OECD warns property is still 140% of it's historical average.

StevieJ

Dan: wrote: »

You mention that it's the fundamentals of the mortgage market that dictate the price, and I agree with this 100% - which is why when I see yet another increase in Mortgage approvals (not applications as you stated) this strengthens my prediction that the bottom is not as far away as some would hope.

Dan you are a raving Bear :cool:

mewbie_2

Dan: wrote: »

when I see yet another increase in Mortgage approvals (not applications as you stated) this strengthens my prediction that the bottom is not as far away as some would hope.

Have you considered applying for Fionulla's old job? I'm assuming she must surely be finished by now.

Keiser_Soze

MP2 makes an excellent point. House prices will rise & fall from month to month & in different regions of the UK. It's never a smooth line, up or down. However, the overall trend will be dictated by the overall money injected into the housing market.

It's no coincidence that house prices rose from 1996 to 2007 (the UK as a whole, there will always be regional differences) roughly in line with the amount of money injected into it (via mortgages whether they be prime, Alt-A or sub-prime). This will always happen with a product where the supply is illiquid (i.e. housing supply in this instance) and demand is strong (demand in the technical sense, there's no such thing as 'pent-up demand'). And it's also no coincidence when the same money supply (into mortgages) is contracting. House prices will contract in line with this.

The major UK banks have given assurances to lend again 'at 2007 levels'. However, this will note abate falls, as non-UK banks have not given the same promises. And it was these non-UK banks who made up a good 50% of (UK)lending from 2000 onwards. These institutions have now either gone bust, been taken over or re-building their capital ratios. They won't re-enter the UK market until they feel there's money to be made. They're under no obligations like their UK counterparts to lend to UK people & businesses.

So UK banks can lend at 2007 levels but as the overall money supply into the UK market has reduced substantially, until an equilibrium is found, I feel further house price drops are inevitable (with rises along the way & regional differences, but the overall trend will be downward).

mp2

Keiser_Soze wrote: »

MP2 makes an excellent point. House prices will rise & fall from month to month & in different regions of the UK. It's never a smooth line, up or down. However, the overall trend will be dictated by the overall money injected into the housing market.

It's no coincidence that house prices rose from 1996 to 2007 (the UK as a whole, there will always be regional differences) roughly in line with the amount of money injected into it (via mortgages whether they be prime, Alt-A or sub-prime). This will always happen with a product where the supply is illiquid (i.e. housing supply in this instance) and demand is strong (demand in the technical sense, there's no such thing as 'pent-up demand'). And it's also no coincidence when the same money supply (into mortgages) is contracting. House prices will contract in line with this.

The major UK banks have given assurances to lend again 'at 2007 levels'. However, this will note abate falls, as non-UK banks have not given the same promises. And it was these non-UK banks who made up a good 50% of (UK)lending from 2000 onwards. These institutions have now either gone bust, been taken over or re-building their capital ratios. They won't re-enter the UK market until they feel there's money to be made. They're under no obligations like their UK counterparts to lend to UK people & businesses.

So UK banks can lend at 2007 levels but as the overall money supply into the UK market has reduced substantially, until an equilibrium is found, I feel further house price drops are inevitable (with rises along the way & regional differences, but the overall trend will be downward).

which in turn is why a return to historical normal lending practices will lead to normal historical house prices.

the 2 go hand in hand.

if people wonder why prices of houses dont drop to equilibrium straight away, consider this.

lets say the average number of houses that need to be sold each month is 80,000 (80,000 new buyers vs 80,000 new sellers). today only 35,000 homes a month are being sold.

not only does that mean less sales, but the key is that there is an excess of maybe 45,000 houses coming onto the market every month that arent being sold.

so say that there is x amount of money available in the mortgage market each month, this is being divided by only 35,000 houses per month, not 80,000. which slows down the fall to the equilibrium price.

i.e its actually not possible for all 80,000 new houses on the market to be sold at todays high market prices, because simply put, there isnt enough money to go round.

all 80,000 home owners can price their houses at £200,000, but its not possible for everyone to receive £200,000, therefore what is the true value of average house prices?

after all, everyone is chasing the same pot of money. either you get all the money or i get the money, we both cant get it, unless we both cut our prices in half. thats where the equilibirum price is.

therefore house prices will keep chasing downwards for a long time. prices would need to drop significantly until there is a match between money available vs equilibrium number of houses sold each month (80,000).

Cannon_Fodder

mitchaa wrote: »

Where does the myth that there is no money to go around come from as i frankly do not understand it??

Myth...?

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/4696197/Mortgage-lending-halves-in-a-year-and-no-revival-in-sight-says-CML.html
"borrowers are still finding it virtually impossible to find a mortgage amid the credit crisis unless they have a sizeable deposit and a spotless credit history."

http://www.independent.co.uk/money/mortgages/mortgage-lending-growth-weak-as-credit-crunch-bites-1635429.html
"The Bank of England said net mortgage lending rose by £690m in January, less than half analysts' forecasts for an increase of £1.5bn and much lower than December's £1.794bn rise."

http://www.cml.org.uk/cml/publications/marketcommentary 19 March 2009
"Building societies accounted for just 5% of mortgage approvals in January, down from around 14% over the last three years. This will inevitably feed through into far less lending by that sector in the coming months."

"The story for specialist lenders has been even more stark. They now account for just 3% of activity, down from 17% in 2007."


Just to put it into numbers, take a peek at;
http://www.bankofengland.co.uk/mfsd/iadb/fromshowcolumns.asp?Travel=NIxSTxTAxSUx&FromSeries=1&ToSeries=50&DAT=RNG&FD=1&FM=Jan&FY=1963&TD=1&TM=Apr&TY=2009&VFD=N&CSVF=TT&C=ZB&Filter=N&html.x=12&html.y=21

Figure only go back to 1993, and NEVER in that time, did Monthly Net Lending on Dwellings drop under £5Bn, until Feb08, since when it has now shrunk to under £500M...

Does that help give a sense of the drop in funds?

Feel free to play with the figures yourself at http://www.bankofengland.co.uk/mfsd/iadb/index.asp?first=yes&SectionRequired=A&HideNums=-1&ExtraInfo=false&Travel=NIxSTx

StevieJ

Conrad wrote: »

phallet - prices are down a minimum 20%. If you claim otherwise - I'll do the usual and call E/A's in your area.

)

I have a fact at last :T No houses near me have been obviously for sale (no board), even so my neighbours house has sold The selling price was 97% of the price when it was last sold end Sept 2006, does that mean house prices are down 3% since end 2006, oh no disaster:eek:
Conrad if you would like a little wager, say 1k ( loser proceeds to charity) I am willing to pass the details to Martin (and send a cheque). What was that phrase? Do you feel lucky, well do yeh

Kenny4315

sockpuppets wrote: »

Great work my young disciple. I'm so proud of you. phallett's name has just been added to the list. nice one. cheers

Are you the fish or the sock with buttons ??

Kenny4315

Conrad wrote: »

phallet - prices are down a minimum 20%. If you claim otherwise - I'll do the usual and call E/A's in your area.

The other day I was in nearly every EA in the city, all except those that deal with high end stuff, and although they claim a 20% reduction it was hot air, because in reality the prices on display were at best 10% down on peak. They seemed to be a bit sheepish when I pointed out some prices against the peak and what they had on display, didn't come anywhere near the 20% suggested on the indicators.

I have already said somewhere that the HP indicators are being skewed by

1. lack of sales.
2. the bulk of actual sales are forced sales or close to it.

So the reality of the matter is that if we adjusted for the above, we'd be nowhere near a 20% drop at present. We'll only see the true extent of the correction once we get substantial sales volume that isn't overly skewed by forced sales.

mp2

Kenny4315 wrote: »

The other day I was in nearly every EA in the city, all except those that deal with high end stuff, and although they claim a 20% reduction it was hot air, because in reality the prices on display were at best 10% down on peak. They seemed to be a bit sheepish when I pointed out some prices against the peak and what they had on display, didn't come anywhere near the 20% suggested on the indicators.

I have already said somewhere that the HP indicators are being skewed by

1. lack of sales.
2. the bulk of actual sales are forced sales or close to it.

So the reality of the matter is that if we adjusted for the above, we'd be nowhere near a 20% drop at present. We'll only see the true extent of the correction once we get substantial sales volume that isn't overly skewed by forced sales.

you still cant get your head around the fact that sales are low because prices are too high.

as prices fall, sales will rise. for every sale thats going for 10% below asking price there are 3-4 new properties that arent selling at all.

why? because theres no money.

if those other 3-4 properties want to sell they must reduce their prices because there isnt enough money to go round.

i.e if theres £800,000 worth of mortgages available, and 4 houses on sale, they may sell for £200,000 each.

if theres £400,000 worth of mortgages available, 1 might sell for 190,000, another 180,000, the other 2 wont even sell, they will struggle to sell because there isnt enough money available in the market (how much is available isnt determined by what you can afford but what the banks are prepared to lend).

its almost a case of first come first served because prices will keep chasing down as the years pass until the equilibrium reaches £400,000 / 4 houses = £100,000 each, as a national average.

StevieJ

mp2 wrote: »

you still cant get your head around the fact that sales are low because prices are too high.

.

You can't get your head around the fact that sales are low because there are no houses for sale :cool: