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The Colour

Hpc And Transaction Volume

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..but surely for there to be an HPC then transaction volume with have to increase?

Eg

property sales volume increasing + price increasing = bubble

no properties selling = no crash (stagnation)

property sales volume increasing + price decreasing = crash

Or am I a total knoob?

Thanks

tc

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..but surely for there to be an HPC then transaction volume with have to increase?

Or am I a total knoob?

Thanks

tc

No your points are good.

It would depend where the figures were sourced.

1. No property selling but asking prices stagnate = Deadlock

2. No property selling but asking prices continue to be reduced until sale occurs = HPC

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Further to Google Ads very pertinent and helpful contribution ;) , it’s worth pointing out that, unlike the stock market, with house prices HPI is actually highly correlated to the volume; so much so, in fact, that if you know the volume (say by looking at the BoE approval stats) you can estimate the HPI and hence the price trajectory.

HPC thread examining this idea in some depth:

http://www.housepricecrash.co.uk/forum/ind...opic=26933&st=0

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..but surely for there to be an HPC then transaction volume with have to increase?

Eg

property sales volume increasing + price increasing = bubble

no properties selling = no crash (stagnation)

property sales volume increasing + price decreasing = crash

Or am I a total knoob?

Thanks

tc

You have a point in that houses have to sell in order for prices to fall. But there's an error in the logic. You're only considering two states "property sales (volumes increasing)" or " no property sales" - but you can have some property sales even though volumes have decreased, and that is what you are likely to get in a situation with falling prices.

The truth is that volumes probably need to fall for a crash. The reason is that more people start failing to get the price they want, so fewer properties sell, but the houses that do sell are forced sales, and these take the average selling prices downward.

This is pretty much what the thread Spline links to shows: that high volume has been a good indicator of HPI over a long period.

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I’ve added some graphs below to show how things work out if you make the assumption that HPI and volume are functionally related in the way suggested by the correltation.

The staring point is the BoE approvals for house purchase – these are highly seasonal, that’s the green line (NSA), and need adjusting by the usual X12 Arima methodology to get the yellow line (SA).

BoE Approvals - NSA to SA ajustment

14ik6rk.jpg

You then run the SA through the correlation discussed on the thread above to extract the HPI – that’s the yellow like below, and as you can see it’s quite good at tracking (in this case) the Halifax annualised HPI when the time-line is properly corrected.

Compare Halifax HPI with prediction based on approvals

14ik6y9.jpg

You can even integrate the HPI to predict the prices. B)

Edited by spline

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I’ve added some graphs below to show how things work out if you make the assumption that HPI and volume are functionally related in the way suggested by the correltation.

Um, OK, though I am a bit thick with numbers (though I am trying).

The staring point is the BoE approvals for house purchase – these are highly seasonal, that’s the green line (NSA), and need adjusting by the usual X12 Arima methodology to get the yellow line (SA).

OK, thats clear.

You then run the SA through the correlation discussed on the thread above to extract the HPI – that’s the yellow like below, and as you can see it’s quite good at tracking (in this case) the Halifax annualised HPI when the time-line is properly corrected.

This is not so clear, especially how the morgage approvals and the HPI line fit together. Like they are correlated.

You have a point in that houses have to sell in order for prices to fall. But there's an error in the logic. You're only considering two states "property sales (volumes increasing)" or " no property sales" - but you can have some property sales even though volumes have decreased, and that is what you are likely to get in a situation with falling prices.

The truth is that volumes probably need to fall for a crash. The reason is that more people start failing to get the price they want, so fewer properties sell, but the houses that do sell are forced sales, and these take the average selling prices downward.

This is pretty much what the thread Spline links to shows: that high volume has been a good indicator of HPI over a long period.

Thanks, this makes sense to me, I can see how a reduction in property sales can happen durring a crash, it's just the term 'crash' brings to mind some sort of avalanche where people start panic selling if they are coinsidering moving within the next half decade.

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This is not so clear, especially how the morgage approvals and the HPI line fit together. Like they are correlated.

Hi The Colour - Yup, the're closely correlated ...

smrkty.jpg

(graph nicked from the thread linked above)

Edited by spline

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I've no doubt that Spline's contribution is interesting, relevent and of high standard (as per usual from spline) but I can't read it because of the stupid f'ing adverts. I will add my voice to the others who have been pointing out what a total f'ing mess fubra are making of this website.

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Thanks, this makes sense to me, I can see how a reduction in property sales can happen durring a crash, it's just the term 'crash' brings to mind some sort of avalanche where people start panic selling if they are coinsidering moving within the next half decade.

Yes, there might well be an avalanche of people wanting to sell, but there's not enough people wanting to buy (at the asking prices at least), and too many of the people wanting to sell hold out for a better price than they can realistically expect. So actual sales fall, and the sales that complete tend to be ones where the owner has to sell or is prepared to settle for a lower price.

If prices actually fall rather than just stagnating (the above scenario is basically the same in a stagnation, but with fewer forced sales) there is the additional factor that people start to be scared of buying an asset with falling prices and the whole sentiment shifts. Certainly in the early 90s it was seen by many as rather eccentric and dangerous to buy - rather than perceiving a low in the market, most people just remembered the very recent slide in prices and worried that buying wasn't a good idea. As a result it took demand a while to pick up properly again.

I've no doubt that Spline's contribution is interesting, relevent and of high standard (as per usual from spline) but I can't read it because of the stupid f'ing adverts. I will add my voice to the others who have been pointing out what a total f'ing mess fubra are making of this website.

Yes, I've complained repeatedly about the ****-up in the coding which means the RHS of the page disappears. So far the best I've received is Webmaster suggest I change my browser (er, sorry but it's your ****-up, you sort it out) - then to be fair he did get back to me and say it wasn't his problem it is Fubra's. But they don't seem interested in fixing a blatant ****-up in the design of the site. I can barely use it at home, and I'm not messing with my settings just to make their bad coding work. The new adverts just add insult to injury.

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Yes, I've complained repeatedly about the ****-up in the coding which means the RHS of the page disappears. So far the best I've received is Webmaster suggest I change my browser (er, sorry but it's your ****-up, you sort it out) - then to be fair he did get back to me and say it wasn't his problem it is Fubra's. But they don't seem interested in fixing a blatant ****-up in the design of the site. I can barely use it at home, and I'm not messing with my settings just to make their bad coding work. The new adverts just add insult to injury.

Can I second or third or fourth or whatever that complaint? It's a right pain when people make the effort to send a constructive post and you can't read half of it because of some work experience effort with the page design. SORT IT!!

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Thanks Spline and Magpie. The correlation between volume and HPI is strong. Do you think that one causes the other? Or do you think that they are both caused by another factor(s)? Also do you think there may be a point at which HPI can continue downwards and volumes can increase?

You might have panick listing as people realise, but after the crest, transaction volumes should drop as nobody wants to catch the falling knife.

Or in this case a terminal velocity chainsaw.

But surely if prices are dropping, people should start to buy again. I think if I could comfortably afford the nice flat I have always wanted for a fair price, I would enter the market to buy it, even if there was a crash going on.

tc

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Surely low volume indicates *disagreement* amongst market actors as to the market trend.

So, volume should be correlated with the absolute magnitude of the first derivative of the price. i.e. the faster the price is changing, the higher the volume should be.

frugalista

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Surely low volume indicates *disagreement* amongst market actors as to the market trend.

So, volume should be correlated with the absolute magnitude of the first derivative of the price. i.e. the faster the price is changing, the higher the volume should be.

frugalista

Not sure I follow that. Does it take into account the stickiness of property prices - people are reluctant to sell at a loss, so falling prices tends to reduce the number of sales that complete regardless of the maths.

Thanks Spline and Magpie. The correlation between volume and HPI is strong. Do you think that one causes the other? Or do you think that they are both caused by another factor(s)? Also do you think there may be a point at which HPI can continue downwards and volumes can increase?

I tend to think it's a basic supply and demand issue. Assume a fairly constant supply. Where demand exceeds supply, prices tend to rise, and plenty of sales complete. Where demand is less than supply (by which I specifically mean that there is insufficient demand at the asking price) there are less sales, but the sales that do occur will be at stagnant or falling prices. This feedback loop is exaggerated by rapid HPI (which further increases demand) or by a serious crash (which further reduces demand).

Bear in mind "demand" doesn't just mean "how many people want a house" (it's often misused that way by people arguing that limited supply of housing and a growing population means eternally rising prices). It is the answer to the question "at any given price point, how many people would be willing to buy?"

But surely if prices are dropping, people should start to buy again. I think if I could comfortably afford the nice flat I have always wanted for a fair price, I would enter the market to buy it, even if there was a crash going on.

Depends on whether they perceive that prices will stop falling - it may seem hard to imagine now, but if prices start to fall, a lot of people will be far less anxious to "get on the ladder". It takes a while for people to believe the market will turn as we saw last time (even in 1995-7 when prices started to rise, a lot of people were reulctant and didn't trust the rises would continue). And even if a few FTBs return to the market, if the idea that property prices are falling takes hold, you immediately lose flippers and "property developing" becomes a big risk, so there's a big chunk of demand gone. And I'm not convinced BTLs would be jumping back in too quickly - so many of them are focused on capital gains that a falling market would be a discouragement. So of course some people will still be buying while prices fall - there will be some demand, but not as much as in a rising market, by a long way.

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"This is an advert post which helps to pay for the running of this website"

This is an advert that makes me no longer wish to visit Housepricecrash.co.uk

Edited by jrbxyz

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at the end of the day, only rising lending rates will stop a housing boom.

the higher IR will make a cheaper house more expensive.

so a 160k flat at 4% would be the same monthly as a 80k flat at 8%.

we can have our crash, but we wont be able to eat it.

im not think i can EVER get a cheap monthly house, but what i am trying to avoid is to sign up to a record purchase at a record low IR.

if the IR goes up while om holding onto to such a massive loan ill be robbed for the next 10-15 years..

houses will not crash while lending rates are so low.

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at the end of the day, only rising lending rates will stop a housing boom.

the higher IR will make a cheaper house more expensive.

so a 160k flat at 4% would be the same monthly as a 80k flat at 8%.

we can have our crash, but we wont be able to eat it.

Thats what the VI's try to tell us but its not the case.

It only works out like that if you have no deposit and only if it's an interest only mortgage.

If you want to make extra payments and pay it off early you're way better off with the 8%

Isnt this stuff all common knowledge at HPC?

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  • 341 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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