Traders predict house prices will fall by 50% in four years

PS_RalphW · Post by **PS_RalphW** » 11 Jun 2008, 10:07

Well, according to Heinberg, (sp?) industrial society becomes untenable when about 15% of global GDP is spent on producing the energy supply (ie. the EROEI falls to about 6).

That represents about $300/barrel in current dollars. $130 is about 6.5% gdp. Of course, that is the market price. The best figure I have seen is that new oil developments are running at about $80 /barrel to develop. That means we have two more doublings before the cost of developing new oil sources exceeds what society can effectively pay for. After that, expensive oil will be left in the ground (at least as a primary source of energy. Oil for secondary purposes still makes sense). At that price, it is more economical to develop other sources of energy (renewables in most forms). It puts an upper limit on the logistic effort that can be deployed to sustain oil output as we go over Hubbert's peak. Oil output must then fall in line with geology (or probably faster). The global economy will either learn to use the available energy more efficiently, or shrink. We know which is more likely.

The market price is rising faster than exponentially. Two more doublings will take less than two years at this rate. Which means that it cannot continue at this rate. Something has to give in the next two years, and that is almost certainly large scale demand destruction, with a drop in real price for oil. What that does to the financial economy is anybody's guess.

So my bottom line is - spend your cash inside of two years.

contadino · Post by **contadino** » 11 Jun 2008, 10:19

JohnB wrote:If I buy one now I can expect it to fall in value, and it seems silly to buy, but I also think I should be making preparations while insulation materials etc are readily available, and I've got a few years to get the garden productive.

Spot on, IMHO.

phobos · Post by **phobos** » 11 Jun 2008, 11:47

If you can find the right place now, Id consider it with a below asking price offer, the kind of property you are looking for may well be unavailable if you wait 3 - 4 years.

Eternal Sunshine · Post by **Eternal Sunshine** » 11 Jun 2008, 23:44

JohnB wrote:If I buy one now I can expect it to fall in value, and it seems silly to buy, but I also think I should be making preparations while insulation materials etc are readily available, and I've got a few years to get the garden productive.

This is my main worry at the moment - house prices are too high for me to buy, but by waiting I'm losing the time that I should be preparing my home. I feel backed into a corner, and hearing about PO related issues in the mainstream media is making me really stressed. This is constantly on my mind & driving me mad!

I've decided to wait & see what it's like this time next year, and if house prices have fallen enough I'll try to buy a small house. If they haven't fallen that much, maybe the world won't be in as bad shape as I'm imagining right now.

Miss Madam · Post by **Miss Madam** » 12 Jun 2008, 11:37

I'm in a similar situation, as a potential FTB I can see that the general trend in house prices (i.e. circling toward the plug hole) is good for me as the bottom rung of the ladder is slowly getting closer and closer to my grasp. My property bee for Oxford is showing reductions of up to ?40k! But it is stressful to be in rented accomodation with my dumbass BTL landlord who won't put in energy efficiency measures as he doesn't pay the energy bill, and not in a position myself to act (other than food preps, changing every bulb to CFLs, keeping the chimney swept and stockpiling fire wood, keeping an emergency bug out gear and surreptiously digging up corners of the garden for veggies) - but I am far more optimistic now than I was a year ago, as whilst the PO message seems to be writ large in the world news - which is scary, at least house prices aren't rising anymore - so the end goal is getting closer. I think patience will pay off, I just don't want to overstretch myself in the short term (and thankfully the banks aren't letting people do that anymore) as I realise that maybe at some point I will lose my job (should the PO recession really kick in) - I just don't want to be in the first wave of repossessions - as these folk will be treated the harshest, once repossessions become very common, I have a feeling that the banks will struggle to physically deal with every case / public sentiment will not be with them. So I'm waiting for a little house, that I can afford.

eatyourveg · Post by **eatyourveg** » 12 Jun 2008, 12:35

Miss Madam wrote:I'm in a similar situation, as a potential FTB I can see that the general trend in house prices (i.e. circling toward the plug hole) is good for me as the bottom rung of the ladder is slowly getting closer and closer to my grasp. My property bee for Oxford is showing reductions of up to ?40k! But it is stressful to be in rented accomodation with my dumbass BTL landlord who won't put in energy efficiency measures as he doesn't pay the energy bill, and not in a position myself to act (other than food preps, changing every bulb to CFLs, keeping the chimney swept and stockpiling fire wood, keeping an emergency bug out gear and surreptiously digging up corners of the garden for veggies) - but I am far more optimistic now than I was a year ago, as whilst the PO message seems to be writ large in the world news - which is scary, at least house prices aren't rising anymore - so the end goal is getting closer. I think patience will pay off, I just don't want to overstretch myself in the short term (and thankfully the banks aren't letting people do that anymore) as I realise that maybe at some point I will lose my job (should the PO recession really kick in) - I just don't want to be in the first wave of repossessions - as these folk will be treated the harshest, once repossessions become very common, I have a feeling that the banks will struggle to physically deal with every case / public sentiment will not be with them. So I'm waiting for a little house, that I can afford.

I am in total agreement on the 'first wave of possessions' point, the distress will not fully register, BAU will still be going on, it will take a while after that for all the implications to start registering with the public. It's going to be a hell of a time all round.

PaulS · Post by **PaulS** » 12 Jun 2008, 13:35

I'd say that a possible solution lies in buying agri or forested land. Park a 2nd hand caravan for temporary use and start building straw bale style house. Eventually planning restriction should be lifted as people will need to relocate from towns to the countryside.

Agri land is going up in price like it wasn't made any more, so you can't really lose out financially. No point in having a large sum sitting in a bank account, getting eaten away by inflation (e.g. in agri land inflation is 50%, in oil it is 100%, in food about 15-20%, etc).

JohnB · Post by **JohnB** » 12 Jun 2008, 13:50

Buying land is tempting, but it's not as liquid as cash in the bank. If/when I find the right place I've got the cash available. I've no idea what area I'll end up in, so I might find I own land tens or hundreds of miles away from where I choose to live, and not have the money available to buy somewhere to live. Gambling on being able to build a home on it when I need it feels too risky.

If I could find crops that only need attention for 28 days a year, I could buy 13 bits of agricultural land in different locations, and move the van between them

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PaulS · Post by **PaulS** » 12 Jun 2008, 14:34

The point is a general one - for anyone with a cash nest egg.

You can either keep it in a bank (or worse still on the stock market) and see it slowly reduce in purchase value through inflation or
you buy something that is pretty well guaranteed to keep increasing in price, such as agri or forest land.

Forest land need not take any maintenance and agri land can be easily rented through agents - most farmers don't have the cash to buy much land but with food prices rising, they want to work more land.

When reday to settle, sell the land at an auction (takes perhaps 2-3 months), or, if alowed, build your own house.

I am just concerned for people who believe the official inflation rate (what, about 3%!), not realising that this rate hides some very large inflation rates in the areas that matter.

Remember John, had you bought the land you were interested in here in Cornwall, you would have paid ?3000/acre. Now its more like ?4,500/acre. Next year ?6,000?

Post by **clv101** » 12 Jun 2008, 14:37

PaulS wrote:I am just concerned for people who believe the official inflation rate (what, about 3%!), not realising that this rate hides some very large inflation rates in the areas that matter.

Remember John, had you bought the land you were interested in here in Cornwall, you would have paid ?3000/acre. Now its more like ?4,500/acre. Next year ?6,000?

The inflation rate is different for everyone. It depends on what you actually buy. If you are planning to spend 80% of your total worth on a house, and house prices are falling at at least 10% per year - then who cares what's happening with food, your personal rate of inflation will be negative!

JohnB · Post by **JohnB** » 12 Jun 2008, 15:15

At the moment I'm living on the interest on the money from my house sale, something I'm happy to do while house prices are falling. I'm effectively travelling for free because I can buy a similar, or better, house whenever I feel like it. The down side is that I could be losing out on making money from owning land, but that wouldn't pay the bills at the moment. I'm also losing out on the chance to stock up on useful stuff while it's available and affordable, because I've got nowhere to store it.

However, I'm learning to live more simply, with less stuff, watching my battery and how much the PV is putting into it to see how long I can stay on the computer, and I'm in a beautiful location on a lovely sunny day

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