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Housing Crash Good For Us -- Opinion Piece

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Excellent article which reflects my feelings about the housing market. The only bit I didn't like was the suggestion that prices would fall to 2004 levels - I'd still be priced-out by a spectacular margin if that were all that happened. My wage (which compares favourably for my geographical location) has only just reached a point at which I could afford to buy at 1997 levels!

I liked his apple example to illustrate demand. The demand argument has always been a popular one with bulls, which I have always answered by suggesting that if 1000 people want a bar of chocolate, and you have 10 bars of chocolate to sell, then you can rightly suggest that there is plenty of demand. But if each potential chocolate-buyer can afford to pay 25p for a bar of chocolate and your bars of chocolate are priced at 50p, you're not going to sell any, regardless of how much 'demand' there is. The bulls love to use the demand argument but always conveniently overlook the 'spending power vs price' element of it.

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I liked his apple example to illustrate demand. The demand argument has always been a popular one with bulls, which I have always answered by suggesting that if 1000 people want a bar of chocolate, and you have 10 bars of chocolate to sell, then you can rightly suggest that there is plenty of demand. But if each potential chocolate-buyer can afford to pay 25p for a bar of chocolate and your bars of chocolate are priced at 50p, you're not going to sell any, regardless of how much 'demand' there is. The bulls love to use the demand argument but always conveniently overlook the 'spending power vs price' element of it.

Good point, BB.

The problem is that many people do not understand what 'supply and demand' actually means.

'Demand' is very different to 'desire'. For demand to count as demand it must be supported by the ability to pay, either in cash or through debt.

In your example of the chocolate bars, no-one can afford to pay 50p. Therefore 'demand' is nil, although 'desire' may be high.

As the price reduces to stimulate demand there will be one or two takers until eventually an equilibrium between supply and demand is reached at a certain price.

The law of supply and demand reamains sound - so long as people understand it properly.

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A good opinion piece on why HPC is good for the US

http://www.washingtonpost.com/wp-dyn/conte...id=opinionsbox1

This is correct. I'm a homeowner and want to sell; if prices fall then I lose on the sale but the price of what I want is cheaper. Normally if things get cheaper it's regarded as a good thing, but apparently housing is an exception beacuse it's regarded primarily as an investment and not a place to live.

There's also a common sense limit to any house price falls; the cost of the land plus rebuilding costs.

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Good point, BB.

The problem is that many people do not understand what 'supply and demand' actually means.

'Demand' is very different to 'desire'. For demand to count as demand it must be supported by the ability to pay, either in cash or through debt.

In your example of the chocolate bars, no-one can afford to pay 50p. Therefore 'demand' is nil, although 'desire' may be high.

As the price reduces to stimulate demand there will be one or two takers until eventually an equilibrium between supply and demand is reached at a certain price.

The law of supply and demand reamains sound - so long as people understand it properly.

As long as extremely cheap credit and brainwashing techniques are kept out of the equation.

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There's also a common sense limit to any house price falls; the cost of the land plus rebuilding costs.

The price of land suitable for residential development and residential property prices are very much linked, so if the latter falls, so will the former.

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Seems to be more people looking at the credit crunch and concluding that the best way forward now is a very painful but short recession that involves a HUGE housing crash and then allow growth to return in 18 - 24 months or so. The alternative is years of slowdown akin to Japan in the 1990.

Alas, it is election year in the US so it ain't going to happen.

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Nice to see: "Inevitably, the bust arrived" in print.

I think we will be seing "Inevitable" and "bust" in relation to house prices much more often.

Just include the phrase "Inevitable house price crash" subtly in all your conversations and the meme will spread (inevitably of course).

Someone who says "Inevitable house price crash" sounds like they have thought about it and know what they are talking about. Someone that says "100%, guaranteed" sounds like a gold salesman :)

VMR, looking forward to the inevitable house price crash.

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Very good --- To the point - states the plain truth -- Worth reading. Will anyone take notice though? As I keep saying - House "prices" are far far too high. Simple. They need to come down substantially. Simple.

Yes they need to come down but thats where the trouble is you see your average punter who got a pad in 1996 for £40 soon found it was worth £100k and so MEWed to buy a new car and then went double of quits by selling it for £110 and gambling/investing in a new pad at £200k and taking a holiday in the process and spending tons on furnishing the new pad.

prices go down then what is this guy going to do with all the debt ?

Banks know this and none know what to do about it.

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I'm a homeowner and want to sell; if prices fall then I lose on the sale but the price of what I want is cheaper.

Me too. And it always makes my blood boil when the media begin every piece with "Bad news for homeowners today, as prices have fallen". I'd love it if just once, the BBC started a piece by saying "Great news for pretty much anybody under the age of 40 who haven't been stupid with their finances, as prices have fallen". I'd love to read some research into who gains and who loses in a crash. Even mortgage free sixty year olds with a 500k house could gain if it means that their 30 year old children finally move out of the family home.

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Yes I want a HPC too. My downsizing neighbours have priced their house at a level that we can't sensibly afford. If prices crash 40% or more I'll snap it up for cash. We want their land. Probably rent out the house, or maybe use it as guest overspill accomodation.

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  • 297 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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