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DoubleBubbleTrouble

Real House Prices (i.e. Adjusted For Inflation...

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Does anyone know what the "inflation" figures they use for that graph are:

graph-house-prices-1975-2006.gif

i.e. are they:

CPI

RPI

Wage inflation

?

Just wondering how different it would look with higher or lower inflation...!

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I know this graph has been used by bulls to prove the soft landing arguement, but when you actually look at the recent boom and compare it to the last boom. Round off the the jagged top area from the recent boom, shrink it to match the last boom in size and it would be a perfect match. I wonder if you magnified the last boom in the graph if you would get a jagged top as well?

Downwards from here?

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yes i follow

i made this point before

The 1970s, boom was over just like that

The 1990s, took a little time before heading down

This huge boom, will take longer to swing down, as there is inherent inertia - far more speculators to get wind of whats happening, and head for the exit

Of course it isnt as simple as that, theres also other factors - unemployment levels, IR etc....

Edited by notanewmember

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I know this graph has been used by bulls to prove the soft landing arguement

They must have created a masterpiece of spin to make that graph prove an argument in favour of a soft landing. All I see is a bigger bubble than has ever existed before, and therefore further to fall.

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I think it's misleading to use false origins (e.g. not starting the Y axis at zero).

Here's the graph without a false origin (well there's one on the x-axis :P )

house_prices_without_false_origin.gif

post-4243-1152660318.gif

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I think it's misleading to use false origins (e.g. not starting the Y axis at zero).

Here's the graph without a false origin (well there's one on the x-axis :P )

house_prices_without_false_origin.gif

Brilliant :) With statistics you can prove anything you want!

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Alright, here's a more interesting origin

if you accept nationwide's 'trend' (and accept that that covers inflation) then you can remove the trend from the data. Including an offset so that the average deviation is zero, you then have a measure of how much house prices are undervalued / overvalued (in the currency of the time)

hp.jpg

post-1731-1152695085.jpg

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Actually - you can go one better than that and correct for inflation on these results too - using the same 'trend' (0.6% per quarter) and shifting into today's money we have the second graph - which shows the two peaks aren't so different after all

hp2.jpg

post-1731-1152696032.jpg

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Nice but what I really want to see is 3 versions of that same graph but using:

CPI back over the period of the graph,

and

RPI over the period of the graph,

and

average Wage inflation over the period of the graph.

The reason being I'm slight suspicious as to their choice of "inflation" measure that was used to translate the historical figures....

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Guest Alright Jack

My personal feeling about that graph is that it has become something of a liability. It basically says you trust the government CPI statistic to the extent that you are happy to draw very important life bearing conclusions from it.

The CPI is fraudulent and should be ignored completely. There are other metrics you could use that will still make the case for an overpriced housing market. Use average wages or M4 or anything that is not so blatently distorted.

Ditch the graph, it is as meaningless as the CPI because it is based on the CPI.

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I heard once that a market with a double peak is a sign of a massive crash. Not sure how much truth there is in this.

I've never really bought into this "chartist" theory that you can predict the future by looking for patterns in graphs (ie double tops). That said there are plenty of people who make a much better living than I doing just that.

If your looking for signs of a massive crash just look at the fundamentals of the market. With price earnings multiple so high houses are unaffordable for most, it just can't last.

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  • 338 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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