House prices cannot "recover", simple common sense!

tomstickland

It seems reasonable simple to me: the boom was a result of easy borrowing. That's changed now, prices will come down. We're still in the denial stage - people are just sitting around waiting for someone to pay full price for the house that they are trying to sell.

the_ash_and_the_oak

tomstickland wrote: »

It seems reasonable simple to me: the boom was a result of easy borrowing. That's changed now, prices will come down. We're still in the denial stage - people are just sitting around waiting for someone to pay full price for the house that they are trying to sell.

a price only achievable by a minority of buyers, hence reduced transaction levels

nembot

Fantastic thread Max, finally someone with a realistic view of what's really happening.

Makes a refreshing change from tabloid headline posting sheep.

edit decent blog too!

fc123

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.

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

Sorry, but that's not true. I lived in a cheapish London suburb and no-one on low wage could buy any type of flat.

Also,there was no min wage back then so no comparables.
Yes, there were low wages but, also, no tax credits and other add ons.

Interest rates were a lot higher so affected monthly payments plus, if one went to Building Society, mainstream leneder type, one took a repayment mortgage anyway...so monthly payments were higher.

I am trying to remember what we paid basic retail staff (P/T) back then and I am sure it was about £3.50 phr. Now it's £6 p hr.

96 prices will come back in real terms but it may take a few years. Got to get a period of inflation out the way first.

lemonjelly

tomstickland wrote: »

It seems reasonable simple to me: the boom was a result of easy borrowing. That's changed now, prices will come down. We're still in the denial stage - people are just sitting around waiting for someone to pay full price for the house that they are trying to sell.

1 the boom was a result of easy borrowing - Agree
2 That's changed now - Agree
3 prices will come down - Not sure of the evidence for this. Theoretically, perhaps. But the evidence isn't there to back this up. Prices may fall in "real" terms, but where is the crashing that is supposed to happen. Other factors seem to be preventing price falls.

Max_Headroom_3

lemonjelly wrote: »

1 the boom was a result of easy borrowing - Agree
2 That's changed now - Agree
3 prices will come down - Not sure of the evidence for this. Theoretically, perhaps. But the evidence isn't there to back this up. Prices may fall in "real" terms, but where is the crashing that is supposed to happen. Other factors seem to be preventing price falls.

So where's the money going to come from?

lemonjelly

Max_Headroom wrote: »

So where's the money going to come from?

No idea, and I'm not sure it is there.

To be honest, I'm as suprised as you are by the current housing market. I anticipated prices would fall further, and kind of think that they still have further to go. Mainly due to reasons in line with your original post.

I think there are further areas of bad news to come out, and I expect unemployment to continue to rise for at least a year.

Despite this, there appears to be some life in the housing market, and it has started to creep upwards. I'm not sure why, but that appears to be happening.

So, despite the fact that I'd expect prices to be falling, they're defying my expectations. Question is, why.

(NB I don't think the answer will be as simplified as the post I quoted).

Max_Headroom_3

My suspicion is that (in simple terms and just using example percentages to make the point) 10% are convinced it's a good time to buy now (or simply need to) and are buying and having to pay what owners will accept.

90% don't think so and aren't buying so their "valuation" of property goes unrecorded.

Now that's all fine until the amount of people that absolutely have to sell (rather than being prepared to sit it out) exceed by some margin the 10% out there that are buying.

It's when that happens that we'll see things change more significantly in my opinion.

Thrugelmir

Max_Headroom wrote: »

My suspicion is that (in simple terms and just using example percentages to make the point) 10% are convinced it's a good time to buy now (or simply need to) and are buying and having to pay what owners will accept.

90% don't think so and aren't buying so their "valuation" of property goes unrecorded.

Now that's all fine until the amount of people that absolutely have to sell (rather than being prepared to sit it out) exceed by some margin the 10% out there that are buying.

It's when that happens that we'll see things change more significantly in my opinion.

So possibly prices could stagnate. As mimimal house purchases continue to absorb whatever property is the market.

On current transactions levels its been calculated that people would only move once every 30 years!

Sums up where we are currently.

Forced selling helps no one. In a way we've become a nation of renters. As for some they'll never repay their mortgages. Merely paying rent. So they'll be no wealth to pass onto the next generation.

Our property will be owned by a guy in China........

lemonjelly

The idea that rather than any form of crashing, we'll see a prolonged period of stagnation is one I've mulled a while, and suggested before.

I think it is entirely possible we could see such stagnation apply not just to house prices, but also things such as interest rates etc.