Tip Top Posted May 19, 2005 Share Posted May 19, 2005 Prices have been falling for months and we have seen more then 15% falls and even the halifax admits it. What i've suddenly realised is that house price falls are all relative and you don't need prices to decline to have a crash. House prices have been going up by so much for so long that people have taken it as the norm and expect 15 - 20% or more gains every year. They think this is the ordinary, normal, how things are... So now that house prices gains have suddenly shrunk to zero its equivalent to a 30% crash to somebody expecting 20% gains every year. That is why we have suddenly seen such a rapid decline in the economy which has totaly shocked everybody. The media and everybody has been looking for a drop in house prices without realising that the drop in house price gains was actually the house crash they had missed. Quote Link to comment Share on other sites More sharing options...
BandWagon Posted May 19, 2005 Share Posted May 19, 2005 (edited) Howdy TipTop, welcome to the board. Let me quickly say that I appreciate your comments, because I suspect others on this board are about to tear your logic to threads... Edited May 19, 2005 by BandWagon Quote Link to comment Share on other sites More sharing options...
Culpability Brown Posted May 19, 2005 Share Posted May 19, 2005 Prices have been falling for months and we have seen more then 15% falls and even the halifax admits it.What i've suddenly realised is that house price falls are all relative and you don't need prices to decline to have a crash. House prices have been going up by so much for so long that people have taken it as the norm and expect 15 - 20% or more gains every year. They think this is the ordinary, normal, how things are... So now that house prices gains have suddenly shrunk to zero its equivalent to a 30% crash to somebody expecting 20% gains every year. That is why we have suddenly seen such a rapid decline in the economy which has totaly shocked everybody. The media and everybody has been looking for a drop in house prices without realising that the drop in house price gains was actually the house crash they had missed. <{POST_SNAPBACK}> I hadn't though of it like that but yeah you're absolutely right. Makes a hell of a lot of sense. Quote Link to comment Share on other sites More sharing options...
slater14 Posted May 19, 2005 Share Posted May 19, 2005 Prices have been falling for months and we have seen more then 15% falls and even the halifax admits it.What i've suddenly realised is that house price falls are all relative and you don't need prices to decline to have a crash. House prices have been going up by so much for so long that people have taken it as the norm and expect 15 - 20% or more gains every year. They think this is the ordinary, normal, how things are... So now that house prices gains have suddenly shrunk to zero its equivalent to a 30% crash to somebody expecting 20% gains every year. That is why we have suddenly seen such a rapid decline in the economy which has totaly shocked everybody. The media and everybody has been looking for a drop in house prices without realising that the drop in house price gains was actually the house crash they had missed. <{POST_SNAPBACK}> Nice post. I would just add to that - This is the START of the correction (crash). I dont think anybody really expected it to go +10% 2004 and -50% 2005. We have "stand off" before we have crash - we are in "stand off" now. Everything in property is always slow and has drag effect. Everything takes a while to ripple through. Like feeling a tree - cut it at the base, its a long time before the top reaches the ground.....but it WILL hit the ground no matter how much it may feel like it wont. Quote Link to comment Share on other sites More sharing options...
zzg113 Posted May 19, 2005 Share Posted May 19, 2005 (edited) Like felling a tree - cut it at the base, its a long time before the top reaches the ground.....but it WILL hit the ground no matter how much it may feel like it wont. Good analogy. Yeah, at the moment we're at that bit where the guy has hacked almost all the way through the trunk, and the tree starts to make little cracking noises.....any minute now someone's going to shout "TIMBERRRRRRRRR!!!!!" Edited May 19, 2005 by zzg113 Quote Link to comment Share on other sites More sharing options...
RichM Posted May 19, 2005 Share Posted May 19, 2005 yup, psychology is the key. gordon is right on one thing. stability has been a good strategy. people quickyl get comfortable, and forget how quickly economies can go into reverse. worked for a while anyway. Quote Link to comment Share on other sites More sharing options...
slater14 Posted May 19, 2005 Share Posted May 19, 2005 Good analogy. Yeah, at the moment we're at that bit where the guy has hacked almost all the way through the trunk, and the tree starts to make little cracking noises.....any minute now someone's going to shout "TIMBERRRRRRRRR!!!!!" <{POST_SNAPBACK}> and I dont see that the BoE or Blair can do anything about it. As ianbe said so beautifully - "They have effectivley crossed the 'event horizon' No sticking plaster in the world is going to stop this mighty oak coming crashing down. Quote Link to comment Share on other sites More sharing options...
Culpability Brown Posted May 19, 2005 Share Posted May 19, 2005 They should at the very least have the balls to be honest with people and not allow further deterioration encouraging young FTBers to continue to enter the market. I know that's naieve but it's time politicians had some respect for their electorate and showed some real leadership. Quote Link to comment Share on other sites More sharing options...
Smell the Fear Posted May 19, 2005 Share Posted May 19, 2005 Is there any where I can get economic analysis of the quality found on this website? This is easily the most compelling discussion anywhere..... Keep it up, and brace yourselves for the sh*tstorm about to hit..... Quote Link to comment Share on other sites More sharing options...
slater14 Posted May 19, 2005 Share Posted May 19, 2005 They should at the very least have the balls to be honest with people and not allow further deterioration encouraging young FTBers to continue to enter the market.I know that's naieve but it's time politicians had some respect for their electorate and showed some real leadership. <{POST_SNAPBACK}> If they did that the market would never forgive them. Britain would be a third world backwater in 5 years. It is surprisisng though, they nanny us in eveything we do from washing our hands to smoking to driving to working hours.....but they dont think a celeb obessed, iliterate, yobbish, drunken spendthrift population needs its hand holding when we are about to go down the big 'snake ladder'. Quote Link to comment Share on other sites More sharing options...
pre-raphaelite Posted May 19, 2005 Share Posted May 19, 2005 In areas where I'm looking the "correction" is underway. The peak was Summer 2002 through Autumn 2003. Since that peak prices are 10% down - as against nationally 10% up. Quite a difference. These areas are relative cold spots - outer North East London/Redbridge area. 30's semi's and terraced houses. The people selling are often dead! or retiring and the incomers move for reasonable schools. The turnover of houses is low compared to most of London and has slowed to a trickle. Even if Nationally house prices were to pick up, my feel is this area is under pressure anyway. The people needed to keep the market going are stretched STBers who are having difficulty selling. On the other hand I can't see many distressed sellers either. The media did report this a little of this during General Election night - noting that in Outer East and Outer North-East London there was much less of a "feelgood factor". With House boom ending 2 years earlier than most of the country. Quote Link to comment Share on other sites More sharing options...
Tip Top Posted May 20, 2005 Author Share Posted May 20, 2005 if you do some simple rough sums on this; average house worth £160k with two people on average wage of £25k total house income of £50k per annum. That is until you consider the income from the house price increase of 15% per year. That's adds another £25k to the household income! Therefore for people who had come to expect this as normal house prices remaining flat at 0% per annum this is a drop of £75k to £50k for household income i.e. represents a 30% fall in income!!! Even people who haven't MEWed will be feeling the psychological pinch in the wallet..... Quote Link to comment Share on other sites More sharing options...
tao Posted May 20, 2005 Share Posted May 20, 2005 TipTop yup its all about relativity and conditioning. Put a frog in a pan of cold water and gradually bring to the boil..frog will boil to death..drop a frog in hot water..it will jump out (its not stupid,just conditioned) Quote Link to comment Share on other sites More sharing options...
Scarecrow Posted May 20, 2005 Share Posted May 20, 2005 if you do some simple rough sums on this;average house worth £160k with two people on average wage of £25k total house income of £50k per annum. That is until you consider the income from the house price increase of 15% per year. That's adds another £25k to the household income! Therefore for people who had come to expect this as normal house prices remaining flat at 0% per annum this is a drop of £75k to £50k for household income i.e. represents a 30% fall in income!!! Even people who haven't MEWed will be feeling the psychological pinch in the wallet..... <{POST_SNAPBACK}> Do you think many people count their growing equity as part of their household income? Surely only a few deluded people would take their equity out as hard cash - the majority do not remortgage year upon year. I certainly wouldn't count equity as part of my household income - mostly because I only keep an eye on the "value" when I'm about to move, and need the equity as a deposit for my next place. For people like me, a decline in prices is a psychological advantage, as the next rung in the ladder is closer. Quote Link to comment Share on other sites More sharing options...
mad'un Posted May 20, 2005 Share Posted May 20, 2005 Good analogy. Yeah, at the moment we're at that bit where the guy has hacked almost all the way through the trunk, and the tree starts to make little cracking noises.....any minute now someone's going to shout "TIMBERRRRRRRRR!!!!!" <{POST_SNAPBACK}> They won't shout "timber!" though, because they have their heads up their backsided. Until the tree hits the ground it's still in the air - everythings OK. It's going to take the tree to hit them on their thick skulls and cause damage before they acknowledge anthing! - just my humble, pessimistic opinion Quote Link to comment Share on other sites More sharing options...
john Posted May 20, 2005 Share Posted May 20, 2005 Good analogy. Yeah, at the moment we're at that bit where the guy has hacked almost all the way through the trunk, and the tree starts to make little cracking noises.....any minute now someone's going to shout "TIMBERRRRRRRRR!!!!!" <{POST_SNAPBACK}> Hi, I was around when we had the last house price crash and from memory it all happened much quicker than that and without any warning cracking noises. It happened at the end of a month, a summer month I think it was. Within almost days, weeks certainly, it was obvious to everyone that house prices were plunging. The situation now seems quite different to me, we have numerous surveys reported over many months and although it is becoming apparant that we are at least entering a slow down there is still no evidence of anything you could describe as a crash. Last time we had a real crash you didnt need a monthly survey to tell you that there had been a fraction of a percent change one way or the other, you just had to look in an estate agent window to see that the prices were 30% less than they had been a few weeks ago. With interest rates being so much lower than at the time of the last price crash maybe this is just another slow down period, as we have seen befor over and over again? Quote Link to comment Share on other sites More sharing options...
theChuz Posted May 20, 2005 Share Posted May 20, 2005 Hi, I was around when we had the last house price crash and from memory it all happened much quicker than that and without any warning cracking noises. It happened at the end of a month, a summer month I think it was. Within almost days, weeks certainly, it was obvious to everyone that house prices were plunging. The situation now seems quite different to me, we have numerous surveys reported over many months and although it is becoming apparant that we are at least entering a slow down there is still no evidence of anything you could describe as a crash. Last time we had a real crash you didnt need a monthly survey to tell you that there had been a fraction of a percent change one way or the other, you just had to look in an estate agent window to see that the prices were 30% less than they had been a few weeks ago. With interest rates being so much lower than at the time of the last price crash maybe this is just another slow down period, as we have seen befor over and over again?<{POST_SNAPBACK}> Maybe it was to do with the speed of information back then though, perhaps no one knew that a crash was comming until the papers and ALL the media told them at once, causing people to shit a brick and ofload. Today thanks to the good ol internet information is more readily available so people of an economic mind can study this information and know in advance that if things carry on this way it has to crash. Interest rates are an important factor for sure, but it is to be balanced with the actual burden of debt someone holds. I could be wrong but.. If you mortgage yourself to the maximum at 3.5% IR it only takes it to reach 7% IR and your payments have doubled. Back them when they were at 15 % i would assume peopel mortaged themselves to the max at around 7% (isnt that the long term average?) so really there payments only doubled. The real bugger is when people havnt got a job, and there be lots and lots of job losses at the moment. I could of just spoke complete and utter b*llocks , i have no economic understanding ive just interpreted what ive read from HPC(hopefully right) over some time. If i have got what i said right they woooohooooo my time spent here hasnt been in vien Quote Link to comment Share on other sites More sharing options...
munimula Posted May 20, 2005 Share Posted May 20, 2005 Is there any where I can get economic analysis of the quality found on this website? This is easily the most compelling discussion anywhere.....<{POST_SNAPBACK}> The Economist MoneyWeek Quote Link to comment Share on other sites More sharing options...
No Muggy Bear Posted May 20, 2005 Share Posted May 20, 2005 Hi, I was around when we had the last house price crash and from memory it all happened much quicker than that and without any warning cracking noises. It happened at the end of a month, a summer month I think it was. Within almost days, weeks certainly, it was obvious to everyone that house prices were plunging. The situation now seems quite different to me, we have numerous surveys reported over many months and although it is becoming apparant that we are at least entering a slow down there is still no evidence of anything you could describe as a crash. Last time we had a real crash you didnt need a monthly survey to tell you that there had been a fraction of a percent change one way or the other, you just had to look in an estate agent window to see that the prices were 30% less than they had been a few weeks ago. With interest rates being so much lower than at the time of the last price crash maybe this is just another slow down period, as we have seen befor over and over again?<{POST_SNAPBACK}> This crash will happen quickly, to those people who have been caught out unaware. The crash won't be news till its common knowledge. Then its too late for those affected to do anything about it. On the other hand this crash has been anticipated by me and others on this board, a few sane people I know etc for at least 3 years. I have stayed out the market for four years, smelling this beast for so long, I can hardly believe its here at last! Quote Link to comment Share on other sites More sharing options...
LLcoolbot Posted May 20, 2005 Share Posted May 20, 2005 This crash will happen quickly, to those people who have been caught out unaware. The crash won't be news till its common knowledge. Then its too late for those affected to do anything about it.On the other hand this crash has been anticipated by me and others on this board, a few sane people I know etc for at least 3 years. I have stayed out the market for four years, smelling this beast for so long, I can hardly believe its here at last! <{POST_SNAPBACK}> A few people I know are buying now. I've tried warning them, advising them of this site etc. but they just wont have it. One guy I know is desperate to get into Buy to let because one of his mate's has got one. He's already overstretched on his own property he bought 2 years ago. Some folks just do not see this crash coming. I sometimes find myself wondering if they're right. Quote Link to comment Share on other sites More sharing options...
newaccount99 Posted May 20, 2005 Share Posted May 20, 2005 The media and everybody has been looking for a drop in house prices without realising that the drop in house price gains was actually the house crash they had missed.<{POST_SNAPBACK}> Yep, top post tip top! When you slam a fully laden **** off sized oil tanker into reverse initally it really doesn't do much.....then after about 20mins everyone suddenly realises it's actualy stopped moving....It then takes a further 20 mins of just floating there before it starts moving backwards. The housing market is the same, it's been in full reverse for 10 mths now.....In two more, everyone will have realised they aren't 1 penny richer than they were a year ago.....then slowly at first, come the Autumn everyone realises it's not taking a breather the EA's told them it was, it's actually in decline.....by then it's too late to get off, as noone wants your overpriced flea pit Quote Link to comment Share on other sites More sharing options...
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