Why There Will Never Be A Hpc - Ever

[alabala]

So why is it different this time?

From the literature available openly this is what is different (my opinion), two bubbles overlapping.

Previous Bubbles:

1. Housing Bubble

Credit Crunch

Job Loses

Recession

This Bubble:

1. Credit Bubble

2. Housing Bubble

Credit Crunch

Job Loses

Recession

Edited July 20, 2007 by alabala

[HPC Convert]

Whether there will be a crash or won't be is besides the point. You clearly don't have a clue what you are talking about...

Whether posters agree with the end prediction or not - this post is a reasoned argument.

[HPC Convert]

Thats a great poster that you have written to convince yourself but your deluded. Just in case you havent understood let me repeat. You are deluded. I do admit though that you havenot understood me. Do however continually bump your post so that it stays in a prominent position, because your post is every reason why it will crash.

Someone I know was offered an interest only mortgage recentyl from a leading mortgage advisor (referred by Fxtns). It was for 265k. His deposit was 20k. The advisor siad that this was the vbest mortgage for him because it would allow him to stretch his 'affordability'. My friend eans 48k. Because my firnd is thick he thinks ghis monthly payments will pay his mortgage competely (the capital and the interest). As you will know he is wrong. Whats worse your friend the mortgage broker scum then adds salt to the wound by saying he can give a better rate of interest if he adds the 'fees' to the loan, that way my friend will have extra cash to tart up his 2 bed ****** flat in N8. My friend of course is compeletly oblvisous to the fact that he having a hot poker up his arrsrss!" You might think that the broker has advised him to take out a sacvings plan to ensure the capital is paid off. Your deluded. Instead h e said property prices will rise?!?!?!??!?!??

Sheesh, you know - I'm pssed off. So ****** the ****** ofvcffv"!"!

(5 mins later).

Calmer now.

Perhaps you can elucidate how those in the same psoition as my friend (FTBs) will actually benefit from the type of offers made by your friends in the business. Saying that, youre maths are proabbly that good so I won't expect anything from you. Once last try: perhaps I'm mad: prove it to me.

Its rightly considered on this site that it is poor form to criticise grammar and spelling, but yours in so awful that I have to say you might take steps to improve these areas.

[HPC Convert]

You can smell the stench of fear and political spin a mile away

Be fair here. Yes the OP can be criticised, but how about those bearish commens all the while that refuse to accept LR and Haliwide forecasts of hpi? Strikes me that many bearish posts are all about stuff hatching in the mud and we are all going to have to eat cardboard etc etc - based on nothing. Pots n kettles when it comes to political spin......

Edited July 20, 2007 by HPC Convert

[The Matador]

Be fair here. Yes the OP can be criticised, but how about those bearish commens all the while that refuse to accept LR and Haliwide forecasts of hpi? Strikes me that many bearish posts are all about stuff hatching in the mud and we are all going to have to eat cardboard etc etc - based on nothing. Pots n kettles when it comes to political spin......

http://www.housepricecrash.co.uk/forum/ind...51556&st=15

Ole!

[bazzzzzzz]

Be fair here. Yes the OP can be criticised, but how about those bearish commens all the while that refuse to accept LR and Haliwide forecasts of hpi?

Tedious, isn't it.

The herd menatility here has many believing HPI = imminent crash.

Unbelievable.

Newcomers are particular vulnerable to this sort of rubbish.

The rate of increase has slowed.

OMG! CRASH!

Yawn.

[FernandoMorientes]

ROFL

Herd mentality??? You seem to ignore the fact that this site has largely gone AGAINST the grain and not fallen for the VI tricks taking on huge sums of debt incurred by the 'sheeple herd' we are now begining to see stretched to the limit!

You keep your head in the sand there Baz.

Tedious, isn't it.

The herd menatility here has many believing HPI = imminent crash.

Unbelievable.

Newcomers are particular vulnerable to this sort of rubbish.

The rate of increase has slowed.

OMG! CRASH!

Yawn.

[PropertyGuru]

I don't know what's funnier. The idea that 'Baz' may actually be SO STUPID he believes what he posts, or the idea that 'Baz' is SO STUPID, he thinks he can protect his lously little job at the estate agents and the 'value' of his flat above the chip shop (that he just bought!) by posting VI crap on THIS board!!!

[Guest Cletus VanDamme]

I guess it's understandable to throw in the towel and believe there will be no crash ever, given the number of false dawns.

As was argued by the bulls here during the early days of this forum, the only thing that will crash the market is high interest rates, just like last time.

Now we are heading towards such rates (in comparison to the level of debt), the crash will follow.

Might still take a year or two though.

[FernandoMorientes]

Prefered the last avatar by the way, it was more in tune with your style of posts!

I don't know what's funnier. The idea that 'Baz' may actually be SO STUPID he believes what he posts, or the idea that 'Baz' is SO STUPID, he thinks he can protect his lously little job at the estate agents and the 'value' of his flat above the chip shop (that he just bought!) by posting VI crap on THIS board!!!

[the_duke_of_hazzard]

I guess it's understandable to throw in the towel and believe there will be no crash ever, given the number of false dawns.

As was argued by the bulls here during the early days of this forum, the only thing that will crash the market is high interest rates, just like last time.

Now we are heading towards such rates (in comparison to the level of debt), the crash will follow.

Might still take a year or two though.

I had a look at charcolonline.co.uk, to look at the "best buys" - I was struck by the complete absence of any rates beginning with 4% (even short term fixed) and very very little under 5.5%. And these are presumably for the people with the best credit rating.

In any case, it's more expensive to buy property now - from the first month you pay for it - than it was a few months ago. If a correction doesn't happen now, then it never will.

[Te Mata]

If a correction doesn't happen now, then it never will.

Oh ye of little faith, never say never.

[Guest Yeahbutnocrash]

Well it's a fact there has been huge HPI over the the last few years

Prices may be softening in some areas which is hardly surprising

And I think it's fair to say the market has become more vulnerable to price falls maybe even a crash

I'm not saying there can't be a crash but it's not a fact there will be an HPC as there are many factors involved - We will only know it for sure if we are in the midst of a crash or after it has happened

Remember what you have on this site are a number of self-appointed experts (guru's) who (sometimes) give (or attempt to give) the impression they have 'special knowledge' about how markets work so we should all believe them and anyone who does not can be labelled as 'sheeple' or 'bulls' for example

Whilst the reality is that these people do have useful knowledge which is well worth examining and taking some of it on board but they are not always right although they may be right some of the time

Can we really categorically say that in a couple of years time we will all beable to pick up good quality property in good locations cheaply?

I'd like to think that will be the case but I somehow doubt it

Edited July 21, 2007 by Yeahbutnocrash

[FernandoMorientes]

Covered all your bases there! I will stick to reading the bears and bulls opinions cos they have one!

Well it's a fact there has been huge HPI over the the last few years

Prices may be softening in some areas which is hardly surprising

And I think it's fair to say the market has become more vulnerable to price falls maybe even a crash

I'm not saying there can't be a crash but it's not a fact there will be an HPC as there are many factors involved - We will only know it for sure if we are in the midst of a crash or after it has happened

Remember what you have on this site are a number of self-appointed experts (guru's) who (sometimes) give (or attempt to give) the impression they have 'special knowledge' about how markets work so we should all believe them and anyone who does not can be labelled as 'sheeple' or 'bulls' for example

Whilst the reality is that these people do have useful knowledge which is well worth examining and taking some of it on board but they are not always right although they may be right some of the time

Can we really categorically say that in a couple of years time we will all beable to pick up good quality property in good locations cheaply?

I'd like to think that will be the case but I somehow doubt it

[Yandros]

Be fair here. Yes the OP can be criticised, but how about those bearish commens all the while that refuse to accept LR and Haliwide forecasts of hpi? Strikes me that many bearish posts are all about stuff hatching in the mud and we are all going to have to eat cardboard etc etc - based on nothing. Pots n kettles when it comes to political spin......

Very true. RealistBear seems to be able to spin ANYTHING into a trigger for a HPC. According to him, the crash began in Q2 2007 Dollar rises...HPC! Dollar falls...HPC! Same for gold, stocks - anything. He's not the only one, and it makes this site look pretty ridiculous at times.

[steve99]

I had a look at charcolonline.co.uk, to look at the "best buys" - I was struck by the complete absence of any rates beginning with 4% (even short term fixed) and very very little under 5.5%. And these are presumably for the people with the best credit rating.

In any case, it's more expensive to buy property now - from the first month you pay for it - than it was a few months ago. If a correction doesn't happen now, then it never will.

What I find strange is that when intersest rates reached rock bottom a few years ago all the EA's were saying that house price inflation was justified on the basis of the low IR's, why arn't they now saying that house prices should half in price cause the interest rates are double what the best deals were 4 years ago???

[eightiesgirly]

Well it's a fact there has been huge HPI over the the last few years

Prices may be softening in some areas which is hardly surprising

And I think it's fair to say the market has become more vulnerable to price falls maybe even a crash

I'm not saying there can't be a crash but it's not a fact there will be an HPC as there are many factors involved - We will only know it for sure if we are in the midst of a crash or after it has happened

Remember what you have on this site are a number of self-appointed experts (guru's) who (sometimes) give (or attempt to give) the impression they have 'special knowledge' about how markets work so we should all believe them and anyone who does not can be labelled as 'sheeple' or 'bulls' for example

Whilst the reality is that these people do have useful knowledge which is well worth examining and taking some of it on board but they are not always right although they may be right some of the time

Can we really categorically say that in a couple of years time we will all beable to pick up good quality property in good locations cheaply?

I'd like to think that will be the case but I somehow doubt it

I know very little about 'stuff' but in the last property downslide houses were taking about a year to sell and if you went to the estate agents to buy you got a book full of properties to view. If you were trying to sell a flat - forget it!

[lets get it right]

The OP was a good post and unfortunately yours was not

Supply and Demand influences all goods and services.

You seem to half understand this by stating how certain factors may influence demand such as sentiment. You also noted that demand can also be influenced by affordability. If you can not afford something at the market value then you are not in a position to effect the price no matter how much you desire something.

If we were talking about a commodity that was not a neccessity such as tulip bulbs for example, sentiment would pay a more important roll in the demand side of the equation as demand could in theory go to zero.

Housing is a basic human need and is not tranferable into another type of product/service, so it can be said the price of houses is in-elastic.

If there is a high demand, very high "need" for people to be housed, but both sentiment and affordability changed then there would be some downward pressure on prices, but ultimately, because housing is a neccessity, prices would revert to the "maximum affordable". This maximum affordability could very well be lower than today because people could have less money, finance could be more expensive and less available but the real cost for people could be even higher. Real cost would be how much it effects them.

You dont even mention supply. If half the houses in England were taken away do you seriously believe it would make no difference to demand?

You may not like or agree with the OPs views and concludsions but it seems you are simply not bothering to look at any facts.

Let's persist with this for the sake of trying to force some answers out of you.

Answer me this. In July 1988 the removal of joint tax relief (MIRAS) announced in the 1988 budget was implemented. The housing market just STOPPED. The supply was the same but, because affordability had SUDDENLY changed, demand was lowered and the market ground virtually to a halt.

So, prices fell without any alteration in supply. Can you explain this?

Between 1988 and 1995 - thousands of property developers and builders went broke and supply contracted as very little new house building took place. Prices continued to fall. How do you explain that?

Most people (wrongly) attribute the last property crash to a steep rise in interest rates. Let's assume most people are correct. So prices fell because demand fell, not supply.

House prices - asking prices - fell quite significantly in my area during 2004 and 2005. New build flats stood empty for months, prices were dropped, incentives were increased but ... prices still fell. Why? Because rising interest rates were stifling DEMAND - nothing to do with SUPPLY.

It's now become a mantra - high house prices are caused by the lack of supply. You buy it, the media buys it, everyone buys it - despite it being obvious nonsense.

High house prices are caused by cheap credit.

There is always demand for housing - from people who don't currently own and people who want to own something nicer.

Well, just to make the point so you don't misinterpret what I am saying ...

High house prices are NOT caused by lack of supply.

High house prices are caused by DEMAND.

Demand is fuelled by sentiment and affordability.

Please explain why house prices have fallen in the past when supply has either not altered or has fallen.

[Guest Yeahbutnocrash]

Covered all your bases there! I will stick to reading the bears and bulls opinions cos they have one!

Yes - I gave some respect to the opinions of bears whilst making that post

The market certainly seems more vulnerable but we dont yet know for sure what will unfold in the future

- It partly depends on where IR's are going but apparently employment is still holding up well

If there were simultaneous high IR's & higher unemployment IMO that would make a crash scenario more of a possibility

I think it's right to be cautious before believing over-bearish predictions and predictions from people who try and give the impression they know how the future will unfold but have not always been right in the past...

So that's my opinion (perhaps it's a bit too subtle & genuinely realistic) - What was yours again?

Edited July 21, 2007 by Yeahbutnocrash

[Flat Bear]

Let's persist with this for the sake of trying to force some answers out of you.

Answer me this. In July 1988 the removal of joint tax relief (MIRAS) announced in the 1988 budget was implemented. The housing market just STOPPED. The supply was the same but, because affordability had SUDDENLY changed, demand was lowered and the market ground virtually to a halt.

So, prices fell without any alteration in supply. Can you explain this?

Between 1988 and 1995 - thousands of property developers and builders went broke and supply contracted as very little new house building took place. Prices continued to fall. How do you explain that?

Most people (wrongly) attribute the last property crash to a steep rise in interest rates. Let's assume most people are correct. So prices fell because demand fell, not supply.

House prices - asking prices - fell quite significantly in my area during 2004 and 2005. New build flats stood empty for months, prices were dropped, incentives were increased but ... prices still fell. Why? Because rising interest rates were stifling DEMAND - nothing to do with SUPPLY.

It's now become a mantra - high house prices are caused by the lack of supply. You buy it, the media buys it, everyone buys it - despite it being obvious nonsense.

High house prices are caused by cheap credit.

There is always demand for housing - from people who don't currently own and people who want to own something nicer.

Well, just to make the point so you don't misinterpret what I am saying ...

High house prices are NOT caused by lack of supply.

High house prices are caused by DEMAND.

Demand is fuelled by sentiment and affordability.

Please explain why house prices have fallen in the past when supply has either not altered or has fallen.

hmmm

Do you understand what elasticity of supply and demand means?

Here is an artical on elasticity and how it effects the uk housing market which I would say is quite accurate

Elasticity and the UK Housing Market.

Elasticity measures the responsiveness of demand and supply to changes in price and incomes.

Price Elasticity of Demand.

PED measures the % change in demand in response to a % change in price. In the housing market, demand for housing is often inelastic. This is because there are few substitutes to buying a house; home buyers see buying a house as a necessity. Therefore as prices rise people are willing to spend a higher % of their income on the house. This has been helped by greater generosity from mortgage lenders: it is now easier to get a bigger mortgage multiple than before. E.g. in the past 15 years, UK house prices have risen by nearly 200%, but demand has continued to grow. This suggests demand for housing is very inelastic.

However for some people on low income their demand may be more elastic; this is because as house prices rise they can no longer afford to buy.

Income Elasticity of Demand.

YED measures the % change in demand in response to a % change in income. In the UK rising incomes have led to a bigger % of income spent on housing. This suggests demand is income elastic for housing. Demand is elastic because as income rises, people place great emphasis on buying a bigger and more attractive house. For example people are willing to spend alot on a new house near a good state school; this is because buying a house in the right location can save the necessity of sending a child to a private school. Some people even buy a second house when there income increases. In the past 15 years the ratio of house prices to incomes has increased significantly.

Prices Elasticity of Supply

PES measures the % changes in supply in response to a % in price. In the short term supply is very inelastic; this is because it takes along time to get planning permission and build a house. In the long term the elasticity of supply depends on geographical location. For example, in London it is very difficult to find space to build more houses, therefore supply is very inelastic. In other parts of the country it is easier to get planning permission and find space to build new houses.

The taking away of the MIRAS scheme in August 1988 was said by many to be the "trigger" for the early 90s crash. In reality it did have quite an effect on demand for a number of reasons.

* It created a rush to buy in the months preceeding (demand increased)

* There was a marked slowdown directly afterwards (demand reduced)

* Prices, for many, on servicing mortgages increased (affordability reduced thus demand)

* Sentiment changed as many believed it was a poorer investment (demand reduced)

It was not the only factor but was an important ingredient.

So when affordability changes for any reason this changes the demand

When sentiment changes for any reason this changes the demand

Example could be the end of MIRAS as above or even more pronounced the lowering of the cost of borrowing together with the easy access to higher amounts of finance over the past several years which has been the most important factor in increasing demand to unbelievable heights.

There are many factors effecting a market as complex as the UK housing market with all its sub markets but factors such as changes in affordability would be very important. Higher BOE base rates would have a universal effect and will effect the market as it has done in all the 3 previous corrections.

[eightiesgirly]

When we bought our home in the early eighties we couldn't have cared less what the repayments were or how long for. Both young and stupid.

In fact I didn't even go to look it at, very much a sellers market and we had three properties gazumped out from under us, I couldn't bear to fall in love with another house and have the rug pulled from under me.

Twenty years and one crash later on I am no longer young and thanks to experience and things like this forum I am a little less stupid.

The last time housing went all wrong it seemed to me a combination of everything going up at once, plus people being made redundant. Everyone owed loads so there was no room for movement, when you could'nt make the payments then that was it. Reposession. Once a house on your road goes for knock down price everyone who's a bit stretched tries to sell quick before they get repossesed, then that seems to be it.

We were already well in trouble before the rates went orbital - too much spendy on the flexible friend, led to slippy slidy on the wetty grippers!

[benj]

too much spendy on the flexible friend, led to slippy slidy on the wetty grippers!

One of t'crossbeams 'as gone out of skew on t'treddle?

[eightiesgirly]

One of t'crossbeams 'as gone out of skew on t'treddle?

Aye lad 'tas that!

[Fool's Gold]

In simple terms, the market will not crash because there is an insufficient supply of housing to meet housing need.

Oh silly me, I just thought it was a figment of my imagination that I can't sensibly afford one of the hundreds of houses for sale in the local paper. I mean, the paper is full of them, but don't understand why they are still in the paper if there is such an undersupply.

Never mind, I'll just put all rational thought aside, get a 5 times mortgage around my neck and jump on in ! You've put my mind at ease dgl001, I really can afford one of those hundreds of houses for sale

[lets get it right]

In the short term supply is very inelastic;

The taking away of the MIRAS scheme in August 1988 was said by many to be the "trigger" for the early 90s crash. In reality it did have quite an effect on demand for a number of reasons.

* It created a rush to buy in the months preceeding (demand increased)

* There was a marked slowdown directly afterwards (demand reduced)

* Prices, for many, on servicing mortgages increased (affordability reduced thus demand)

* Sentiment changed as many believed it was a poorer investment (demand reduced)

It was not the only factor but was an important ingredient.

So when affordability changes for any reason this changes the demand

When sentiment changes for any reason this changes the demand

Example could be the end of MIRAS as above or even more pronounced the lowering of the cost of borrowing together with the easy access to higher amounts of finance over the past several years which has been the most important factor in increasing demand to unbelievable heights.

There are many factors effecting a market as complex as the UK housing market with all its sub markets but factors such as changes in affordability would be very important. Higher BOE base rates would have a universal effect and will effect the market as it has done in all the 3 previous corrections.

Well I don't know, am I going mad - you take me to task for saying that house prices depend on demand - not supply - and then you post something that absolutely agrees with my position.

Thank you.