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Realistbear

" The Housing Market: It's 1991 All Over Again "

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http://www.citywire.co.uk/Blogs/Property/E...rsionID%3d96330

The housing market: it's 1991 all over again

At least that's what you might surmise from the latest Council of Mortgage Lenders' house loan data.
Howard Archer at Global Insight says the data shows:
'The increasing struggles that home buyers - especially first-time buyers - are facing to afford a house. In particular, the CML reported that loans-to-income multiples for first-time buyers averaged a record 3.39 in July. This was up from 3.37
in June, 3.23 in July 2006 and 2.36 a decade earlier.
'In addition, the proportion of the income of first-time buyers spent on servicing their
mortgage payments climbed to 19.7% in July. This was the highest ratio since 1991.'
'Furthermore, the CML reported that the proportion of the income that home movers spent on servicing their mortgage payments climbed to 16.9% in July. This was the highest ratio since 1992 and up from an average of 11.0% in 2003.'
1991, you may recall, was the depths of the last UK housing recession - a time when the International Herald Tribune advised its cosmopolitan readership:
'For foreigners looking for a British home or an investment the value is obvious. A two-bedroom maisonette in the heart of London's Chelsea, which two years ago was worth around £230,000 ($395,000), is now on the market for £189,500.'
:blink:

Some bulls/neithers might argue that the example given of the loss is not mix adjusted or sufficiently seasoned with inflation as losses in those days were actually gains as house prices never actually go down even though they appear to do so.

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http://www.citywire.co.uk/Blogs/Property/E...rsionID%3d96330

The housing market: it's 1991 all over again

At least that's what you might surmise from the latest Council of Mortgage Lenders' house loan data.
Howard Archer at Global Insight says the data shows:
'The increasing struggles that home buyers - especially first-time buyers - are facing to afford a house. In particular, the CML reported that loans-to-income multiples for first-time buyers averaged a record 3.39 in July. This was up from 3.37
in June, 3.23 in July 2006 and 2.36 a decade earlier.
'In addition, the proportion of the income of first-time buyers spent on servicing their
mortgage payments climbed to 19.7% in July. This was the highest ratio since 1991.'
'Furthermore, the CML reported that the proportion of the income that home movers spent on servicing their mortgage payments climbed to 16.9% in July. This was the highest ratio since 1992 and up from an average of 11.0% in 2003.'
1991, you may recall, was the depths of the last UK housing recession - a time when the International Herald Tribune advised its cosmopolitan readership:
'For foreigners looking for a British home or an investment the value is obvious. A two-bedroom maisonette in the heart of London's Chelsea, which two years ago was worth around £230,000 ($395,000), is now on the market for £189,500.'
:blink:

Some bulls/neithers might argue that the example given of the loss is not mix adjusted or sufficiently seasoned with inflation as losses in those days were actually gains as house prices never actually go down even though they appear to do so.

In other news:

"Modern geologists consider the age of the Earth to be around 4.54 billion years (4.54×10^9 years).[1] This age represents a compromise between the interpretations of oldest-known terrestrial minerals – small crystals of zircon from the Jack Hills of Western Australia – and astronomers' and planetologists' determinations of the age of the solar system based in part on radiometric age dating of meteorite material and lunar samples."

http://en.wikipedia.org/wiki/Age_of_the_earth

Edited by sossij

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In other news:

"Modern geologists consider the age of the Earth to be around 4.54 billion years (4.54×10^9 years).[1] This age represents a compromise between the interpretations of oldest-known terrestrial minerals – small crystals of zircon from the Jack Hills of Western Australia – and astronomers' and planetologists' determinations of the age of the solar system based in part on radiometric age dating of meteorite material and lunar samples."

http://en.wikipedia.org/wiki/Age_of_the_earth

AWOOGA

Troll alert!

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At least that's what you might surmise from the latest Council of Mortgage Lenders' house loan data

Data is meaningless and biased - only anecdotal evidence is valid......

isn't that the case RB?

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I won't take anything the article says seriously as I refuse to believe FTB'rs are only paying 3.39 income this is surely a load of crap.

Indeed. If the average income in the UK is, for example, 40k (which it isn't) that means the average FTB property is around 135k which it isn't.

I have to agree with Bateman on this one--the data put out by most VIs is meaningless and bares no resemblance to anything in the real world. However, the thrust of the article--that things are as bad or much worse than the pit of Great Crash 1 is probably true.

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In other news:

"Modern geologists consider the age of the Earth to be around 4.54 billion years (4.54×10^9 years).[1] This age represents a compromise between the interpretations of oldest-known terrestrial minerals – small crystals of zircon from the Jack Hills of Western Australia – and astronomers' and planetologists' determinations of the age of the solar system based in part on radiometric age dating of meteorite material and lunar samples."

http://en.wikipedia.org/wiki/Age_of_the_earth

Modern Geologists are completley wrong, the earth is 6000 years old, just ask any religious nut GWBush supporter.

Edited by steve99

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Some bulls/neithers might argue that the example given of the loss is not mix adjusted or sufficiently seasoned with inflation as losses in those days were actually gains as house prices never actually go down even though they appear to do so.

Excellent! :lol::lol:

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I won't take anything the article says seriously as I refuse to believe FTB'rs are only paying 3.39 income this is surely a load of crap.

No the figures are accurate- anyone with a self cert or interest only loan has to inflate their income- this gets the mortgage companies of the hook shuold anyone want to sue them for mis-selling mortgages at some time in the future

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Guest DissipatedYouthIsValuable
Indeed. If the average income in the UK is, for example, 40k (which it isn't) that means the average FTB property is around 135k which it isn't.

I have to agree with Bateman on this one--the data put out by most VIs is meaningless and bares no resemblance to anything in the real world. However, the thrust of the article--that things are as bad or much worse than the pit of Great Crash 1 is probably true.

I agree. Total bo l l o cking toss.

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I won't take anything the article says seriously as I refuse to believe FTB'rs are only paying 3.39 income this is surely a load of crap.

The figures may, or may not be correct, however, when carrying out any analysis it is important to assess apples with apples and not bananas. This piece does that and states things are as bad as 1991.

As far as my history goes in 1991 we were in the middle of a HPC so now, according to this article, we should be in a similar position?

I believe that we are and just haven't realised it yet!

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At the moment house prices are like a drunk at a roof top party. You know he's going to fall soon. Except at the UK roof top party everyone keeps plying (sic) him with more booze despite knowing what is going to happen.

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I won't take anything the article says seriously as I refuse to believe FTB'rs are only paying 3.39 income this is surely a load of crap.

I'm sitting with 2 people in my office who have owened only 1 property in their life so far, they have owned for over ten years. Are they FTBs?

Either way, REPO13 is correct, you need to compare apples with apples. In this case it's still wrong, as MIRAS was around during the peak, and was one of the major reasons for the sudden peak. So, it's not even apples with apples, more like apples with an apple and it's cart.

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I won't take anything the article says seriously as I refuse to believe FTB'rs are only paying 3.39 income this is surely a load of crap.

Obviously its total sh1te.

But it is the council of mortgage lenders so what would you expect - 'Dont buy a house, dont use our products or services'?

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I don't think the figures themselves are wrong,

x buyers mortgaging for y with an average income of z gives the income multiple.

Income multiple is a simple sum.

All it tells you is that by and large the average salary of people getting on the first rung is 40k, which is double the national average salary. And they have to borrow 135k FFS.

Affordability is still going up (or is it down?).

I don't even think they are trying to spin it as buy now before it's too late.

It is unsustainable, there are a few mugs still out there who have spent too long wacking off to property p0rn.

It has already started to go horribly horribly wrong.

The elastic has stretched too far, it is snapping.

Don't worry.

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Guest wrongmove
The housing market: it's 1991 all over again

By 1991, prices had dropped down to a sustainable level. They were pretty well bang on trend (though they fell much further in real terms). See graph here: http://www.housepricecrash.co.uk/index.php

I wish it was 1991 again.

What exactly is the point of this article?

Edited by wrongmove

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I won't take anything the article says seriously as I refuse to believe FTB'rs are only paying 3.39 income this is surely a load of crap.

3.39 x income makes sense but only because it excludes people who are not buying.

If the average FTB earns £50,000 p/a then 3.39 gives £170,000 mortgage. Anybody who earns less than £50,000 is excluded from the figures because they are not buyers at all.

If the average FTB property cost £3m it would be still be affordable for FTBers, anybody who earned less than £1m per annum simply wouldn't be counted and the CML would still be able to say 3 x income.

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By 1991, prices had dropped down to a sustainable level. They were pretty well bang on trend (though they fell much further in real terms). See graph here: http://www.housepricecrash.co.uk/index.php

I wish it was 1991 again.

What exactly is the point of this article?

But wasn't this when we were in the ERM and had really high interest rates?

Wasn't this the reason why it is different now because interest rates are so much lower?

Also the straight line shown on the front page, is this a straght line trend going from then to now. If so, it is pretty useless because it is skewed by the massive HPI in the last few years.

Once we go the other side of the mountain, the YOY average growth also drops and that red line moves down. I think it should be compared with average earnings. Now that would be a graph to see. That would show you how much past the real trend line this has got.

Of course that is why statistics are so valuable, they can prove anything. :)

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Also the straight line shown on the front page, is this a straght line trend going from then to now. If so, it is pretty useless because it is skewed by the massive HPI in the last few years.

Once we go the other side of the mountain, the YOY average growth also drops and that red line moves down. I think it should be compared with average earnings. Now that would be a graph to see. That would show you how much past the real trend line this has got.

Hi Bobthe~

Do you mean something like the graph attached (if I've attached it correctly, never done this before - apologies if it hasn't)?

I've basically taken the Nationwide average house prices (not inflation adjusted) and average wages from 1971 to 2007 (1st quarter of each year). This is working on the basis of growth of £100 from 1971.

Notice how far apart they are getting lately :unsure: ? Figures below (1st column is year, 2nd is wages and 3rd is houses).

Wages Houses

1971 £100 £100

1972 £113 £127

1973 £128 £177

1974 £151 £209

1975 £191 £219

1976 £221 £243

1977 £240 £262

1978 £271 £292

1979 £313 £375

1980 £379 £478

1981 £427 £501

1982 £468 £510

1983 £507 £555

1984 £538 £626

1985 £583 £700

1986 £630 £752

1987 £679 £862

1988 £737 £951

1989 £805 £1,256

1990 £883 £1,257

1991 £950 £1,151

1992 £1,008 £1,101

1993 £1,039 £1,057

1994 £1,077 £1,083

1995 £1,111 £1,078

1996 £1,151 £1,084

1997 £1,199 £1,177

1998 £1,261 £1,327

1999 £1,322 £1,423

2000 £1,381 £1,639

2001 £1,443 £1,771

2002 £1,495 £2,011

2003 £1,546 £2,530

2004 £1,613 £2,958

2005 £1,678 £3,223

2006 £1,752 £3,703

2007 £1,822 £4,055

Cheers

Scott

wages_house_prices_1974_to_2005.pdf

wages_house_prices_1974_to_2005.pdf

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looking at that Scott, its a wonder how we have got to this situation in the first place.

oh yes, easy credit. Thats what I had forgotten. oh wait....whats happening at the moment? CRUNCH TIME!! :lol:

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looking at that Scott, its a wonder how we have got to this situation in the first place.

oh yes, easy credit. Thats what I had forgotten. oh wait....whats happening at the moment? CRUNCH TIME!! :lol:

Yeah, you're right DoctorJ. I'm quite glad that Bobthe~ gave us the challenge of a new graph. It really surprised me how much it really is 'different this time'.

Makes the late 80's/early 90's look like a walk in the park.

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