Things will get worse

dopester

Oh yes they will.

Also read what Seema Shah has to say.

http://www.guardian.co.uk/business/2008/aug/17/housingmarket.property1

The Observer
Sunday August 17 2008
Heather Stewart and Alex Brett

Behind Mervyn King's warning and government dithering, a host of factors suggest that the property crash will be with us for a long time - and could have far-reaching effects. Heather Stewart and Alex Brett report

Karen Ward, chief UK economist at HSBC, says the value of housing has a natural limit, set by people's incomes; and 'what drives house prices away from this is over-optimistic expectations, and credit which is willing to follow that trail. Now, both those things are working in reverse.' She believes that part of the reason house prices have turned so quickly since last autumn is that, deep down, we all half knew the market had gone mad.

Now, analysts are scrambling over each other to increase their predictions of how far prices could fall from their peak. Many say 20 per cent; some up to 35 per cent, or even more.

The house price-to-income ratio, a measure of how expensive property has become, had shot up to more than seven times income by last year, when the market peaked. Since prices turned, it has begun to slip, but remains very high by historical standards - and well above the five and a half hit at the peak of the 1980s boom (see chart).

Many of the arguments used to justify rising prices, and reassure optimistic investors in recent years, are likely to reverse as the economy turns.

'There are no first-time buyers. Deals are taking a lot more time to complete,' she says.

LilacPixie

'There are no first-time buyers.

This is the bit that worries me the most. No FTB means literally every home is worthless. if there is no FTB at the bottom of the chain then there is no chain.

lynzpower

I was thinking as I bought my observer yesterday, that I was expecting to see a bit of "upturn" chat given how optimistic some posters have been on here recently had I missed something ??

Seemingly not. this is one of the pessimistic articles Ive ever read from a quality paper, really showig the human toll as estate agents ( with families to support, and responsibilities) explain the siutuation.

Also the article of the forst page of the cash & business section stated this is the worst time for a FTB since the 70s.

dudleyboy

LilacPixie wrote: »

This is the bit that worries me the most. No FTB means literally every home is worthless. if there is no FTB at the bottom of the chain then there is no chain.

Not worthless - it's a roof over you and your family's head, a place to store your stuff and a place to relax, unwind and spend time with your nearest and dearest.

However, since everyone over the past 8 years has come to depend on their [STRIKE]home[/STRIKE] property as a source of income, current or potential, then I can understand the number of people wishing they hadn't "released" all that equity by taking on an even bigger debt - perhaps now regarding this asset to be a liability.

Truth is, I realised years ago that like all pyramid schemes the swelling housing market was set to collapse. It requires people to come in at the bottom to make the people on higher tiers wealthier. When the people no longer enter at the bottom the pyramid collapses, the ones on the lower tiers suffering worse than the ones on the higher tiers. As a potential late entry, I chose to keep well away.

So no first time buyers is definitely a problem for the bloated housing market and this pyramid is set to collapse spectacularly.

amcluesent

The British Chambers of Commerce, which becomes the first business group to forecast that Britain would fall into recession, predicts that the economic slump will force unemployment to soar by between 250,000 and 300,000 in the next two to three years.

The Bank of England is battling soaring inflation as well as the slumping economy.

The threat of job losses will pile more pressure on beleaguered householders. The soaring cost of food and energy has cut families’ spending power by nearly £700 a year.

Where's Gordon? Oh wait...in hiding, making the right decisions for the long term. :eek:

dougs

amcluesent wrote: »

Where's Gordon? Oh wait...in hiding, making the right decisions for the long term. :eek:

and listening to peoples' concerns....

NOT!

Jonbvn

dudleyboy wrote: »

However, since everyone over the past 8 years has come to depend on their [strike]home[/strike] property as a source of income,

Truth is, I realised years ago that like all pyramid schemes the swelling housing market was set to collapse.

Everyone?

Gosh you are so smart you must wear your underpants outside your trousers;)

Trollfever

Who is Gordon?

dudleyboy

Jonbvn wrote: »

Everyone?

Gosh you are so smart you must wear your underpants outside your trousers;)

And this week's award for the most pedantic poster goes to...

dudleyboy

Trollfever wrote: »

Who is Gordon?

"Au revoir, Monsieur Premier Ministre."

WTF?_2

LilacPixie wrote: »

This is the bit that worries me the most. No FTB means literally every home is worthless. if there is no FTB at the bottom of the chain then there is no chain.

FTBs have been an endangered species for quite some time because prices got to the point where servicing mortgage debt was simply unaffordable to the average person, even with ultra-low (short term) fixed interest rates.

A lot of the market was held up by speculators/amateur BTLers at the end. Typically they were funding new purchases by remortgaging existing property. A real chain of dominoes waiting to fall.

I feel really sorry for FTBs suckered in since the BoE's Aug 2005 rate cut, with its effect to spin out the boom for a couple of years longer. There was undoubtedly peer pressure to get on the ladder and the media was hyping property ownership for all it was worth. Nowhere in the mainstream would you read or hear the view that prices were stupid and unsustainable. There were people who took on stupid amounts of debt because they were convinced by everyone around them that it was the only way to go. Maybe the sets of parents would remortgage their properties to 'help out'. Disastrous.