House price futures - average house at £117k in 2011

GDB2222

House price futures - average house at £117k in 2011.

http://www.tfsbrokers.com/pdf/RISK&MANAGE/2008/Nov-08.pdf

Residential derivative prices were marked down sharply during October

as the chart opposite shows. This month we have configured the chart
differently to illustrate the gap between actual and derivative prices
which is now £39,004. This figure being the currently forecasted
amount the UK house price is expected to fall in the coming 12 months.

Some residential derivative market spectators are increasingly
suggesting that the house price will not fall to £134,346 in a year or to
£117,011 in three years. They could be right. Here is the thing; if you
think the levels are too low, put your buying trousers on and come to
market. Unlike every other house price forecast, the derivative

“estimates” are tradable.

Kez100

Seems realistic if mortgage interest rates stay about 6-7% and wages don't deflate.

That would make a 'average' FTB place circa £90? Again, on present day wages, that sounds sensible as 2.5x average joint wage.

It may overshoot a bit more if unemployment is high and lack of liquidy remains. It may not overshoot if people sat with cash decide they want soemthing cheap they can touch and know won't disappear. They may not overshoot if the stock market rallies a bit and people pull out for property.

How do the buyers on here feel - would you buy what you are waiting for if a place was marketed 40% cheaper than peak?

carolt

Depends on interest rates available to FTB's - long term rates eg fixed, rather than basing a 25 year strategy on a v low rate for 6 months lol!

And on whether I thought prices were still liable to fall a lot further.

And on things like job security, rental costs v mortgage costs, etc.

Complicated sums.

Kez100

I agree. It's all going to depend not just on facts but on how everyone feels as well. Once you add that it is impossible to be sure at this early stage.

domcastro

Didn't understand that article - are they saying houses will or will not fall. In your quote it says that "house price will not fall to £134,346 in a year or to
£117,011 in three years" eh?

penguine

I think that must be a typo in the article, they probably meant to say "now".

Elsewhere in the same article:

Capital Economics property economist Seema Shah said: "With
unemployment now rising sharply, economic activity contracting,
and mortgage lending criteria still tightening, the pace of house
price falls is set to intensify. We expect house prices to drop 20%
next year." A Collins Stewart analyst suggested “Buyers have simply
disappeared and are unlikely to return in meaningful numbers until
house prices have fallen at least 30%, and probably by much
more”.

luvpump

Kez100 wrote: »

Seems realistic if mortgage interest rates stay about 6-7% and wages don't deflate.

That would make a 'average' FTB place circa £90? Again, on present day wages, that sounds sensible as 2.5x average joint wage.

It may overshoot a bit more if unemployment is high and lack of liquidy remains. It may not overshoot if people sat with cash decide they want soemthing cheap they can touch and know won't disappear. They may not overshoot if the stock market rallies a bit and people pull out for property.

How do the buyers on here feel - would you buy what you are waiting for if a place was marketed 40% cheaper than peak?

I tend to agree with you, The market needs to deflate to a sustainable level for the long term, not the short term...

ad9898_3

i think Carol covered all the bases their. It wasn't long ago that 25% off peak was thought of as cloud cuckoo land, now 25% is mainstream.

40% is slowly starting to creep in to forecasts, although still thought by some as cloud cuckoo land. I expect 40% to become mainstream over the next 6 months.

So in that respect I wouldn't buy at the moment for 40% off peak. There are so many variables at the moment with Gordon 'it started in America' Brown seemingly and scarily willing to do anything to stay in power.

Kez100

People who think 40% is cloud cuckoo land just aren't thinking logically. I'm in the 30-40% ballpark.

A proper housing market needs chains. Very few FTBs have been starting chains it has been BTL.

We all know buying new BTL is dead until we reach a level those with the money for a good deposit get the yield they want. These people are switched on, not mugs. They want most bang for their buck.

FTB's need prices to fall to sensible multiples so they can get on the ladder. There are plenty of them but if the numbers don't stack up them the lenders won't lend and if they fear for their jobs they may hold off longer.

Interest rates falling now won't help sell very many more just enable people to stay where they are easier. Only once prices have fallen will low interest rates help the market increase to proper levels.

I'm sure it will return because living in rented unless lucky can be such an unsettling life in the UK. This isn't going to be overnight because the economy is shot at the moment and changes take time. It cannot be done overnight.

Buyers ain't suckers anymore. Sellers have their fingers in their ears. The quicker EAs talk sellers around the better IMO but they do not seem to be doing so. Blaming it on sellers isn't good enough - you need to be honest and let them know how many buyers ready to proceed you have had in your office this month. Bit scary that isn't it? Use that to illustrate the need to drop properly and to keep up with the declining prices. Small drops and rallying phone calls will only prolong the pain.

GDB2222

domcastro wrote: »

Didn't understand that article - are they saying houses will or will not fall. In your quote it says that "house price will not fall to £134,346 in a year or to £117,011 in three years" eh?

There's no mis-print. They are saying that the futures market is pointing to those prices in a year and 3 years, respectively. Those are the prices at which transactions are actually taking place in the futures market.

They also mention that some spectators think that's overdoing the gloom, and they suggest that those spectators should put their money where their mouth is.

Is that clearer now?

lostinrates

Kez100 wrote: »

How do the buyers on here feel - would you buy what you are waiting for if a place was marketed 40% cheaper than peak?

Yes.

I'd buy now expecting property to lose a futher 15% from peak (according to the highly useful nice round numbers school of economics ) if it were a property we would stay in for minimum 8-10 years. Made an offer on this basis last week, but felt emotionally cool enough not to be forced into a bidding war- things were different for me ven in spring, where letting go of something I didn't really love as it shot out of our budget was very hard. For me its not the desire to buy thats been cooled, nor the intent diminished in the longer term, but a REAL change is that we don't feel that pushing harder than we feel comfortable with is ncessary or a gamble we'd take.