Nationwide - July - 1.7% YOY -8.1%

PasturesNew

Levelling out doesn't mean going up.

If a house remains at £150k for 5 years
If in that 5 years you can pretty much save £50k
It would still make sense to wait.

I'm looking to buy in 2011-2013.

rjgb

Very fair point. Ignore my ramble above then!

One thing to think about though is that if the BOE is now more likely to reduce or maintain interest rates, rather than increase them, there should be better mortgage deals appearing in the not too distant future.

Once people have seen prices drop about 10-15% in total from their peak, I think they would be tempted to purchase again since further reductions are less likely. They would think they are in a period which is a trough in the average house price - i.e. a good time to buy. If many people feel this way, and moreover see others buying, confidence could increase very quickly, leading to rapid rises in house prices again.

Bottom line is that I'm not sure I'd wait until 2011-2013 before making a move, as it could then be a seller's market all over again...

What do others think?

Treadmill

I should imagine theres a fair few people backing out on buying a house right now...

I think the negative equity numbers will be a lot higher than official figures suggest due to the amount of people that have withdrawn equity and got secured loans.

obsessed_saver

House price fall might be triggered by lower mortgage approvals, but it doesn't necessarily stop falling because the level of mortgage approvals level out.

Let's say the level of mortgage approvals is the accelerator pedal.

You depress it and it accelerates the house price fall.

If you keep the pedal down (levelling out mortgage approvals), your car is still accelerating (house prices continue to drop).

Generali

kingkano wrote: »

So whether its as bad/worse OR not, is down to what you think inflation is now Use any government figures and its not as bad this time. If you really think inflation is 8 or 10% then it's looking similar....

It does depend what you think inflation is. My feeling is that the 5% of the RPI is about right overall. Things we buy a lot are going up quickly but you do have to take into account the price of things bought less frequently too to get a meaningful figure for inflation.

There is definitely an argument for calculating an 'EPI' - Essentials Price Index. The trouble is, what do you include on it? What about fags and booze for example? To a smoker, cigarettes are essential; to an alcoholic booze is. What about a car? Or a bicycle? Or bus fares?

kingkano wrote: »

Then again is their worse to come when recession really hits? Or are people already in recession mindset considering the figures we are seeing.

There will be worse to come if there's a recession for many reasons but the 2 that stick out in the mind are:

1. As people lose their jobs they are more likely to default on their mortgage and thus be reposessed. Ultimately, the bank has to sell that property for whatever price they can get. That will be a big push down on prices at the margin and market prices are set at the margin.

2. If you look through all the flim-flam about CDOs, MBSs, LIBOR, money markets, swap rates and all that jazz, fundamentally the credit crunch has been caused by banks losing money and so not having so much available to lend to people. During a recession, bank profits almost always drop as debtors struggle to repay their debts. That is likely to mean that the credit crunch is set to continue for a while yet. It may ease a little as the big losses from asset value write-downs work their way through but I don't see a quick end to all this.

baby_boomer

Treadmill wrote: »

I think the negative equity numbers will be a lot higher than official figures suggest due to the amount of people that have withdrawn equity and got secured loans.

There seems to be a fair amount of guesswork involved as I imagine S&P work from "official figures"

baby_boomer wrote: »

S&P said that for every further percentage point decline in house prices, between 60,000 and 180,000 extra homeowners could fall into negative equity......"

If this is the best they can do, it doesn't help the Bank of England or the government to plan ahead :eek:

Paul_N_4

-8.1% YoY, -9.0% from peak, add in about 4% inflation over the year, say real drop of around -12%? That would put prices back to around March '06 prices.

WTF?_2

The mortgage supply restrictions have been the trigger for (steep) falls.

The coming recession combined with sentiment (houses are now seen as a losing bet) will be what keeps the pressure on the accelerator pedal.

And as Generalli pointed out, credit conditions aren't set to get any better once we go into recession. Normally banks end up struggling at the tail end of recessions because the hard times squeeze their balance sheets. This time around they've got themselves into unprecedented levels of trouble whilst the economy was still motoring ahead. One can only imagine the banking problems that await as times get tougher.

lostinrates

rjgb wrote: »

Very fair point. Ignore my ramble above then!

One thing to think about though is that if the BOE is now more likely to reduce or maintain interest rates, rather than increase them, there should be better mortgage deals appearing in the not too distant future.

Once people have seen prices drop about 10-15% in total from their peak, I think they would be tempted to purchase again since further reductions are less likely. They would think they are in a period which is a trough in the average house price - i.e. a good time to buy. If many people feel this way, and moreover see others buying, confidence could increase very quickly, leading to rapid rises in house prices again.

Bottom line is that I'm not sure I'd wait until 2011-2013 before making a move, as it could then be a seller's market all over again...

What do others think?

Uneducated opinion...
..I think people are struggling wth things other than house prices. i think fuel prices and living on the edge of their credit worth is going to limit many people's ability to pick up a 'bargain'. I think if the media remains as negative thats a further stumbling block, and I think the current open ended question of election is a concern for many in respect of taxation concerns although I would very much LIKE to buy later this year personally I'm not sure it will be the bottom by any means.

I think an election could change everything. I think a period of relative politcal stabilty, whther there is a change in leadership or not, is vital.

Personally our deposit will be bigger after January, and then DH will be based abroad again for six months...I hope if we don't buy end of this year things look decreasing to stable till at least this time next year.

mustrum_ridcully

rjgb - I think you may of forgotten psychology and greed.

Do you remember back in the early nineties when if you told someone that you're buying a house they'd think you were mad? That's Psychology, after a year or so of price drops and tales of negative equity woe people will start to think that house prices aren't going to go up again anytime soon. They'll assume downwards in the natural direction, much like they assumed prices will only ever go up during the boom (forgetting the last bust).

Then there is greed, why shouldn't house buyers be as greedy as sellers? They'll have the view that property is going down in value so you may as well wait a few months for the sellers to knock a few grand off the price "so we'll get a better house for less". Instead of hearing stories about how much a seller got for their 3-bed semi, we might well hear people boasting about how little they paid for a 3-bed semi.

I'm sure house prices will go up again in the longer-term future and psychology and greed will flip around again, but none of us can predict when. Just look at the bears, some were predicting a crash in 2003/4, chances are the bulls will be just as wrong in the short term about a boom.