House Price Crash Part 2

Harry_Powell

I liken the House price crash, Credit Crunch and Recession as a hurricane that swept through the world's financial systems, wrecking havoc to even the most sturdy looking institutions.

Now that things seem to be calming down, people are starting to climb out of their storm shelters, dust themselves off and get ready to continue on with their lives. What they have forgotten in that all hurricanes have an eye and I believe we are currently inside it. It wont be long now before the eye moves on and the trailing part of the storm approaches.

This trailing storm will be in the form of inflation, fuelling higher mortgage rates which will in turn fuel mass reposessions. When we see interest rates in the region of 10%, how many over-leveraged BTL and OO's will start to go under, especially if they have lost their jobs or had their overtime cut or their wages or working hours reduced?

A lot of people are killed and injured by hurricanes because they leave the safety of their shelters when they're in the eye of the hurricane, thinking the storm is all over, and are then caught by the trailing storm. Don't get caught out yourself. OO and BTLers, make the most of the low rates by salting away as much money as you can into savings accounts or directly onto your mortgages. FTBers, keep hunkered down in your storm shelters, wave 2 of this financial storm is coming! Do not buy just yet!

purch

A lot of people are killed and injured by hurricanes because they leave the safety of their shelters when they're in the eye of the hurricane, thinking the storm is all over, and are then caught by the trailing storm

I doubt that too many are.

Most are killed or injured by the storm surge that preceeds the Hurricane.

Really2

Harry_Powell wrote: »

This trailing storm will be in the form of inflation, fuelling higher mortgage rates which will in turn fuel mass reposessions. When we see interest rates in the region of 10%, how many over-leveraged BTL and OO's will start to go under, especially if they have lost their jobs or had their overtime cut or their wages or working hours reduced?

One slight flaw. high inflation means increased money supply.

So high inflation then casues wges to follow suit!

Rents then follow inflation up!

House prices then go up due to increased money supply.

Do you think high inflation in the past as errode debt or increased it.

High inflation would make it easier not harder for the majority as their wges would increase but their mortgage debt would be static.

the_ash_and_the_oak

Really2 wrote: »

One slight flaw. high inflation means increased money supply.

So high inflation then casues wges to follow suit!

Rents then follow inflation up!

House prices then go up due to increased money supply.

Do you think high inflation in the past as errode debt or increased it.

High inflation would make it easier not harder for the majority as their wges would increase but their mortgage debt would be static.

got a point tbh. tho not really into the idea that inflation is going to come in as this saviour wiping away everyone's debt.

don't really see wage inflation on the horizon tbh. think we'll see fuel, food and taxes taking up larger proportions of salary imo

Harry_Powell

Really2 wrote: »

One slight flaw. high inflation means increased money supply.

So high inflation then casues wges to follow suit!

Rents then follow inflation up!

House prices then go up due to increased money supply.

Do you think high inflation in the past as errode debt or increased it.

High inflation would make it easier not harder for the majority as their wges would increase but their mortgage debt would be static.

Yes, and all this will be in a short enough time-frame to save the indebted? I doubt it very much.

There is always a lag before these sorts of corrections take place, meanwhile those who are barely affording to repay their mortgages now will be swept away long before your wage inflation comes to their assistance. TBH, a lot of people will just be glad to have a job and won't be rocking the boat by asking for pay increases - the last time we had high inflation we also had industries that were heavily unionised, who negotiated for wage increases. We don't have that anymore.

Really2

the_ash_and_the_oak wrote: »

got a point tbh. tho not really into the idea that inflation is going to come in as this saviour wiping away everyone's debt.

don't really see wage inflation on the horizon tbh. think we'll see fuel, food and taxes taking up larger proportions of salary imo

I don't think we are going to see high inflation either.
The 10%+ IR is wishfull thinking. I am more of a deflation view myself.

Dan:_4

Why do people assume that house prices will crash with higher interest rates?

Harry_Powell

Dan: wrote: »

Why do people assume that house prices will crash with higher interest rates?

um, for a similar reason that they crashed when we had a credit crunch - they can't get a mortgage they can afford.

Why do people believe that you can have a property market with no First Time Buyers?

Harry_Powell

Really2 wrote: »

I don't think we are going to see high inflation either.
The 10%+ IR is wishfull thinking. I am more of a deflation view myself.

Fine by me because deflation will have the largest impact on people's largest asset - their homes. I win both ways!

Crash, crash, crash!

Really2

Harry_Powell wrote: »

Yes, and all this will be in a short enough time-frame to save the indebted? I doubt it very much.

There is always a lag before these sorts of corrections take place, meanwhile those who are barely affording to repay their mortgages now will be swept away long before your wage inflation comes to their assistance. TBH, a lot of people will just be glad to have a job and won't be rocking the boat by asking for pay increases - the last time we had high inflation we also had industries that were heavily unionised, who negotiated for wage increases. We don't have that anymore.

You lost me so high inflation will happen over night?

I would actually look at poster like purch or pobby (I think) they actually went through inflation i thought it was not "different this time".

i fail to see inflation grabbing hold without anyone noticing or reacting.

So where will all this money go companies start turning-over 10% more and making 10% more profit but the workers keep getting laid off and not getting wage increases.


Sorry you seems to be wanting without actually looking at what happens.

Can you show show a time when inflation went nuts after a recession without a boom and earnings to follow?

chucky

Harry_Powell wrote: »

When we see interest rates in the region of 10%, how many over-leveraged BTL and OO's will start to go under, especially if they have lost their jobs or had their overtime cut or their wages or working hours reduced?

A lot of people are killed and injured by hurricanes because they leave the safety of their shelters when they're in the eye of the hurricane, thinking the storm is all over, and are then caught by the trailing storm. Don't get caught out yourself. OO and BTLers, make the most of the low rates by salting away as much money as you can into savings accounts or directly onto your mortgages. FTBers, keep hunkered down in your storm shelters, wave 2 of this financial storm is coming! Do not buy just yet!

do you think that renters won't be made unemployed or have their hours cut?