Monday, 8 December 2008

Another home-grown housing forecast

A few weeks ago, I asked people to send me their own house price forecasts.

Mark Wadsworth just sent me a very nice chart based on Nationwide's house prices adjusted for earnings growth. Assuming that prices fall as low as in mid 1990s, then according to Mark, UK homeowners might be looking at a 50 percent drop in home values. If prices revert to median of £102,000, that's still a 45 percent fall from peak.

When he isn't making gloomy yet plausible housing forecasts, Mark is writing his own highly opinionated but always interesting blog. It is always on my list of sites I must visit every day.


Anonymous said...

Thanks Mark and Alice - a brilliant chart.

As this bust is clearly linked global systemic problems on a scale greater than those of the 89-96 crash, a dip into the green 'location' underlying value band would seem likely again.

That's a mighty bust!

B. in C.

Mark Wadsworth said...

Ta for mention. I really do think that price/earnings ratios are the key to all this. As Rich C pointed out at HPC, higher or lower interest rates merely speed up or defer the effective capital repayments.

Anonymous said...

My thanks to Mr. Wadsworth for this information.

It is useful in as much as it tends to confirm Alice's own prediction that the fall from the peak of the boom to the long term trend would be 44% (this was posted months ago but I remember it well).

Anonymous said...

cool chart

Anonymous said...

I stopped visiting Mark's blog because it kept fouling up my browser. I've just deleted Sackerson's from my favourites list for the same reason. Such a pity - they are both good stuff.

Anonymous said...

That's a very interesting graph :) Thanks Alice & Mark.

One question how long (in months) do you think it will take to reach the Green / Location section?

Mark Wadsworth said...

@ D, I've deleted some of my widgets and shuffled as many as possible to the bottom of the side-bar. Is that any better? While we're on the topic, Alice's 'blog itself is quick to load but the comments window always takes ages to open. Heck knows why.

@ Anon, prices have now been falling for slightly over a year and we appear to be about one third of the way there, so I'd give it two more years before you even think about buying (there appears to be a natural upper limit to the speed at which sellers are prepared to drop prices compared to a year before).

Then we'll dawdle around at the upper edge of the 'green zone' for another year or three (so there's no hurry to dive in).