If house prices fall another 37% ...

penguine

whathavewedone wrote: »

I was trying to illustrate how disastrous it would be for the economy if we had a crash 70% from peak coupled with high interest rates.

Falls of a further 37% from here would be 57%, not 70%.

whathavewedone

Whoops, so it does.

We'd still be f%cked though and so would hordes of other people so it doesn't alter my argument.

Prices don't need to fall 57% from peak to be affordable to FTBS (apart from those wanting detached 4/5 bedrooms with acres of land and paddocks as their first home on a salary of 30k with a 10k deposit). They are close to being affordable already, about another 10-15% and we will have undershot.

Carolt is right in a way. The powers that be don't give a stuff about individuals whether they be first time buyers, hard working families or whatever.

What you're wrong about is suggesting that the person who cannot afford to buy and so has to rent is in a worse position than the person who could afford to buy, saved up a big deposit, put it down on a house and then lost the house and ended up owing the bank lots of money.

In terms of scandals, in terms of bad publicity for governments photographs of sobbing children and haggard parents leaving their homes without a pot to pi££ in are worth a lot more money to the Daily Mail (if the people concerned are middle class) or the Sun (if the people concerned are working class) than a couple of FTBs who can't afford to get on the ladder (sob).

So what do the powers that be care about? Votes. Who do you think's going to get in next election? Who are their core voters? Which section of society is the most disenchanted with labour at the moment? Yes that's right the middle classes. You think the tories are going to let them all go bankrupt and lose their homes to save the young FTBs? After what happened last time, 11 years in the wilderness? I don't think so.

chucky

penguine wrote: »

OK, so how is the government going to keep your hypothetical buyer of a £1m home from falling into negative equity? How are they going to prop up house prices? If they could, don't you think they would have done it already? Where's the money going to come from to keep lending at the levels that pushed prices up this far in the first place -- more bailouts?

in the words of Mr Graham Devon

Graham_Devon wrote: »

QE and bailouts.

and there's your answer

penguine

StevieJ wrote: »

Are you saying that a 57% drop is just over half a 300% increase? Looks like dodgy arithmetic to me, may be wrong though

No. That's not what she's saying.

StevieJ

penguine wrote: »

No. That's not what she's saying.

I have deleted my post anyway
But she did say

It's funny isn't it how to some people rises of 300% plus are perfectly reasonable and there are logical reasons for it - but suggesting that you could see falls that would wipe out only just over half that drop is unthinkable and ridiculous!!

I assume refererring to the 57%.

carolt

StevieJ wrote: »

Are you saying that a 57% drop is just over half a 300% increase? Looks like dodgy arithmetic to me, may be wrong though

Dunno - I wasn't really concentrating.

Let's see - buy house for 100K - goes up to 300K - is that right?

Then loses 57% = 171K, actually, acc to my calculator. So you're right, just under half a 300% increase, actually.

Doesn't really alter my point.

Dan:_4

carolt wrote: »

Let's see - buy house for 100K - goes up to 300K - is that right?

Is that right? Too broad a question - what is the time span between these two figures?

penguine

whathavewedone wrote: »

Prices don't need to fall 57% from peak to be affordable to FTBS

The point of the original article wasn't about affordability (however that's defined). The author was pointing out that if they fall a further 37% then they will reach the HPER seen at the end of the last housing crash. So I think the relevant question is whether this crash is going to be as bad as the last one or not.

(And it won't, of course, because the Tories are going to charge in like knights in shining armour and save us.)

Incidentally, a HPER of 3.5 or so wouldn't mean that swathes of FTBs would be able to buy

whathavewedone wrote: »

detached 4/5 bedrooms with acres of land and paddocks as their first home

It would mean that a first time buyer on a salary of say £20k a year with a 10% deposit could buy a reasonably sized flat in a decent area.

Kenny4315

Graham_Devon wrote: »

So it's ok for first time buyers to be totally priced out, but not ok for home owners to face negative equity?

Interesting.

Many of these complaining FTB's haven't worked for more than a few years, they have virtually nothing saved, and whinge on that they are 'priced out of the market'. Then expect to just buy the biggest purchase in your with virtually nothing saved. A significant factor in the rise in the first place 125% mortgages, etc.

Whether you like it or not more people will be adversely effected by a 57% than will be positively effected. Many a small business has used capital from there main residence to set up, many a pensioner was plannig to downscale and live comfortably off the difference, to most there wealth is tied into the value of there house. The only ones that may gain if they don't find themselves unemployed, in this scenario with a drop of 57% is renters of an age of 20 to 30, but they don't drive the economics of the country it is those of between 30 and 55 that do, they pay most of the tax, they have most of the property stock, and they are the ones the create most consumer demand thus keeping the economy moving. If you can't see this intuitively then your clueless.

ad9898_3

whathavewedone wrote: »

It's not that there's nothing wrong with cheap house prices per se but to go from the house prices we have now to very cheap house prices will cause carnage to the economy and leave many many families without a home.

What gets me is now the boot is on the other foot, and the high leveraged face 'carnage', it's all of sudden different than it was for FTB'rs 3-4 years ago, it was carnage for them too at the time when, all because they weren't born earlier they get shafted and can't buy property.

To me it's swings and roundabouts, 2000-2007 was bad for FTB'rs who would have had to drown themselves in debt for a cardboard shoebox, 2007 onwards, it's bad for all the highly leveraged who are falling like flies, the karma always gets you in the end.