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Jonnybegood

Are Many Expecting To Much From A Crash

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Now I know there is wide ranging views on the falls to expect if a crash does come along, Some will say only 10% whilst others will say that property will fall in some places by as much as 60%.

If property in many areas over the past 10 years has increased 250-300% then what is stopping it falling just 50%.

Example - I found some leaflets on propeties me and my wife looked at back in 1998 and compared with prices the same properties sold in the last 3 years

1998 - £77,499 (2004 £205,000),£82,000 (2005 £217,995), £69,995 (2005 £222,500)

Well I think that looking back property in the uk was undervalued, Wages have not increased greatly over the past decade but many can still afford today to buy a property 200-300% more than 10 years ago.

Forget the isolated 7X income mortgages the majority are max 4x incomes, many have adapted by sharing or younger couples moving in together rather than alone.

The houses I listed above were in Wales (Just outside Cardiff) and 3-4 bed detached, Now at the time the wife was off work on maternity and we still could afford to buy, then when she went back to work it took us just 8 years to pay off the mortgage and bring up 2 children the same time.

With more and more women now working (2 incomes) and electronic goods and other home improvements such as windows and doors cheaper than ever before, a minimum wage even for the office cleaner it just could not of gone on that these large 3-4 bed detached house would sell for sub £100k.

We would of been at a stage where an office cleaner and his wife who worked at the local supermarket could afford to buy a 4 bed detached property, Where would that of left the higher earners to buy, 5,6,7 bed homes with a few acres of land.

I do think the boom as gone on to far and property is overvalued but not by that great an amount, especially when you factor in the lower IRs we have seen over the past 5-6 years.

Don't expect the falls to be that great if they happen, a slow fall of upto 20% (Maybe 25% for some empty apartments / Flats) over the next 5 years.

Remember it has taken a long time to peak and these things are known to be very slow on the decline, the absolute bottom of a crash may not be seen for another decade.

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Now I know there is wide ranging views on the falls to expect if a crash does come along, Some will say only 10% whilst others will say that property will fall in some places by as much as 60%.

If property in many areas over the past 10 years has increased 250-300% then what is stopping it falling just 50%.

Example - I found some leaflets on propeties me and my wife looked at back in 1998 and compared with prices the same properties sold in the last 3 years

1998 - £77,499 (2004 £205,000),£82,000 (2005 £217,995), £69,995 (2005 £222,500)

Well I think that looking back property in the uk was undervalued, Wages have not increased greatly over the past decade but many can still afford today to buy a property 200-300% more than 10 years ago.

Forget the isolated 7X income mortgages the majority are max 4x incomes, many have adapted by sharing or younger couples moving in together rather than alone.

The houses I listed above were in Wales (Just outside Cardiff) and 3-4 bed detached, Now at the time the wife was off work on maternity and we still could afford to buy, then when she went back to work it took us just 8 years to pay off the mortgage and bring up 2 children the same time.

With more and more women now working (2 incomes) and electronic goods and other home improvements such as windows and doors cheaper than ever before, a minimum wage even for the office cleaner it just could not of gone on that these large 3-4 bed detached house would sell for sub £100k.

We would of been at a stage where an office cleaner and his wife who worked at the local supermarket could afford to buy a 4 bed detached property, Where would that of left the higher earners to buy, 5,6,7 bed homes with a few acres of land.

I do think the boom as gone on to far and property is overvalued but not by that great an amount, especially when you factor in the lower IRs we have seen over the past 5-6 years.

Don't expect the falls to be that great if they happen, a slow fall of upto 20% (Maybe 25% for some empty apartments / Flats) over the next 5 years.

Remember it has taken a long time to peak and these things are known to be very slow on the decline, the absolute bottom of a crash may not be seen for another decade.

Of course they were undervalued, you could not build a house for that price, let alone buy the land.

Todays prices are around 25% off the mark, however interest rates and creative lending have allowed it to continue against a backdrop of falling wages and an ever increasing unskilled, undereducated workforce entering the jobs market that is deflating wages.

The equilibrium will be balanced when we go through the 11% rate, to remove the deadwood subprime loans, and the tightening of the jobs market, we should come down the other side on a steep fall then bounce along for five years on the bottom before inflation has eroded the high debts built up over several years.

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I wonder why the Bank of England is planning on 40% being wiped off property prices. Property is only worth what someone will pay. Someone will pay only what they can borrow. People can only borrow what lenders will lend them. Lenders can only lend if there is some chance of the borrowing being repaid. Monetarist policies massage the ability to repay through interest rate manipulation. The Bank of England sets the interest rates. So why would the Bank of England bother planning for a HPC if there wasn't going to be one?

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Guest muttley

Yes they were undervalued, and they will become undervalued again. That's how you get a +20% fall.

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Now I know there is wide ranging views on the falls to expect if a crash does come along, Some will say only 10% whilst others will say that property will fall in some places by as much as 60%.

If property in many areas over the past 10 years has increased 250-300% then what is stopping it falling just 50%.

Example - I found some leaflets on propeties me and my wife looked at back in 1998 and compared with prices the same properties sold in the last 3 years

1998 - £77,499 (2004 £205,000),£82,000 (2005 £217,995), £69,995 (2005 £222,500)

Well I think that looking back property in the uk was undervalued, Wages have not increased greatly over the past decade but many can still afford today to buy a property 200-300% more than 10 years ago.

Forget the isolated 7X income mortgages the majority are max 4x incomes, many have adapted by sharing or younger couples moving in together rather than alone.

The houses I listed above were in Wales (Just outside Cardiff) and 3-4 bed detached, Now at the time the wife was off work on maternity and we still could afford to buy, then when she went back to work it took us just 8 years to pay off the mortgage and bring up 2 children the same time.

With more and more women now working (2 incomes) and electronic goods and other home improvements such as windows and doors cheaper than ever before, a minimum wage even for the office cleaner it just could not of gone on that these large 3-4 bed detached house would sell for sub £100k.

We would of been at a stage where an office cleaner and his wife who worked at the local supermarket could afford to buy a 4 bed detached property, Where would that of left the higher earners to buy, 5,6,7 bed homes with a few acres of land.

I do think the boom as gone on to far and property is overvalued but not by that great an amount, especially when you factor in the lower IRs we have seen over the past 5-6 years.

Don't expect the falls to be that great if they happen, a slow fall of upto 20% (Maybe 25% for some empty apartments / Flats) over the next 5 years.

Remember it has taken a long time to peak and these things are known to be very slow on the decline, the absolute bottom of a crash may not be seen for another decade.

You put your heading as "Are Many Expecting To Much From A Crash, Was property undervalued 10 years ago":

You obviously can't spell --- it's "TOO MUCH" not "TO MUCH". Your spiel is a bit silly too. 'Fact is - property prices are utterly insane. Period. This opinion might not sit well with you, probably because you have paid a very high price for a cr*p property.

Edited by eric pebble

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Its undervalued when the majority can't buy and over valued when the majority can buy.

does that mean new ferraris are inherently overvalued and 2nd hand ford fiestas inherently undervalued then?

or perhaps shouldn't a valuation strategy be based on future utility - I'd say houses are undervalued when their (admitedly estimated) future utility (freedom from rent) is worth more than their purchase price, and overvalued when future utility is below this.

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does that mean new ferraris are inherently overvalued and 2nd hand ford fiestas inherently undervalued then?

or perhaps shouldn't a valuation strategy be based on future utility - I'd say houses are undervalued when their (admitedly estimated) future utility (freedom from rent) is worth more than their purchase price, and overvalued when future utility is below this.

If you look at the past 50 years, everytime theres a boom they say homes were undervalued but people could afford them however they didnt want to take the risk incase they lose even more value, when the boom starts home prices become over valued people can't really afford them but they still buy racking up the price till it gets to a point were its over valued but they still buy. when it slows down people become scared and prices become undervalued till the next point were people start buying.

If you look at most financial millionaries they make their money in a crash rather than a boom, ie they buy in a crash and sell in a boom, only fools by in a boom feeding the boom, once the elite have no more materials to sell they Suffocate the boom inorder to induce a crash, and the money that the fool has paid in a boom the elite use in a bust, its actually funny if you think about it.

So it seems they made money in a boom, so yes, however they brought in a crash.

Edited by crash2006

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They teach people to save in a bust and spend in a boom, so you get less for your money, if you spend in a crash on something that makes money in a boom you just sit around in a boom racking up your money to buy in a bust and the cycle starts again, the only problem is starting it.

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Markets are pendulums swinging from delirious optimism (overvalued) to extreme pessimism (undervalued).

I don't believe most people think that houses have been unaffordable in the short term, but rather they might prove to be unaffordable in the medium to long term. The problems come when banks re-evaluate risk, they become more picky about who they lend to and how much they will lend, interest rates also rise. This then has a knock on effect as people can no longer go out spending and companies as a result, start to lay people off. Then people can't afford their mortgages etc etc.

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House prices never (never) deviate from average earnings over the long haul. When house prices do drift from the fundamentals, as they do every 7-10 years, there is always (always) a correction.

Q: Are houses overpriced today in relation to earnings?

A: How much does the average house cost and how much is the average wage?

Q: I see what you mean, I suppose a very sharp correction is due?

A: I am afraid so.

Edited by Realistbear

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Guest Yeahbutnocrash
I wonder why the Bank of England is planning on 40% being wiped off property prices. Property is only worth what someone will pay. Someone will pay only what they can borrow. People can only borrow what lenders will lend them. Lenders can only lend if there is some chance of the borrowing being repaid. Monetarist policies massage the ability to repay through interest rate manipulation. The Bank of England sets the interest rates. So why would the Bank of England bother planning for a HPC if there wasn't going to be one?

It's pretty obvious they are not planning for 40% drops

As I remember that figure was used as a worst-case scenario excercise

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Could you provide some graphs for this? Thanks.

In cyberland there is a graph that traces house prices in relation to earnings over the past several decades. The wages line was, IIRC, more or less straight at a gradually inclining angle. House prices wove up and down below and above the wage line but always reverted to the wages trend. Have to do a Google as I cannot remember where it is. It is significant and should be posted next to the Haliwide graph as a permanent reminder that house prices both rise and fall despite Gordon's promise that we will have boom only.

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whey - hey!..., another "neither" putting up posts on the possibility of no crash when everything is primed and ready to go down <_<

Almost as desperate as our recent 'bear turns bull' episodes.

watch out guys, they are amongst us.... :ph34r::lol:

Edited by sign_of_the_times

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Q: Are houses overpriced today in relation to earnings?

A: How much does the average house cost and how much is the average wage?

Q: I see what you mean, I suppose a very sharp correction is due?

A: I am afraid so.

I am bearish, but I am a bit bored of the "average wage can't afford the average house" argument.

The fact is that low earners do not / cannot buy houses to the same degree that higher earners do. There are council houses, housing associations, private rented, nursing homes, amongst others.

All of these are reasons why it is probably better to lose the lower quartile when doing the calc.

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You put your heading as "Are Many Expecting To Much From A Crash, Was property undervalued 10 years ago":

You obviously can't spell --- it's "TOO MUCH" not "TO MUCH". Your speel is a bit silly too. 'Fact is - property prices are utterly insane. Period. This opinion might not sit well with you, probably because you have paid a very high price for a cr*p property.

Do you mean 'spiel'?

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That graph is enough to put a spring in any bear's step. The constantly repeating pattern portends a crash the like of which has never been seen before. I think we are going to get that gravitational effect that peels the face back from the skull due to the sheer downward speed and momentum of the crash.

The graph on wages:house prices I was referring to was a little less dramatic but underscored the fact that HPI never moves away from the fundamentals for long.

The bottom line, as always, prices go up and they go down and the further they drift from the fundamentals the further they have to fall. All so simple--just like gravity.

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Too much X and not enough whY?

I believe a lot of people on here are expecting too much from a house price crash. But not in the context that is being discussed. If you look at the main house price graph we are all looking at the highs and lows for the value of houses, but am I the only one looking at the time all this takes. The time of the peaks and troughs are about 3x in length when comparing the last 2 crashes and subsequent recoveries. If you take all this in to account and the next crash were to start In the next few years it maybe as long as 20 years for house prices to reach there absolute minimum. Are we to all put our lives on hold and save for such a time? It makes me laugh when people state they are going to buy up all the repossessions from the crash and let them out. Great idea, but how old are you going to be when you recover your investment and losses?

Just consider. If it takes 20 years to get to the point where we should be investing or buying our houses how long will it be for us to benefit from it all when we start to see an increase. 40+ years. Great if life expectancy is to go up.

I think it’s going to be a long drawn out process where the idea of owning a home is going to be considered to be more like buying a car and the depreciation that comes with it.

Graphs are all well and good, but there has to be issues driving it. Thousands of Uninsurable and un-mortgagable houses due to flooding, introduction of more red tape or should I say HIPS, higher inflation and interest rates. Well that’s a nice justifiable “whY” for the next turn.

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Ha Ha :rolleyes:

OK - it's a fair cop! But not as bad a mistake as "to" rather than "too". Whilst I'm here Johnybegood --- tell us how much you paid for your property, its particulars, and when you bought it..... :P:lol::lol:

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Now I know there is wide ranging views on the falls to expect if a crash does come along, Some will say only 10% whilst others will say that property will fall in some places by as much as 60%.

If property in many areas over the past 10 years has increased 250-300% then what is stopping it falling just 50%.

Example - I found some leaflets on propeties me and my wife looked at back in 1998 and compared with prices the same properties sold in the last 3 years

1998 - £77,499 (2004 £205,000),£82,000 (2005 £217,995), £69,995 (2005 £222,500)

Well I think that looking back property in the uk was undervalued, Wages have not increased greatly over the past decade but many can still afford today to buy a property 200-300% more than 10 years ago.

Forget the isolated 7X income mortgages the majority are max 4x incomes, many have adapted by sharing or younger couples moving in together rather than alone.

The houses I listed above were in Wales (Just outside Cardiff) and 3-4 bed detached, Now at the time the wife was off work on maternity and we still could afford to buy, then when she went back to work it took us just 8 years to pay off the mortgage and bring up 2 children the same time.

With more and more women now working (2 incomes) and electronic goods and other home improvements such as windows and doors cheaper than ever before, a minimum wage even for the office cleaner it just could not of gone on that these large 3-4 bed detached house would sell for sub £100k.

We would of been at a stage where an office cleaner and his wife who worked at the local supermarket could afford to buy a 4 bed detached property, Where would that of left the higher earners to buy, 5,6,7 bed homes with a few acres of land.

I do think the boom as gone on to far and property is overvalued but not by that great an amount, especially when you factor in the lower IRs we have seen over the past 5-6 years.

Don't expect the falls to be that great if they happen, a slow fall of upto 20% (Maybe 25% for some empty apartments / Flats) over the next 5 years.

Remember it has taken a long time to peak and these things are known to be very slow on the decline, the absolute bottom of a crash may not be seen for another decade.

Ive mentioned this a few times on this board, the mid to late 90's (depending on where you live) was just about the best time ever in living history to buy property in the UK, forget the 70's and 80's, they were plagued with high interest rates and unemployment. What we'll go back to after the crash is anyones guess, I unfortunatly suspect that the VI',s that is the big financiers, banks, govt etc will favour inflation rather than deflation, ie keep interest rates reletivley low for the next few years while wages catch up, causing the crash in that imaginary situation 'Real terms' (which deletes the value of your savings) as oposed to 'Nominal prices' ie a real crash where your savings keep and enhance their value.

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Too much X and not enough whY?

I believe a lot of people on here are expecting too much from a house price crash. But not in the context that is being discussed. If you look at the main house price graph we are all looking at the highs and lows for the value of houses, but am I the only one looking at the time all this takes. The time of the peaks and troughs are about 3x in length when comparing the last 2 crashes and subsequent recoveries. If you take all this in to account and the next crash were to start In the next few years it maybe as long as 20 years for house prices to reach there absolute minimum. Are we to all put our lives on hold and save for such a time? It makes me laugh when people state they are going to buy up all the repossessions from the crash and let them out. Great idea, but how old are you going to be when you recover your investment and losses?

Just consider. If it takes 20 years to get to the point where we should be investing or buying our houses how long will it be for us to benefit from it all when we start to see an increase. 40+ years. Great if life expectancy is to go up.

I think it’s going to be a long drawn out process where the idea of owning a home is going to be considered to be more like buying a car and the depreciation that comes with it.

Graphs are all well and good, but there has to be issues driving it. Thousands of Uninsurable and un-mortgagable houses due to flooding, introduction of more red tape or should I say HIPS, higher inflation and interest rates. Well that’s a nice justifiable “whY” for the next turn.

tha's a very good point - I wish it were different, but I'll only buy a house for security of tenure, and not for profit. My feelings are there won't be a boom again within the coming decades, or maybe longer, mainly for demographic reasons, but also, now, for chartist reasons....

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