So when will House Prices Hit the Bottom?

pyewackitt

IveSeenTheLight wrote: »

I disagree that income multiplier is a good basis on which to lend money and the banks have moved away from this in general

The reason is you could have two similar examples, both with the same income, but vastly different outgoings (Credit Card, Loans, Hire Purchase, amount spent on drink, food, clothes, social outings etc).

I believe the bank should throughly review a persons accounts and factor all of these in to identify how much someone can afford to re-pay and to include a margin for changes i.e. interest rates.
therefore affordability become a more important factore than income alone.

Agreed - income multipier is just an aproximation but it should be obvious that the 5, 6 or more times salary that people were allowed to borrow were incredibly risky.

What you seem to be saying is that everyone needs to look at their own specifics of where they live, what they want to buy, what they can afford, amount of their savings, stability of their jobs etc. - Surely that is obvious (well to those of use who haven't overstretched).

- but you can't build a picture of the overall market based on everyone's specifics... it just isn't available as a data set... instead you need to look at averages you need to look at historical norms.

ninky_2

i there any evidence that cheaper properties might actually see some sort of benefit from a downturn? ie people downsizing to a more affordable property or going for a less ambitious property because that's what they can now get a mortgage on? what happened in the last recession?

RainMaker_2

ad9898 wrote: »

No, that is not possible, in the downturn, you don't need any money not to buy a house, however when you do want to buy a house money is obviously required, money that no longer exists in the way it has done in the recent past.

If there is no money, it's the same as saying there is a pent up demand for Ferraris, however, 99% of the general public cannot access the money required to buy one, so the 'pent up demand' stays 'pent up', indefinately.

First of all, comparing a Ferrari to a house is futile. The former is a luxury, the latter a necessity.

I don't know where you get the notion that there is no money available to be lent? But there is certainly no shortage of funds, only a lack of willingness to lend it, ergo, by the tightening lending crieria.

When, and I repeat WHEN lending criteria starts to be relaxed, the demand will start to be satisfied. When house prices start to recover that will lead to further relaxing of lending criteria, FTB's once again scrabbling to get on the property ladder, pushing prices up further and so on....and the whole boom-bust cycle starts again. It's as predictable as runrise and sunset.

IveSeenTheLight

pyewackitt wrote: »

I never disagreed - look at the London vs. N Ireland vs. Nation index from Nationwide data:

Which shows the huge differences in UK regions during a crash and the kind of timeline you can expect for some regions to bottom whilst others will be almost unaffected.

you just proved my point that the UK average means diddley squat and that local data analysis is a much better data to consider

pyewackitt wrote: »

What you seem to be saying is that everyone needs to look at their own specifics of where they live, what they want to buy, what they can afford, amount of their savings, stability of their jobs etc. - Surely that is obvious (well to those of use who haven't overstretched).

- but you can't build a picture of the overall market based on everyone's specifics... it just isn't available as a data set... instead you need to look at averages you need to look at historical norms.

Exactly, there are a lot of people on here quoting UK averages and how much further they have to drop. this can influence people into thinking that something is happeining in their area which may not be so.

And you can build a set of local specific data.
When I buy property, I do not care what is happening at the other end of the country or even 20 miles away. I even ignore different types of property when analysing the worth.
I do take local averages as a broad basis of understanding, but I never assume one area will react the same as the next and the next

Snooze

ad9898 wrote: »

IEven if people want to buy now, 9/10 people that could have bought 2 years ago, now can't.

Two FTB friends of mine each bought in 2006 with NR 95% mortgages on 8 year deals. I was having a drink with them a few days ago and both admitted that there's simply no way they'd ever have been able to buy at any less than 90% LTV and just to get the 5% deposit they had to borrow from family. I know several others in similar situations and these are what I would call your average type of person with a £15-20k ish income and virtually nothing in savings/pension pot - certainly typical of the people I know anyway. Both have got £100k+ mortgages and are now dangerously close to disaster on the debt vs. income front. If those had been 2 year fixes instead of 8 years then there's no doubt both of them would have been looking at getting repo'd now.

If either were to apply now they'd get laughed all the way out of the door and although not a nice thing to say, I don't think either of them should have ever been given a mortgage in the first place. However, I've no place to talk as I know 'someone' who used fake payslips with a vastly inflated income to get a mortgage with Alliance & Leicester back in 2001, and then again in 2003! Fortunately it turned out alright in the end but that 'someone' would have never been given a mortgage if he'd submitted genuine info, that is for sure.

Rob

ad9898_3

RainMaker wrote: »

But there is certainly no shortage of funds

I'm not meaning to be smart here, but can you tell me where the funds are going to come from to keep the market at the level it's currently at, nevermind 2007 levels. The levels of debt required to be serviced in the period of 2001-2007 has collpsed major institutions, where is the money coming from to sustain the unsustainable ??

RainMaker_2

ad9898 wrote: »

I'm not meaning to be smart here, but can you tell me where the funds are going to come from to keep the market at the level it's currently at, nevermind 2007 levels. The levels of debt required to be serviced in the period of 2001-2007 has collpsed major institutions, where is the money coming from to sustain the unsustainable ??

Me neither.

The UK banks (at least those needing it) have all be re-capitalised. There is NO shortage of money, only a lack of willingness to lend it. Or phrased another way, the banks are now taking a much more cautious approach.

Just a bloody shame they didn't do that a few years ago !

twirlypinky

Snooze wrote: »

Two FTB friends of mine each bought in 2006 with NR 95% mortgages on 8 year deals. I was having a drink with them a few days ago and both admitted that there's simply no way they'd ever have been able to buy at any less than 90% LTV and just to get the 5% deposit they had to borrow from family. I know several others in similar situations and these are what I would call your average type of person with a £15-20k ish income and virtually nothing in savings/pension pot - certainly typical of the people I know anyway. Both have got £100k+ mortgages and are now dangerously close to disaster on the debt vs. income front. If those had been 2 year fixes instead of 8 years then there's no doubt both of them would have been looking at getting repo'd now.

If either were to apply now they'd get laughed all the way out of the door and although not a nice thing to say, I don't think either of them should have ever been given a mortgage in the first place. However, I've no place to talk as I know 'someone' who used fake payslips with a vastly inflated income to get a mortgage with Alliance & Leicester back in 2001, and then again in 2003! Fortunately it turned out alright in the end but that 'someone' would have never been given a mortgage if he'd submitted genuine info, that is for sure.

Rob

This is the sad situation that we're in. Cost of living is so high that people aren't able to save the amount they need for a deposit (I'm not talking about everyone here, we're all different).

I don't know about anyone else, but basically (and this is a sad fact) unless I find a partner that wants to buy with me, or manage to save £25000 in the next two years, I'm not getting on the property ladder until an elderly relative dies. That makes me really sad, but it's true.

I'm in a fairly well paid job, but because I'm single and renting is expensive here (Central Oxford) I really don't have a hope. I'm paying off debt i got buy getting out of a bad marriage (so not from holidays or shoes and handbags) so i can't even start to save until the end of this year.

ad9898_3

RainMaker wrote: »

First of all, comparing a Ferrari to a house is futile. The former is a luxury, the latter a necessity.

Really ??, the irony is, to a great many people the latter has become a luxury too, so I don't think my analogy was too far from the mark. I was just trying to explain this 'pent up demand' issue is fiction, nothing can have a pent up demand if it's way too expensive for people to aspire to in the first place.

Thrugelmir

RainMaker wrote: »

Me neither.

The UK banks (at least those needing it) have all be re-capitalised. There is NO shortage of money, only a lack of willingness to lend it. Or phrased another way, the banks are now taking a much more cautious approach.

Just a bloody shame they didn't do that a few years ago !

The subject has been well discussed on here. So to bring you up to speed the following lenders are now out of the market.

NR ( until yesterday anyway and at a much reduced rate), Abbey Nat , Bradford & Bingley, Halifax , Foreign Banks and smaller wholesale funded mortgage lenders. This is over 50% of the mortgage lending market.

The mortgage market was funded by wholesale funds in the main sourced from Asia. Lehman Bros was a driving force behind this.

Do you want banks to incur yet more losses? The cautious approach of the banks is in direct response to the ecomomic climate and return to traditional banking. Recapitalisation has no bearing on lending, more of restoring capital ratios.