Korean Job Discussion Forums

[Wangja]

OK, this graph is for the UK but it seems that the US (and Australian) market is similarly frothy.

[img]http://www.housepricecrash.co.uk/forum/index.php?act=Attach&type=post&id=580[/img]

http://www.housepricecrash.co.uk/forum/index.php?act=Attach&type=post&id=580

The blue line shows the current price (mean) expressed as a percentage above and below the long term trend. There have been two high peaks (1973 and 1988/9) when prices were around 40% above that trend. They are now 45% above and it seems that the only way is to get back to that trend.

This means that either the long term trend must take a sudden kick up, which is very unlikely, or the short term price peak must reduce.

Add to that the fact that pirces as a multiple of earnings are around 5.5 against a long term trend of 3.5 and the scene is set for a fall, perhaps up to 30%, and a lot of hardship all round.

[Wangja]

http://newsimg.bbc.co.uk/media/images/41226000/gif/_41226255_house_price_070605_gra203.gif



Any reason to believe that trend of (change in annual price increases) will not continue?

Any reason for the graph not to continue into negative territory?

[guangho]

I'm curious about this. In the past 3-4 years, many New Yorkers have gone to Buffalo/Niagara Falls to snatch up cheap housing to rent out under Section 8 (America's rapidly dissapearing program for giving rental aid to the poor)- as a result, prices have increased to such levels that they are no longer viable as investment properties.

By that I mean that the ROI or annual return on investment has dipped from as much as thirty percent a few years ago (meaning you get back all you capital and start making money in a shade over 3 years) to about twelve percent (meaning an eight year wait for profit.) It is all the more remarkable, considering that Buffalo is not a prime destination for labor markets. It does not have the swagger of New York or the third-world slave-labor cachet of Mumbai. (Though it leans to the latter, as does much of the world.)

If Section 8 dissapears, I will assume that in Buffalo, as well as other depressed areas (Rochester comes to mind), the market will decline back to saner levels. You never know tho- there is always another sucker.

[bacasper]

Good call, Wangja.