Why house prices are headed down still

neverdespairgirl

I hope it won't, but I certainly wouldn't bet on it.

moanymoany

loofer wrote: »

Negative equity isn't really a huge problem as much as it is for people that are desparate to sell or need to remortgage.

People who were coming the end of their fixed rate deals were being moved on to the lender's SVR. Unable to get a mortgage elsewhere (-ve equity or just lenders tightening their belts/requirements) they were finding it hard to makre repayments - leading to repos.

With the base rate dropping (and expecting to drop even further apparently) those people on SVR won't be hit as hard as the last lot over the last 6 months or so (assuming the lender passes on the rate cut).

Sellers not desperate to sell (or disillusioned about what they think their house is worth) will just remove their property from the market. So will this just lead to a dip in the supply of houses on the market? market picks up again?

Banks no longer handing out the 90%/95% LTV so some buyers are having to hold off and save that much more of a deposit. So less buyers also. Prospective buyers will also drive down the selling price as they can't get the mortgage for the house they want. (counters the theory above about market picking up)

Just a scenario I was thinking about earlier today:o

During the 90's crash we had bought at the peak. It took longer for prices to fall, but the first thing to happen was that they stopped selling.

We didn't hit negative equity but the 'value' fell by at least a third.

It was a worry because at that time there were massive redundancies all over the place and dh's company reduced the workforce by two thirds. Every day was a concern, would this be 'the day'?

This will happen again, this time it looks as though it is going to be much worse. There are going to be very few people whose job is going to be safe. They will have to live from day to day wondering if they will have a job at the end of the month.

Trying to imagine what the depth of the problems to come is going to be is like trying to describe a 'light year'. We know it exists, but how to tell someone what it is and what it represents is not an easy one.

The realisation of what is coming is dawning on people and it seems that more and more are realising and admitting that it is going to be a biggy.

IveSeenTheLight

ad9898 wrote: »

The big bad internet wasn't available during the last crashes, now we have sites like this showing the truth of whats happeningand its only just begun.

I can agree with this, far more people are aware and are informed. This can partially justify the reason why the drops are faster this time, however........

Wouldn't it conversly mean that the same people will be aware when affordability levels are reached and the house prices meet the long term trend.

Here is the current HBOS affordability spreadsheet showing the UK has a house price - earnings ratio of 5.02. The 25 year average is 4.07

The South East still maintains the higest ratio at 6.39 (The only one still above 6.00)

Scotland no longer has the lowest ratio (4.24). Yorkshire & Humberside is at 4.19 closely followed by North West at 4.29

A year ago the UK ratio was 5.98, now it is 5.02, almost 1 full ratio point.
Theoretically, in another year this will be down close to the average of 4.07

chucky

mewbie wrote: »

I'm bored with this HPC knocking twaddle. The people who will be crossing their fingers, and looking for prices crashing and forced repossessions more than anyone else will be the professional BTL'ers - who really are businessmen and in it for the long term. Assuming they have some cash put by - then they really can be looking to add to their porfolios as prices drop.

In fact any of the bulls on here should be beside themselves with the thought that they can add more property to their collection.

So actually - it's good news all round - isn't it?

the comment was directed at the hardcore HPCers who do not see and will never see the bigger picture. they demand lower house prices and want bankers, EA's, brokers, BTLers etc to do badly or lose their jobs.

they don't realise that if these people are impacted the UK economy must be in the wrong direction and they may not be in a job and won't be able to buy that 'dream' home.

WTF?_2

GDB2222 wrote: »

My view is that we are in for a period of deflation, followed by massive inflation as the stimulus over-shoots dramatically. So, at some stage house prices will shoot up again just to keep pace with inflation. Timing this is going to be key, so keep a very close eye on what is happening, folks.

Agreed. And if we see true inflation as opposed to CPI (salaries as well as prices) then it's worth considering borrowing to buy assets, especially if the government is going to stubbornly hold interest rates too low.

WTF?_2

chucky wrote: »

the comment was directed at the hardcore HPCers who do not see and will never see the bigger picture. they demand lower house prices and want bankers, EA's, brokers, BTLers etc to do badly or lose their jobs.

they don't realise that if these people are impacted the UK economy must be in the wrong direction and they may not be in a job and won't be able to buy that 'dream' home.

And who are these 'hardcore HPCers' that you feel the need to keep berating? You never seem to be able to point out an example but keep going on about it.

Most HPCers here were well ahead of the curve in understanding just how badly screwed the economy was going to be - largely because they never bought into the HPI hype that said that the economy was in fantastic shape and there would be no more boom and bust.

IveSeenTheLight

!!!!!!? wrote: »

Most HPCers here were well ahead of the curve in understanding just how badly screwed the economy was going to be - largely because they never bought into the HPI hype that said that the economy was in fantastic shape and there would be no more boom and bust.

While some may have had fantastic foresight, I would hazzard a guess that the majority didn't buy into property because they couldn't afford to

ad9898_3

IveSeenTheLight wrote: »

I can agree with this, far more people are aware and are informed. This can partially justify the reason why the drops are faster this time, however........

Wouldn't it conversly mean that the same people will be aware when affordability levels are reached and the house prices meet the long term trend.

Here is the current HBOS affordability spreadsheet showing the UK has a house price - earnings ratio of 5.02. The 25 year average is 4.07

The South East still maintains the higest ratio at 6.39 (The only one still above 6.00)

Scotland no longer has the lowest ratio (4.24). Yorkshire & Humberside is at 4.19 closely followed by North West at 4.29

A year ago the UK ratio was 5.98, now it is 5.02, almost 1 full ratio point.
Theoretically, in another year this will be down close to the average of 4.07

I see your point, however with the bank crisis, recession, huge personal debt I think it's pretty certain that we will undershoot that 4.07 average at this point in the cycle. That is an average and we have been so far above that average for so long that a long period 'under' it is probably on the cards.

chucky

!!!!!!? wrote: »

And who are these 'hardcore HPCers' that you feel the need to keep berating? You never seem to be able to point out an example but keep going on about it.

Most HPCers here were well ahead of the curve in understanding just how badly screwed the economy was going to be - largely because they never bought into the HPI hype that said that the economy was in fantastic shape and there would be no more boom and bust.

here you go, this was after a couple of minutes searching... i've highlighted it before and you still inisist and still deny that these hardcore HPCers exist.

funnily enough they've got a high numbers of Thanks versus posting ratio... so there are people that agree with them out there...

http://forums.moneysavingexpert.com/showpost.html?p=15354885&postcount=2

http://forums.moneysavingexpert.com/showpost.html?p=15332667&postcount=7

http://forums.moneysavingexpert.com/showpost.html?p=15305889&postcount=3

if you agree with these posters (and there are many more) it's up to you - i don't.

and as for you being well ahead of the curve in understanding just how badly screwed the economy was going to be - your timing was terrible, you should have bought in 1999 and then sold in 2006.

that's what i would say is being ahead of the curve...

IveSeenTheLight

ad9898 wrote: »

I see your point, however with the bank crisis, recession, huge personal debt I think it's pretty certain that we will undershoot that 4.07 average at this point in the cycle. That is an average and we have been so far above that average for so long that a long period 'under' it is probably on the cards.

I fully agree with you, there will likely be an overshoot, but when it does, the same media will be available to highlight that it is under that 25 year average affordability and therefore your perceived 'long period' may be realised and found to be not so long.

We don't know though and will have to wait and see.