House prices cannot "recover", simple common sense!

Max_Headroom_3

My feeling is that eventually we'll see a tipping point.

All the way up the mantra was "supply and demand" to try and justify why house prices could only go up, completely ignoring what underpins those prices, finance and what the man in the street actually earns and can afford.

Well now I think now it's going to be down to "demand and supply". And long-term, as long as supply at a certain price outstrips demand (which has to be underpinned by affordability) prices will eventually have to drop until they reach a level whereby affordable demand meets supply.

And I don't think for one second we're there yet, whatever anomalies caused by an artificially low number of transactions throw up.

smk77

fc123 wrote: »

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.

I worked in Dixons back in 1996 and was paid about £3.60 p hr so you remembered quite well! Fortunately, that was post school pre uni so just pocket money!

Surely inflation will help bring back prices back in real terms. Static house prices and increased wages? I don't actually believe that we will see prices back to 1996 levels in real terms or anything close. We are living in a different world now. There are various factors putting pressure on housing availability.

-More people with a desire to be on the housing market.
-Young people who don't want to miss out on houses getting back to 2007 levels in the next few years - even though it'll not happen.
-BTL investors wanting to snap up bargains
-Higher population
-More divorces now that in 1996 resulting in a family being split between 2 properties.

I think that the above factors (especially the top 3 listed) MAY drive the market up. The banks will start lending and taking risks as they need to be competitive and we'll all forget about this blip...People got greedy and they'll remain that way.

Max_Headroom_3

smk77 wrote: »

-More people with a desire to be on the housing market.
-Young people who don't want to miss out on houses getting back to 2007 levels in the next few years - even though it'll not happen.
-BTL investors wanting to snap up bargains
-Higher population
-More divorces now that in 1996 resulting in a family being split between 2 properties.

I think that the above factors (especially the top 3 listed) MAY drive the market up. The banks will start lending and taking risks as they need to be competitive and we'll all forget about this blip...People got greedy and they'll remain that way.

I don't see it. The big risk takers that were driving the market were banks like Northern Rock and Bradford & Bingley for BTL mortgages.

And I think we can be pretty confident that those business models simply do not work. Even if banks were daft enough to try and even if they had the funds to try it, it couldn't last, we know that for a fact.

And I think it goes higher than those banks too. They were able to fund in great part by selling off badly packaged debt, hiding all the toxic stuff within AAA rated investments. An awful lot of people got their fingers badly burned, think they'll be as willing to lend again?

Thrugelmir

smk77 wrote: »

-More people with a desire to be on the housing market.
-Young people who don't want to miss out on houses getting back to 2007 levels in the next few years - even though it'll not happen.
-BTL investors wanting to snap up bargains
-Higher population
-More divorces now that in 1996 resulting in a family being split between 2 properties.

I think that the above factors (especially the top 3 listed) MAY drive the market up. The banks will start lending and taking risks as they need to be competitive and we'll all forget about this blip...People got greedy and they'll remain that way.

Yes people will always wish to buy.

Can they afford to buy even though they might want to?

Who are these capital rich BTL investors? They've maxed out their existing property equity on interest only morgages to build their empires. For them there's no more capital.

People can rent. Divorce makes if difficult to buy as seperate individuals. The children are the first concern of the court remember.

As we've discussed endlessly the banks that lent are no more. Forget the media image that all banks lent sub prime, they didnt. As they've limited capital they have no need to take risks either. Profit is margin to banks not quantity of money.

Yakubu22

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.

What a load of balls. Why cant I use 1996? -thats when my parents bought their house.
Would you I rather chose another year like 1823?

If as you say "People earning the equivalent of minimum wage could buy luxury flats in 1996" then why didnt they? Perhaps back then housing was much more affordable and prices were more realistic. NUMPTY

chucky

Yakubu22 wrote: »

What a load of balls. Why cant I use 1996? -thats when my parents bought their house.
Would you I rather chose another year like 1823?

If as you say "People earning the equivalent of minimum wage could buy luxury flats in 1996" then why didnt they? Perhaps back then housing was much more affordable and prices were more realistic. NUMPTY

to be fair to wolvoman October 1996 was the first time in at least 40 years (or even history) where average mortgage rates had dropped below 7% combining this with lowish house prices it was one of the best time to buy in generations when looking at the total cost of buying a house, they didn't go under 7% again until March 1999.

in Dec 2001 they dropped on average to 5.75% but with higher house prices it wasn't as attractive as it would have been in 1996.

Max_Headroom_3

chucky wrote: »

to be fair to wolvoman October 2006 was the first time in at least 40 years (or even history) where average mortgage rates had dropped below 7% combining this with lowish house prices it was one of the best time to buy in generations when looking at the total cost of buying a house, they didn't go under 7% again until March 1999.

in Dec 2001 they dropped on average to 5.75% but with higher house prices it wasn't as attractive as it would have been in 1996.

Do you mean 1996?

chucky

Max_Headroom wrote: »

Do you mean 1996?

yes - just corrected it

Thrugelmir

chucky wrote: »

to be fair to wolvoman October 2006 was the first time in at least 40 years (or even history) where average mortgage rates had dropped below 7% combining this with lowish house prices it was one of the best time to buy in generations when looking at the total cost of buying a house, they didn't go under 7% again until March 1999.

in Dec 2001 they dropped on average to 5.75% but with higher house prices it wasn't as attractive as it would have been in 1996.

Mr C. We seem to be going back in time a lot today. :T

Maybe its a good thing as it helps put things in context.

Back in 1996. The lenders had a virtual cartel on mortgage rates. Standard mortgage was base rate plus 2%. No thrills no gimmicks no trackers. No securisation or wholesale funding. Most lending was done by the then building societies (banks).

So it was more a question of whether you met the conditions of a obtaining a mortgage, and could afford to buy.

From 1999 the whole dynamics of the lending market changed.

Yakubu22

chucky wrote: »

to be fair to wolvoman October 1996 was the first time in at least 40 years (or even history) where average mortgage rates had dropped below 7% combining this with lowish house prices it was one of the best time to buy in generations when looking at the total cost of buying a house, they didn't go under 7% again until March 1999.

in Dec 2001 they dropped on average to 5.75% but with higher house prices it wasn't as attractive as it would have been in 1996.

Yes point taken. But even Houses in my area that cost £100-£110k in 2000-02 have since sold for £190+ this year. Are we suggesting the persons that bought in 2009 is on a salary 40-50% greater than the buyer 8 years ago. I doubt it. I think they probably just borrowed more.