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Supply and demand. Sorry to repeat myself.
Topic Started: 4 Aug 2013, 11:13 AM (17,691 Views)
peter fraser
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genX
10 Aug 2013, 02:03 AM
Oh, I thought the premise was "cheap credit". But let's go with "easy credit". I could be wrong, but I am pretty sure the FICO score requirement is not the same for secured and unsecured lending. But if you have information otherwise?


a) Cars do not secure loans. Auto-loans are unsecured lending, so the comparison can't be made.
b) The supply of cars is elastic, even Ferrari.
FICO - credit history weighting will vary depending on risk, which with unsecured lending depends largely on the loan amount and normal assessment criteria.

Cars do secure lending, every HP, Lease, and chattel mortgage written to buy a car is secured by that car, it's just not considered as safe as property, it's a fast depreciating asset. There are many types of security, all of which have different risks or values to a bank.

I was assuming that the vehicle manufacturers could supply whatever was required by the market. It's probably best to leave the challenge alone, it exposes too many truths.
Any expressed market opinion is my own and is not to be taken as financial advice
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Trojan
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genX
10 Aug 2013, 02:03 AM
a) Cars do not secure loans. Auto-loans are unsecured lending, so the comparison can't be made.
Your understanding in these matters is so lacking.

Why else do they have a REVs register to check to see if the vehicle is encumbered eg vehicle used as security for a loan?
http://www.revscheck.com.au/

Is this how bear rumors start? One ignorant individual make some rubbish up and state it in a way so it sounds like a fact. Other ignorant people read it on one forum and then propagate it to other sites? So it becomes "well known fact".
Like how rents fell in some cities when negative gearing was removed in the 1980s? Pure rubbish but trotted out as "fact" regularly.
Edited by Trojan, 10 Aug 2013, 02:39 AM.
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
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those
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miw
8 Aug 2013, 11:42 PM
One of the finer experiences of APF is that you get to be patronised by ignoramuses.

If you had bothered to google "economic demand" for yourself you might have turned up a few definitions like this:

"In economics, the demand curve is the graph depicting the relationship between the price of a certain commodity and the amount of it that consumers are willing and able to purchase at that given price. It is a graphic representation of a demand schedule.[1] The demand curve for all consumers together follows from the demand curve of every individual consumer: the individual demands at each price are added together."


You might notice that the measure of demand is the amount that people are willing to purchase. Not the amount that they are willing to spend on it. Hint: this would be "number of iphones" or "number of houses". Not "dollar value of iphones purchased". So if there is demand for 1000 iphones, the demand is the same whether those iphones sell for $400 or $4000. Demand is measured in units sold.

Guys, this discussion might go smoother if you cleared up some of the basics at the start. There is still generally not a good understanding of "demand" by most of you.

Read the quote in miw's post earlier (which he immediately followed up with an incorrect interpretation of). It says that the demand is a function of PRICE and QUANTITY. Demand is not measured in quantity. It is not measured in price. It is masured in a QUANTITY at a specific PRICE. If price goes up, less is demanded. If price goes down, more is demanded.

This is a supply and demand curve at equilibrium:
Posted Image

What if we are at equilibrium, and credit is suddenly more readily available? The demand curve moves to the right, and this happens:

Posted Image

Prices increase, and he get back here:

Posted Image

This happens with cars, Toyotas and Ferraris. If people can use credit to buy them, it means more pople can buy them. They are a limited resource.

It also happens with houses in Detroit. If people could not borrow to buy houses in Detroit, less people would buy them, and you could get one for 50 cents instead of one dollar. As long as you had 50 cents in your pocket.
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barns
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Wisebear
9 Aug 2013, 11:43 PM
A good reply and I generally agree with what you say.

The amounts and period in my example are by way of example only so no need to get too technical but anyway I agree your conclusions.

So what do we agree on and what can we conclude?

1) Some people would borrow it and use it to buy houses.
2) Easy credit and low interest rates DO result in generally higher prices.
3) The ratio of house prices will remain generally the same between regions. (you say marginally higher but fine)

This is exactly my position and we agree.

Please note however that originally you thought that
You were doing well until right at the end.

Availability of credit is a factor in determning house prices but is minor. There are many other more important drivers of house prices. Please re-read my previous post (it was probably getting a bit late for you las night).
“You Keep Using That Word, I Do Not Think It Means What You Think It Means” - Inigo Montoya
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genX
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Trojan
10 Aug 2013, 02:30 AM
Like how rents fell in some cities when negative gearing was removed in the 1980s? Pure rubbish but trotted out as "fact" regularly.
Were you here in the 1980s?
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Frank Castle
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Business As Usual

peter fraser
10 Aug 2013, 02:24 AM
FICO - credit history weighting will vary depending on risk, which with unsecured lending depends largely on the loan amount and normal assessment criteria.

Cars do secure lending, every HP, Lease, and chattel mortgage written to buy a car is secured by that car, it's just not considered as safe as property, it's a fast depreciating asset. There are many types of security, all of which have different risks or values to a bank.

Correct
Gen X wrong again
Trojan
10 Aug 2013, 02:30 AM
Your understanding in these matters is so lacking.
Its laughable :lol
Edited by Frank Castle, 10 Aug 2013, 10:51 AM.
Ignore posts by The Whole Truth · View Post · End Ignoring
The forum fuckwit goes RRRAAARRRGGHHhhh - But not a fuck was given..................by anyone.
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Mike
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genX
10 Aug 2013, 01:47 AM
Yes, but consumer credit isn't cheap, and it isn't the rate that Shadow posted as his 'proof' that cheap finance is available to purchase a house in Detroit.


You own 13 properties, or you have mortgages on 13 properties?

You are such a genius I reckon you should buy 13 more!
Provide proof of what shadow stated is wrong, at present all we have from you is hot air. You are not adding to the debate, you have taken the debate down 3 levels with your lack of understanding on the issue.

Perhaps I will buy 13 more or many more then that.
genX
10 Aug 2013, 02:03 AM


a) Cars do not secure loans. Auto-loans are unsecured lending, so the comparison can't be made.
One of the most bizarre statements you have made recently.
Edited by Mike, 10 Aug 2013, 10:56 AM.
http://mike-globaleconomy.blogspot.com.au/
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genX
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Mike
10 Aug 2013, 10:54 AM
Perhaps I will buy 13 more or many more then that.
I wish you the best of luck with that. I noticed you didn't say whether you have 13 mortgages or 13 houses. If you take your assets net of liabilities, do you have 13 houses? Or 1 house? Or none?
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Sober
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Mike
9 Aug 2013, 11:19 PM
Shadow has proved cheap credit is readily available.

"Cheap credit" and "easy credit" are by no means the same thing. (And BTW, the interest rates he referenced are not even "cheap" by current US market standards.)

Quote:
 
He does not need to prove people have the ability to borrow this credit at all in Detroit as anyone in the USA can buy a property in Detroit it is not limited to local people.


I see no evidence of a rush to "buy Detroit" from the rest of the country. But suppose for a moment that there was some imagined stampede to secure investment properties in Detroit. Bank lending criteria do not stop at the potential borrower's capacity to service the loan. They also encompass the income potential of the property, and the resale value if the investment goes bad.

In Detroit, even if the purchaser's credit is golden, the underlying asset can only be considered high risk.

And that does not result in "easy credit", which was Shadow's assertion. Certainly he has provided no evidence to back it.

Quote:
 
What you have not done is prove that easy credit forces prices higher as the main driving force. Most posters have said easy credit is a factor in demand but far from the only factor or most important.

On that point you are most certainly wrong.


STRAW MAN ALERT!!! Where on earth have I stated any opinion on the primacy--or otherwise--of easy credit as a factor driving prices???
Shadow
10 Aug 2013, 12:37 AM
Yep, and Sober has steadfastly refused to reveal his own position.

This is because he knows cheap credit is available in Detroit, and he knows it is not pushing up prices.

My own position on what, exactly?

I called you on your lazy assertion of "easy credit" for purchase of Detroit housing, challenging you to back it up.

You still haven't.

:pop:
Edited by Sober, 10 Aug 2013, 11:37 AM.
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Mike
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genX
10 Aug 2013, 11:30 AM
I wish you the best of luck with that. I noticed you didn't say whether you have 13 mortgages or 13 houses. If you take your assets net of liabilities, do you have 13 houses? Or 1 house? Or none?
My net assets have a present value of $3,120,356.00 based on the latest valuation. How many houses do I own, depends I can move money from one offset account to another and typically own another houses in 1 minute then flip money back and own the other again. It also depends on what properties I want to own, I have some properties worth $350,000 and my most expensive is over $2 million. My present LVR for the portfolio is about 60% excluding the residence I live in, which is where I always try to keep it. Any lower is not tax effective and any higher and banks won't lend me money for my larger developments. It is the sweet spot as I call it.
http://mike-globaleconomy.blogspot.com.au/
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