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Guest An Bearin Bui

"It is different this time" (classic phrase) in that the stock market jitters have actually been caused by housing-backed securities and dodgy debt derivatives based on US mortgages. That's quite unique because previous stock market slumps weren't tied to housing slumps.

If anything, it seems like in 1987, 1998 and 2001, the stock market slumps led to some kind of "flight to housing" as house prices went up after all three SM drops. Interest rates were cut to avoid recession and people flocked to something that seemed secure. This time around it's interesting as housing is the risky asset that caused the slump in the first place so there's no "bricks and mortar" alternative...

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It is different this time" (classic phrase) in that the stock market jitters have actually been caused by housing-backed securities and dodgy debt derivatives based on US mortgages. That's quite unique because previous stock market slumps weren't tied to housing slumps.

....This time around it's interesting as housing is the risky asset that caused the slump in the first place so there's no "bricks and mortar" alternative...

Very true. It's really hard to see the housing market here or in the US reacting the way it did after 1987 because of that. Also, more crucially the upshot of the jitters is likely to be pricier and more restricted borrowing which is possibly in itself enough to bring house prices down.

Personally I think it's 'different every time'. I know 'it's different this time' is a much-derided phrase and rightly so when it is used as a justification of why real house prices can go up forever. But equally history shows a great deal of variation in the why that SM and house price crashes have played out.

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In fact, house prices after the 1987 crash rose about 40% then fell back to a minimum point of 15% higher than 1987 prices. not a great omen, but hopefully they're already too high for that to happen again.

Mine didn't.

Flat bought in 1987 for 44500

Valued in 1994 33000 (mid range, one was as low as 32k)

Sold March 1999 45,500 (excluding fees obviously).

Nationally, you are probably correct, but regionally houses went down and back up at different times, leading the national index to look like it only went down some 15% from the top. Outside London and SE I don't think there was such a big bubble, I could be mistaken.

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Mine didn't.

Flat bought in 1987 for 44500

Valued in 1994 33000 (mid range, one was as low as 32k)

Sold March 1999 45,500 (excluding fees obviously).

Nationally, you are probably correct, but regionally houses went down and back up at different times, leading the national index to look like it only went down some 15% from the top. Outside London and SE I don't think there was such a big bubble, I could be mistaken.

Yes, fair point. I was reporting the national figure. There were some much sharper falls in London and SE for sure.

I didn't really mean to imply it's likely this time. If anything I think it just shows the dangers of expecting history to repeat itself too precisely. There are cycles and recurring themes, but the devil is in the detail.

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Guest

Besides, there is no "flight to housing" because there's nothing to fly *from*.

Joe Soaps in this country don't buy shares, they buy houses.

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Mine didn't.

Flat bought in 1987 for 44500

Valued in 1994 33000 (mid range, one was as low as 32k)

Sold March 1999 45,500 (excluding fees obviously).

Nationally, you are probably correct, but regionally houses went down and back up at different times, leading the national index to look like it only went down some 15% from the top. Outside London and SE I don't think there was such a big bubble, I could be mistaken.

Using Nationwide's figures, house prices peaked in Q3 1989 at £67,782 then reached a low in Q1 1993 of £50,128. A total national decline of 26%.

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Using Nationwide's figures, house prices peaked in Q3 1989 at £67,782 then reached a low in Q1 1993 of £50,128. A total national decline of 26%.

I think you've misread the 89 figures - it was 62,782, meaning the national nominal decline was 19%.

But of course examples like bobthe's are a reminder that many individual properties fell by far more.

My original point was just that history isn't a reliable guide and doesn't tell us much in this case. 87 and 98 led to very different outcomes on HPI and this time circumstances are different to either of those.

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