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Debate House Prices
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The big price falls are over.
Comments
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The crash in the example isn't after the trade up. It's a different case.Can someone please give me a breakdown of how this Independent journalist comes to the £25K equity in his example... after a tradeup, then a 25% crash.
I can't get my head around how he comes to that figure (my maths has it at more), although agree with the low-rates bit.
http://www.independent.co.uk/news/business/comment/jeremy-warner/jeremy-warner-this-housing-correction-has-a-way-to-go-yet-1662347.html
a) £50K deposit + £50K mortgage financing to buy £100K house.
b) House prices double... house now worth £200K.. mortgage around same lets say at £50K... = £150K or equity (if selling up) with a £50K mortgage still to clear at competition.
c) Buy a £300K house. Use £150K of equity carried-over from house sale + £150K mortgage.
d) House prices fall 25%.. = £300K house lost £75K of value = £225K current market value. Outstanding mortgage of circa £150K. Equity £75K? Still pretty brutal.
Case 1 - HPI
Example start with £50k debt and £50 equity to buy £100k house
House prices double to £200k and you sell, paying off your £50k debt.
You now have £150k to spend, and can borrow £150k so you can buy a £300k house - a trade up from the £200k one you have just sold
Case 2 - HPC
Example start with £50k debt and £50 equity to buy £100k house
House prices fall by 25% to £75k and you sell, paying off your £50k debt.
You now have £25k to spend, and can borrow £25k so you can buy a £50k house - a downsizing from the £75k house you have just sold
HTHDo you know anyone who's bereaved? Point them to https://www.AtaLoss.org which does for bereavement support what MSE does for financial services, providing links to support organisations relevant to the circumstances of the loss & the local area. (Link permitted by forum team)
Tyre performance in the wet deteriorates rapidly below about 3mm tread - change yours when they get dangerous, not just when they are nearly illegal (1.6mm).
Oh, and wear your seatbelt. My kids are only alive because they were wearing theirs when somebody else was driving in wet weather with worn tyres.
0 -
The crash in the example isn't after the trade up. It's a different case.
Case 2 - HPC
Example start with £50k debt and £50 equity to buy £100k house
House prices fall by 25% to £75k and you sell, paying off your £50k debt.
You now have £25k to spend, and can borrow £25k so you can buy a £50k house - a downsizing from the £75k house you have just sold
HTH
I was just going to do that
'Just think for a moment what a prospect that is. A single market without barriers visible or invisible giving you direct and unhindered access to the purchasing power of over 300 million of the worlds wealthiest and most prosperous people' Margaret Thatcher0 -
Graham_Devon wrote: »Most families have kids and therefore do not earn 2 wages...if they do, a hell of a lot will be going on childcare.
No, your anecdote is not rocket science. It's just not realistic. Apply it to most families I know and work with, and you will find one parent either works part time, or not at all, as its simply not worth it. I only know one who has 2 kids and both work full time, but then again, their grandmother does all childcare for free.
Er... it's not realistic to assume that most starter homes are bought by people without children..?
Sorry Graham. You Just didn't think through your 'average wage vs. average starter home price' thing in your haste to talk up the non-affordability aspect... and you've been rumbled...0 -
Something else. MSE - money saving - cheap stuff, celebrates falling prices, consumer victories, etc. House prices rising is NOT good news! The majority of people are worse off if prices rise. Young people / new buyers have to risk borrowing more money - in an economy where debt is at dangerously high levels. Moving up the ladder costs more money.
I don't celebrate when my weekly food shop goes up in price - as it does every week. Nor should MSE celebrate, or pump - house price inflation as being good for the soul.0 -
Charlton_King wrote: »Er... it's not realistic to assume that most starter homes are bought by people without children..?
Sorry Graham. You Just didn't think through your 'average wage vs. average starter home price' thing in your haste to talk up the non-affordability aspect... and you've been rumbled...
Lordy. The phrase "cannot afford a starter home" does not mean they WANT to buy a starter home on their average wage, it's just that prices are so high that's the sort of stuff they still cannot afford.
If you want to call that "me being rumbled" go ahead. But it's you who simply can not see past the wording and see what it ACTUALLY means.0 -
Why would house prices go down now?
They are affordable.
Mortgage rates are still relatively low.
There are fewer forced sales than expected and hence less supply.
Prices have slightly risen of late so sentiment is positive.0 -
Charlton_King wrote: »Er... it's not realistic to assume that most starter homes are bought by people without children..?
Sorry Graham. You Just didn't think through your 'average wage vs. average starter home price' thing in your haste to talk up the non-affordability aspect... and you've been rumbled...
??? You think that makes the current situation affordable ???
You seem to be saying that houses are affordable if a couple with two full time jobs and no kids can afford a starter home that's too small to bring up a family in.
How does anyone get to have both a house and some kids in your affordable scenario? The ones who've bought the starter homes have borrowed the max they can on their salary and can't afford either to shell out masses for childcare or for one of them to work fewer hours to look after the ankle-biters. The FTB who've been priced out for years and have had kids while renting are still priced out.Do you know anyone who's bereaved? Point them to https://www.AtaLoss.org which does for bereavement support what MSE does for financial services, providing links to support organisations relevant to the circumstances of the loss & the local area. (Link permitted by forum team)
Tyre performance in the wet deteriorates rapidly below about 3mm tread - change yours when they get dangerous, not just when they are nearly illegal (1.6mm).
Oh, and wear your seatbelt. My kids are only alive because they were wearing theirs when somebody else was driving in wet weather with worn tyres.0 -
Something else. MSE - money saving - cheap stuff, celebrates falling prices, consumer victories, etc. House prices rising is NOT good news! The majority of people are worse off if prices rise. Young people / new buyers have to risk borrowing more money - in an economy where debt is at dangerously high levels. Moving up the ladder costs more money.
I don't celebrate when my weekly food shop goes up in price - as it does every week. Nor should MSE celebrate, or pump - house price inflation as being good for the soul.
HPI above a certain level I agree with you.0 -
??? You think that makes the current situation affordable ???
You seem to be saying that houses are affordable if a couple with two full time jobs and no kids can afford a starter home that's too small to bring up a family in.
How does anyone get to have both a house and some kids in your affordable scenario?
Historically the cost if the mortgage has fairly quicky become less onerous due to inflation wage/wage increases. This is obviously not the case at the moment, but could be relevant in the not to distant future. It depends if couples are prepared to wait before having a family, I think this has become more common in the last 20 or 30 years or so.'Just think for a moment what a prospect that is. A single market without barriers visible or invisible giving you direct and unhindered access to the purchasing power of over 300 million of the worlds wealthiest and most prosperous people' Margaret Thatcher0
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