House prices cannot "recover", simple common sense!

michaels

I think there is a feedback effect we are missing - part of the banks losses and resulting loss of capital was predicated on the predicted repossession and price fall figures (ie more repossessions, sharp price falls). If these do not happen as predicted banks 'as if by magic' suddenly have more capital than anticipated and given the profitability of current property lending will be desperate to put that capital to work in the property market and all of a sudden we have a 'virtuous' circle of rising prices drives more bank capital drives more lending drives rising prices.

I know my local market is currently the exception but possibly it is showing where things may be going - prices fell about 20% to Feb this year but are now pretty much back to peak with a supply squeeze and buyers scrambling for what is available.

Pobby

Well from where I am sitting it`s a load of tripe. I bought in 1998, got a good deal at the time, at peak ( 2007 ) was valued at a bit under a 400% increase in price. How unbelievably stupid that was. What was that based on? Oh yes, forgot myself " it`s different this time " and " house prices can only go.........." and all that stuff. All of this, imho , has lead to a lot of pain and grief which we can all do without.

Oh how I laughed 2 years ago when a developer was trying to sell one room " apartments " for £169,000 in a part of town that was, frankly, down right dangerous.

Anyway it`s a bit of fun reading what the bulls on here have to say about the market.

I also want to point out that I do feel for those in negative equity and anyone without a job right now. My little business is not doing so well, pension funds hit and nowt coming off my savings worth thinking about.

The last 10 years has been a dream that clearly to anyone with a bit of grey matter, would turn into a nightmare.

A special thanks to no more boom and ( Tory ) bust and I won`t let the housing market get out of control.

Thrugelmir

michaels wrote: »

I think there is a feedback effect we are missing - part of the banks losses and resulting loss of capital was predicated on the predicted repossession and price fall figures (ie more repossessions, sharp price falls). If these do not happen as predicted banks 'as if by magic' suddenly have more capital than anticipated and given the profitability of current property lending will be desperate to put that capital to work in the property market and all of a sudden we have a 'virtuous' circle of rising prices drives more bank capital drives more lending drives rising prices.

Repossessions are head line numbers. Mortgage defaults where the borrowers have in essence handed back the keys to their property to clear their debts are not recorded. Whilst negative equity is a problem , the next tier of minimal equity after possibly clearing unsecured debt also comes into play.

There is no magic creation of capital. Capital is cash. Lloyds reported today a funding gap of £223 billion between loans and advances , and customer deposits. In essence this means that LLoyds has to go onto the wholesale money markets and borrow. Not at BOE base or LIBOR but at commercial rates. The only way to cut the deficit is to lend less.

chucky

boltonangel wrote: »

my first home in 2002 was bought for £36k, sold in 2004 for £69k and is now up for sale (with no alterations) for £90k.........so no, i don't think prices have dropped the way everyone is making out.

except for people on this board :rolleyes:

the funny thing is that the prices that houses are being sold now are the prices that will be used for other properties in that area.

just like when prices were going down people were lowering their prices... people will be putting property on at the new market price.

nearlynew

boltonangel wrote: »

my first home in 2002 was bought for £36k, sold in 2004 for £69k and is now up for sale (with no alterations) for £90k.........so no, i don't think prices have dropped the way everyone is making out.

It's terrible isn't it?

Seeing your money devaluing like that right before your eyes.

lemonjelly

Thrugelmir wrote: »

Repossessions are head line numbers. Mortgage defaults where the borrowers have in essence handed back the keys to their property to clear their debts are not recorded. Whilst negative equity is a problem , the next tier of minimal equity after possibly clearing unsecured debt also comes into play.

There is no magic creation of capital. Capital is cash. Lloyds reported today a funding gap of £223 billion between loans and advances , and customer deposits. In essence this means that LLoyds has to go onto the wholesale money markets and borrow. Not at BOE base or LIBOR but at commercial rates. The only way to cut the deficit is to lend less.

There appears to be a little hesitancy by lenders to repossess too. It costs them to do this, and if there are arrears/NE, lenders are aware that they may well incur a loss.

Some of the big lenders are repossessing properties, but are then choosing not to put them back on the market, yet. They're waiting for prices to increase. I suspect that they also don't want to flood the market. IIRC there are one or 2 lenders holding on to about 5000 properties in England alone. These properties are just sitting there.

My neighbour is over £10k in arrears, yet the lender has been dragging their heels over repossessing for over 8 months now. Actually, was £10k 3 months ago at last court hearing, & I know they've paid nothing since.

Interesting asides. I have a client who went through the bankruptcy option 18 months ago. OR is in control of his assets. He is an OO. To date, the OR still hasn't put the house up for sale.

Another one, a client's lender has repossessed the home in court, but isn't acting to take possession by evicting him. The client has even offered to return the keys, but no-one will accept them.

It's all wierd out there...

Max_Headroom_3

I do think there's a bit of a delayed reaction going on, with banks eager to try and hide the true scale of problems by not repossessing etc, perhaps fearful of the effect on the market of mass repossessions.

Yakubu22

mizzbiz wrote: »

I'm really curious about the 'snapping up bargains' viewpoint.

How can a house that sold for £25k in 1999, sold for £92k in 2007 and now worth £85k be a 'bargain'?

It would possibly stretch to be a bargain if it was around £30k, but not at more than treble it's price 10 years ago. I agree with PN that SH*t houses cost more now than very, very nice ones did not an awful long time ago.
My father earned £35k in 1999, he's certainly not earning £105k in 2009, so again I agree with Max - somethings got to give or laons are getting bigger and bigger. We only live so long so after they've doubled the mortgage term from 35 to 70 years, what other ways are there to lend people more money to ensure house prices go UPUPUP?

i completely agree. My parents bough their current home in 1996 for £100k, at the peak of the boom it was "worth" £260k+. Now since the fall, other similar properties have sold for £215-220k- so you could argue thier house is now worth £215-220k. I know for a fact my parents income has not increased 2.2x (let alone 2.5x) since 1996. So maybe for the next 5-10 years we will see a period of stagnantion and occasional minor drops. That will last long enough till we get out of this economic mess and Salaries have time to re-align themselves with House prices.

wolvoman

Yakubu22 wrote: »

i completely agree. My parents bough their current home in 1996 for £100k, at the peak of the boom it was "worth" £260k+. Now since the fall, other similar properties have sold for £215-220k- so you could argue thier house is now worth £215-220k. I know for a fact my parents income has not increased 2.2x (let alone 2.5x) since 1996. So maybe for the next 5-10 years we will see a period of stagnantion and occasional minor drops. That will last long enough till we get out of this economic mess and Salaries have time to re-align themselves with House prices.

You can't use 1996 as a good comparison - prices then were so unrealistically low. People earning the equivalent of minimum wage could buy luxury flats in 1996, that is just silly.

We will never see 1996 prices in real terms ever again.

nearlynew

wolvoman wrote: »

You can't use 1996 as a good comparison - prices then were so unrealistically low. People earning the equivalent of minimum wage could buy luxury flats in 1996, that is just silly.

I bet a lot current owners of empty, new-build flats would kill for that situation now.

Apart from the "having to lower the price" bit, of course.