had a poll two years ago asking 'Are you now, or will you be, in the top 1% of earners in the US?' - 19% of people said they were already a top earner, a further 20% said they would be. And they spend now as if they can pay it back with their millions.

One unrelated thought - possible reason people in the US are a bit more on the ball is that they tend to pay all bills via a cheque, whereas most here probably use standing orders and direct debits for most bills. Banks there are not terribly understanding about bounced cheques either (to say the least) so you need to pay attention to these things. It's surprising how many people never check the balances or statements of their accounts - head completely in the sand.

True, but this continues because a) the banks here int he US are primitive and B) it makes it easier to forget if/when you've paid a bill and late charges can get slapped on (no red reminders here). When I first arrived here and rented an apartment and bought a car they gave me a little book with pages to send in every month with a cheque - they looked at me like I was an alien (well, I was) when I asked about direct debit.

They finally joined the 21st Century and I can pay my bills from my bank online - although I found out a few months ago that what they did was still print out a cheque and mail it even when it's done 'electronically'!

Oh, and if you think it's bad in a checkout when someone takes forever to count out their cash, imagine the old dears' writing a cheque and then balancing the book in front of you - and then realising they forgot stamps and so out with the chequebook again!

Edited by MadJock

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I think people in the US are much more realistic about money and finances - maybe it's a cultural thing. Whenever I'm in the States I really notice how even the wealthy middle classes are very focused on buying plain stuff cheaply - getting a good bargain, low prices, no-frills food and clothes, and so on. They don't seem to have that weird class thing that we have in the Uk (and in continental Europe a bit too) where certain types of people feel it's demeaning to shop at certain stores - you know all that obsession we Europeans have about "I'm at this level of income so I shop in Sainbury's rather than Asda - when I'm a bit richer I'll shop in Waitrose" - all that "It's not just food, it's M&S food" and all that. There seems to be much less of an obsession with branding and presentation and consumer snobbery - "Finest" ranges and lovely design and packaging and so on - in the US. You have to get to a seriously high income level in the States before people start giving a damn about how "upscale" or nicely-packaged their supermarket food is, for example, which is very different from here :)

I think it's just the same in the US as in the UK. There is a definite hierarchy of supermarkets and they vary according to neighbourhood. You will definitely see a different kind of person in the Sainsbury's-esque "Whole Foods Market" (or as a friend described it "the Museum of Modern Vegetables") than you will in Market Basket, which is a bit more like Asda.

frugalista

edit : spelling

EDIT: Here's a statistic I forgot. Time magazine had a poll two years ago asking 'Are you now, or will you be, in the top 1% of earners in the US?' - 19% of people said they were already a top earner, a further 20% said they would be. And they spend now as if they can pay it back with their millions.

That is a classic one, I will have to remember it. Do you have a link?

frugalista

Edited by frugalista

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I think it's just the same in the US as in the UK. There is a definite hierarchy of supermarkets and they vary according to neighbourhood. You will definitely see a different kind of person in the Sainsbury's-esque "Whole Foods Market" (or as a friend described it "the Museum of Modern Vegetables") than you will in Market Basket, which is a bit more like Asda.

frugalista

edit : spelling

That is a classic one, I will have to remember it. Do you have a link?

frugalista

Both Time and Atlantic Monthly where I read this originally have their articles behind a paywall now.

http://www.theatlantic.com/doc/prem/200211/brooks

However I do have this, which has a different take on the results of that poll:

http://www.people.fas.harvard.edu/~aeggers...ooptimistic.pdf

BTW, Wholefoods is a great supermarket, but very very expensive - we use it for the goods we can't get elsewhere. You have to be very picky about food here - you have to work to get anything without salt/sugar added, they use high fructose corn syrup instead of sugar (and it's wayyyy worse than sugar), and fresh fruit/veg sit out being sprayed with water every 5 mins and start to rot quickly. Fortunately there's a farmer's market near us every weekend where we can get decent produce. It's not that much cheaper than the supermarkets but it really is fresh and the money goes directly to the producer.

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The more I think about it, the more I become convinced that one of the main reasons why house prices are high, and why they may not crash or drop for ages, is that the feedback loop connecting action and result with respect to house purchases is very long. What I mean is, one of the primary problems, if not THE problem with paying too much for housing now is that one is left impoverished, or at least much worse off in 30 or 40 years, upon reaching retirement. But the time for that to filter through and have an effect on people's behaviour is just too long. Nobody is seeing people retiring in poverty after having spent their entire salaried life paying off the millstone mortgage. Because people can't see it, they aren't reacting to it. The downsides are all pushed way off into the future, far beyond most people's range of vision. In a country where people buy a load of consumer tat on tick and then think they'll worry about where the money is going to come from to pay it at some vague date off in the future, what chance is there that they will be able to do the calculation of how their personal finances will end up in 30 years time?

If people suddenly started paying £1000 for washing up clothes, they'd very soon see that they weren't getting value for money, when they had to throw them out 3 days later. But they can't see that they're not getting value for money by overpaying to buy houses. It's beyond them.

Ehh I think you're getting ahead of things here. Thats 'step 2' you outlined and its reserved for us.

Step one is for the people who now own property and will lose it over the next few years.

Step two is for us - when we buy the discounted, repossessed stuff - we'll all go on our merry way until, forty years too late, we realise that we too overpaid and those that lost their houses only forked out for 5 years mortgage. We've been paying for forty years and the last laugh is on us.

Wait and see - in 40 years you'll wake up in your worthless house in a cold sweat and remember this post. :ph34r:;)

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Ehh I think you're getting ahead of things here. Thats 'step 2' you outlined and its reserved for us.

Step one is for the people who now own property and will lose it over the next few years.

Step two is for us - when we buy the discounted, repossessed stuff - we'll all go on our merry way until, forty years too late, we realise that we too overpaid and those that lost their houses only forked out for 5 years mortgage. We've been paying for forty years and the last laugh is on us.

Wait and see - in 40 years you'll wake up in your worthless house in a cold sweat and remember this post. :ph34r:;)

When owning a house (capital, interest, taxes, insurance and maintenance) is only slightly more expensive than renting equivalent, and not the factor of 2 or three that it is today, then paying the mortgage for 30 years is not a problem. Barring the lucky few, you have to live somewhere, and you either rent the accomodation or rent the money from the bank to buy - you have to pay one way or another, it's not as if you can forego somewhere to live. Even if the house is worth the same after thirty years and you've paid out the same as renting, you've still come out ahead.

When I bought in 1995, my mortgage was cheaper than equivalent rent even at 8% IR. I was lucky to buy at the right time. Most of the time in the last 30 years it's been about the same. Those who buy in the coming dip with conservative financial commitments (3x salary etc) and aren't unlucky with job loss, illness etc, will do very well from it.

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Ehh I think you're getting ahead of things here. Thats 'step 2' you outlined and its reserved for us.

Step one is for the people who now own property and will lose it over the next few years.

Step two is for us - when we buy the discounted, repossessed stuff - we'll all go on our merry way until, forty years too late, we realise that we too overpaid and those that lost their houses only forked out for 5 years mortgage. We've been paying for forty years and the last laugh is on us.

Wait and see - in 40 years you'll wake up in your worthless house in a cold sweat and remember this post. :ph34r:;)

Hmm, sounds like someone needs to run the numbers.

How about 2 25 year olds, one rents forever, one buys on a 35 year mortgage.

Assume there is 300 pounds per month difference, which goes into renter's pension (plus tax relief). Assume our renter keeps their payments constant, adjusted only for inflation, until they retire at 65.

Our mortgaged holder makes smaller pension contributions starting from age of 35 when mortgage becomes manageable, say 150 ppm and adjusted for inflation. At age 59 when mortgage paid off starts putting in larger amounts (say 1000 ppm). And of course this person now has no rent costs in retirement.

At age 65, the renter gets an income of 470 a week, adjusted for inflation.

The mortgage holder gets about 274, adjusted again.

(numbers from http://www.pensioncalculator.org.uk)

So the renter gets an additional 200 per week in retirement, which is more than enough to comfortably fund renting a house if you don't mind being out of a large city. Whereas the house owner has to contend with house maintenance costs on 270 per week.

Plus, with the dwindling population we'll have when current 25 year olds are 65 (boomers will be gone mostly) accommodation should be pretty plentiful and cheap. The rich pensioner might well be able to buy a place outright from savings if they wished and the poor pensioner will probably not be able to get huge money from downsizing.

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  • 301 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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