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Miles Shipside Of Rightmove, His Most Significant Statement Ever

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"Until this happens, prices are in danger of falling far beyond the level required to address underlying affordability constraints." :unsure: Does he mean the same affordability constraints plenty of folk on here refer to? If so he's suggesting that prices will overshoot the correction needed to restore affordability....down 35%+ it is then Miles... ;)

http://firstrung.co.uk/articles.asp?pageid...&cat=44-0-0

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which requires 35% falls, based on Miles' latest figures?

surely 3 times average earning is around 75K- that looks like a 50+% drop to me from TODAY

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surely 3 times average earning is around 75K- that looks like a 50+% drop to me from TODAY

Anyone want to tell me whether average earnings rise or fall, once the redundancies start in earnest?

Edited by ParticleMan

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Anyone want to tell me whether average earnings rise or fall, once the redundancies start in earnest?

Good point, I heard today that July orders for Galvanised steel went up 28% in one fell swoop, standard steel section around 14%, this on top of rises in April.

Also heard a rumour that a large steelmaker may vacate the UK. Then we will be importing our Steel as well as our energy.

its comforting to know that we can rely on our neighbours to look after us in a tight spot.

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Good find. To truly restore affordability, prices need to fall to below 4 times average earnings - they will probably go to 3 times.

That picture paints a thousand words. It is truly magnificent.

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Let's not lose sight of the fact that housing affordability (and, it follows, the proper value) is based on how much mortgage you can afford PLUS other monetary input. The latter can come from factors such as savings, an inheritance, windfall, uplift in value of an existing house, or a better job/moving to a cheaper area. The traditional UK model is one where a first time buyer needs a large mortgage as a percentage of the purchase price but as he/she moves up the ladder, the percentage usually drops. This is how house type/price differentials are created. I'm sure that many present problem loans are a result of would be ladder climbers having no regard for this natural order of things and yes, you are right, this could not have happened if 'liar loans' were not so freely available.

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Anyone want to tell me whether average earnings rise or fall, once the redundancies start in earnest?

That's a tricky one, I'd consider the least productive and most overpaid jobs to go first (creating downward pressure) and at some point you'll have more people chasing fewer jobs which should reduce wages and create more downward pressure on average earnings.

If house prices are to hit the floor at 3 x average earnings and average earnings are decreasing, then the prices have even further to fall.

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Good find. To truly restore affordability, prices need to fall to below 4 times average earnings - they will probably go to 3 times.

Your chart is astonishing! Do you have a link for that data? Surely it ends all HPC debeate on its own!

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There's clearly an emerging consensus around massive falls, even if there is disagreement about the precise numbers.

Edited by 1929crash

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Let's not lose sight of the fact that housing affordability (and, it follows, the proper value) is based on how much mortgage you can afford PLUS other monetary input. The latter can come from factors such as savings, an inheritance, windfall, uplift in value of an existing house, or a better job/moving to a cheaper area. The traditional UK model is one where a first time buyer needs a large mortgage as a percentage of the purchase price but as he/she moves up the ladder, the percentage usually drops. This is how house type/price differentials are created. I'm sure that many present problem loans are a result of would be ladder climbers having no regard for this natural order of things and yes, you are right, this could not have happened if 'liar loans' were not so freely available.

No, it is the result of earnings growth reducing the cost of the mortgage in real terms while inflation raising the prcies of real estate in nominal terms. "Climbing the ladder" is very easy when inflation is at 10%, not so when it is at 3%.

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That's a tricky one, I'd consider the least productive and most overpaid jobs to go first (creating downward pressure) and at some point you'll have more people chasing fewer jobs which should reduce wages and create more downward pressure on average earnings.

If house prices are to hit the floor at 3 x average earnings and average earnings are decreasing, then the prices have even further to fall.

Middle managers: highly paid, produce little except meetings and expense.

These were some of the big losers in GC1. As aspirers too, they may also be the ones who mewed and pushed the debt boat out a bit too far from the jetty.

I am in the half price houses camp and have been for some time (well before joining here).

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Your chart is astonishing! Do you have a link for that data? Surely it ends all HPC debeate on its own!

Thank you!

I put it together myself from quarterly Nationwide data going back to 1953 and ONS average earnings data. Prior to 1953, I used an annual (hence the spikiness) series from somewhere (I forget where, but given that the 1953 numbers corresponded to the Nationwide data, I assume it to be robust).

I have to say I agree with you on what it tells us. Analytically, one can say that the value of housing comes from our desire and ability to pay for it, which changes (as we see between 3 and 5) during a normal economic cycle. Obviously, when we get a speculative and leveraged buying frenzy as we have had between 2002 and 2007, it goes further. It is no coincidence that we first started hearing about the FTB being priced out in 2001/2002 – when house prices were 5 times earnings.

There is an argument to say that one should measure average household rather than average individual earnings, as more women have joined the labour force. While this is true, it has been largely offset by males leaving the labour force to the extent that, since 1985, there has been a rise of only 10% in the total workforce, including immigrants. On top of this, that rise has largely come in lower than average paid jobs, which means that when adjusted for average household income, the graph peaks at only 0.2 below the chart I posted.

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which requires 35% falls, based on Miles' latest figures?

Some big falls to come then Rightmove average house price is at £235,210.

Average house price now £235,210 - 35% = average house price £152,892, a loss of £82,318

if you bought summer 2007,

And if you go on the Halifax numbers it's

Average house price Aug 2007 £200,000 - 35% = average house price £130,000 a loss of

£70,000 if you bought summer 2007.

With the Halifax if it's 35% from todays average price. Average house price Aug 2007

£200,000 average house price June 08 £180,000 down £20,000 in ten months.

£180,000 - 35% = average house price £117.000 down £83,000 from summer Aug 2007.

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Middle managers: highly paid, produce little except meetings and expense.

They were the sort I was thinking of too. It's amazing just how little work most of them actually do, and the work they do is invariably passed onto one of their underlings.

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I'm pretty sure that ONS average earnings data is of people in full time work...

And once we add the new minimum wage of dole money for those at the bottom in factories and the like and slightly more for anyone with anything like a technical skill..........

Can't buy many houses on £1.77 an hour, nor can one rent much either.

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No, it is the result of earnings growth reducing the cost of the mortgage in real terms while inflation raising the prcies of real estate in nominal terms. "Climbing the ladder" is very easy when inflation is at 10%, not so when it is at 3%.

Great graph.

I presume you mean 'earnings growth' in terms of the individual (promotion etc) rather than by purely wage inflation. Without sounding patronising, I find the word inflation is not always used in proper context, as I'm sure the powers that be recognise this and use it to their own ends. In housing terms, I would say that wage inflation, price inflation and house price inflation are three seperate entities and only when they are in balance can you get economic harmony. For example, if you have house price inflation at 20% pa and wage inflation at 10% pa, raising the extra to climb the ladder will never happen (without the factors I have mentioned).

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surely 3 times average earning is around 75K- that looks like a 50+% drop to me from TODAY

3 times average household income... (as the graph in the second post shows)

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3 times average household income... (as the graph in the second post shows)

Thanks, I checked and it says average earnings, not household income.

Wonder which is right?

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Until this happens, prices are in danger of falling far beyond the level required to address underlying affordability constraints.

Ah, these would be the underlying affordability constraints that many of the experts are telling us don't exist, thanks to gifted deposits, etc? :rolleyes:

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Extradry Martini wrote:

<<I put it together myself from quarterly Nationwide data going back to 1953 and ONS average earnings data. Prior to 1953, I used an annual (hence the spikiness) series from somewhere (I forget where, but given that the 1953 numbers corresponded to the Nationwide data, I assume it to be robust).>>

One thing that would be interesting is plot not average earnings but median and mode earnings. The trouble with going back that far in time on the same plot is that the income distribution has changed beyond all recognition from the beginning of the plot to the end. In the post-war years we had a much more equal income distribution than we have now. The average has become more and more biased upwards by a few very high earners as time has gone on.

The thing is, I'm not at all sure you could find these figures. I couldn't find anything on the web. I believe the state has deliberately suppressed these statistics to make things look better than they are.

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At the risk of sounding boring (I'm trying to look busy rather than gardening) I did a study of housing costs in the mid nineteenth century recently and the average cost of housing as a percentage of household income was usually around 10% - happy days!

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Great graph.

I presume you mean 'earnings growth' in terms of the individual (promotion etc) rather than by purely wage inflation. Without sounding patronising, I find the word inflation is not always used in proper context, as I'm sure the powers that be recognise this and use it to their own ends. In housing terms, I would say that wage inflation, price inflation and house price inflation are three seperate entities and only when they are in balance can you get economic harmony. For example, if you have house price inflation at 20% pa and wage inflation at 10% pa, raising the extra to climb the ladder will never happen (without the factors I have mentioned).

No, I mean wage inflation, which is composed of inflation and real wage growth. As you say the three numbers are all different, and only related over the long term (hence the median reversion on the chart)...

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  • 399 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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