Whither house prices? The BBC's take on 2009

chucky

caveman38 wrote: »

Deposits, I don't beleive were mentioned, only mortgages. I still maintain that the guy with the higher salary, who can get the higher mortgage will afford the better properties. What's confusing about that.

if i'm not mistaken - deposits are still needed to purchase a property with a mortgage.

the higher the deposit (ie the amount you have to save) the better the property that you can buy, this is what differentiates affordability of better properties and salatry (as you say) not just the amount being lent - What's confusing about that?

1echidna

Professional bodies and pundits in general can't be seen as making 'doommongering' forecasts. Throughout the financial and now economic problems they have been wildly optimistic about asset price movements. Expect the realisation to strike soon to house sellers that they will get a better price now than if they wait six months or a year. We are watching a sinusoidal curve with steeper rate of price decreases to come before the rate of fall slows. Perhaps thirty percent falls on average in 2009. The full effects of the credit crunch and declining economic activity have nowhere near hit the housing market yet.

amcluesent

>The full effects of the credit crunch and declining economic activity have nowhere near hit the housing market yet<

I see us entering a 3-4 month bear rally, when the teenage scribblers report that everything is rosy again. The trick will be to sit tight on gold until 2010 when the very last bull capitulates in the final lurch downwards; FTSE at 1500, 5M on the dole, house prices off by 50%

caveman38

chucky wrote: »

if i'm not mistaken - deposits are still needed to purchase a property with a mortgage.

the higher the deposit (ie the amount you have to save) the better the property that you can buy, this is what differentiates affordability of better properties and salatry (as you say) not just the amount being lent - What's confusing about that?

I am not contradicting you. I was only responding to posts 4 & 6 re. mortgage multiples.

[Deleted User]

One of the few positives in the current climate is that (hopefully)people will start to see their homes as just that,homes,and not something that automatically increases in value week in week out,ready for the next re-mortgage that they cant really afford.

chucky

caveman38 wrote: »

I am not contradicting you. I was only responding to posts 4 & 6 re. mortgage multiples.

i know

i was adding to the multiplier only logic which is far too general

b0rker

!!!!!!? wrote: »

Once prices come down to a reasonable level where buyers can afford to borrow a sensible amount (max 3.5x single or 2.5x joint multiple of income), prices will stabilise and the banks can start lending in earnest.

Hence the sorts of stupid, expensive measures to 'hold up' prices are not only damaging the economy with their longer term effects, they are also delaying the recovery.

Nice thinking. So a couple who bought in September 2007 for £105,000 with a £10,000 deposit at 2.5x joint multiple and is now facing £20,000 of negative equity when their 2 year fixed deal ends Sep 2009 (their home will by then only be worth £75,000) should be dumped on the financial scrapheap? Just because the housing market happend to collapse straight after they bought? Despite them saving for a deposit? Nevermind what if one of them was unlucky enough to lose their jobs?

They are left on the SVR with £20,000 to find before interest rates start going up and their monthly repayments become impossible. No chance of securing a new fixed rate with £20,000 of negative equity. Their hellish situation will not be due to any crazy income multiples or 125% mortgages. Just pure bad luck.

In fact the whole 3.5x single or 2.5x joint multiple of income becomes irrelevant when house prices drop so far so quickly. It means that people who's only error was to buy into the housing market at the wrong time will be pretty much financially wrecked. Despite acting prudently when making the initial purchase. The new HIP should come with a fully functioning crystal ball as the farce that is the UK housing market is a very dangerous thing indeed. Especially for first time buyers, with or without an IFA or MA. They do not posses crystal balls either. You would think that in hundreds of years of financial evolution that protection against the loss of a persons home would have been made a great deal more sound than it currently seems to be. Okay if you bought in with a 125% mortgage you shouldn't really expect any security but not if you are initially prudent. This is not the stock market. This is home purchasing on a small and very personal scale where there should be no gambling involved. This should not come down to luck. You are not told that the long term ownership of your home is based on luck when you go to an IFA or MA as a first time buyer. In my opinion you really should be.

So the "stupid, expensive measures to 'hold up' prices" may just save some people like the above. Which is what they are designed to do. Not to hold up house prices against the desires of the blood baying bears like yourself!

hethmar

mvengemvenge wrote: »

I'd love to incorporate that into a chat-up line:D

I should think to pull something like Karen your chat up line would go something like, "Do you want pork scratchings with that pint?":o

novazombie

themanbearpig wrote: »

"Mr Davis predicts prices will continue falling until 2011 or even 2012, eventually dropping to 40% or 50% of their peak of the summer of 2007."

I'm glad they put that in! The masses (especially those that are selling) need to hear things like this. They will start to panic, and try to shift their house now at a 20% loss instead of 50%, thus accelarating the crash.

Is Mr Davis saying a 100k home now will be worth just 40K in 2012?

This is possible I think it will take longer.

The full effects of the credit crunch and declining economic activity have nowhere near hit the housing market yet.

Many are talking about in just 1 years time we will be at the bottom so will buy. They dont consider that HP may just carry on falling for years.

I think the reason we havent seen such huge drops yet is because most people dont really understand whats going on, thats why sellers dont drop enough.

shaven-monkey

Interesting book which may explain how it'll go:-
George Soros - The Alchemy of Finance