House Price Crash Website

movieman

I'm missing something, houses were at constant levels until 6 years ago? And the economy was a constant healthy bundle of joy for everyone all the time?

For the last fifty years, the average house has typically been around 3-4x the average income. Today the average house is about 8x the average income, so by historical standards houses today are twice their normal price.

The only reason for that is that we've had historically low interest rates for the best part of a decade, and now interest rates are rising back towards historically normal levels for the last fifty years. If interest rates return to 8-10%, then house prices will crash, probably to below historically normal levels.

The world has been absolutely flooded with cheap money for the last few years: like it or not, that flood is now coming to an end. If the bank won't lend Joe Sixpack 200k to buy a two-bed terrace in Chav-town, then it ain't going to sell at that price.

The alternative is for an entire generation to be unable to buy a house _at all_ unless their parents give them tens of thousands of pounds and they enslave themselves to the bank for decades. In a democracy, that's... unlikely... to say the least.

Mr_Proctalgia

I think a degree of perspective needs to be given to the whole housing market, and, it needs to have individual personal opinions taken out of it as far as is possible. I sat through the last crash because I didn't HAVE to sell and as a result I am now seeing even larger gains on my house. Please remember that the last crash was caused by 2 problems firstly interest rates went through the roof and secondly a lot of jobs went down the pan. This resulted in a lot of distress sales and people, being ever opportunistic, took advantage of others distress.
The situation nowadays looks different to me, jobs are more secure than last time, pay is better and rates are lower. Of course you can say "look at job losses here there and everywhere". There have always been some job losses occuring or "interest rates are rising" That has ALWAYS been a valid quote, but most of us muddle through don,t we?

The plain and simple truth is in general and for the vast majority of people if they had bought before today they would be sitting on some kind of potential gain - overall house prices are still rising, people are selling because they WANT to - not have to - So the market is operating on the normal rules of supply and demand. If the economy went all pair shaped the voluntary sales would dry up somewhat and prices would stabilise due to increased shortages of houses on the market.

IMHO we are looking at a new housing paradigm that may be poorly understood, if you cannot achieve the price you want then wait to sell, if you want to pay as little as possible - buy now. If you look at the big picture - Houses are still going up in price, and, if you look at a long term graph - they always have done so, ups and downs yes, but the trend has always been upwards. Houses defy common sense, they aren't like cars,they don't generally depreciate. ........and the sooner the nay sayers and doom mongers realise that the happier they will be.

I realise that there will always be niche and one offs, areas of the country that are failing for various reasons, micro markets etc. But generally places are selling and selling fairly quickly too....... So there is a boat about to leave, I think we should all be on it, there is a lot of money to lose!!!

Conrad

HPC view the masses as fairly ignorant.

What really gets them is the fact the masses accept the general consensus that 'prices always go up' and are the 'best' investment.

Firstly this is not the case, they went down sharply in the UK between 1989 - 1994/5.

Secondly the stock market has always produced better returns than housing over time, yet people seem ignorant of this. All the time people say "I dont trust shares" etc. This is based on the fact shares went down from 2001 - 2003.

Thirdly people have this sense of indistructability. They fail to understand prices went down in Japan for 15 years - NO ONE THERE THOUGHT THIS COULD HAPPEN.

Similarly in Germany prices have fallen for a decade.

In Argentina 2002 a massive crash took place, people lost everything.

In Iceland today rates are 12.5% - no one thought this could happen.

Im not a natural pessimist, but I do take the trouble to open my eyes.

Ive made money from UK B2L but enough is enough. Ive sold now and am investing in markets that resemble ours in 1994 rather than just being complacent and hoping good old UK property will just boom forever.

People constantly say to me "Im buying a second property, it will be my pension". The point is they do this with no real homework or grasp of long term investment comparisons, they just know "house prices always go up". They dont take account of all the costs which makes todays investment yield far worse than just sticking the money in the Bank

Its like mass brainwashing.

Thats why the HPCers call others muppets.

movieman

Inflation is a fact of our chosen economic system.

But the government claim that inflation has only been 2% for the last few years: even while house prices have doubled or more.

In the past, a doubling of house prices didn't really matter much if wages also doubled. But for the last few years wages have been increasing by 2-3% a year while house prices have increased by 20% a year, or more. That vast difference between income and borrowing is simply unsustainable.

Please remember that the last crash was caused by 2 problems firstly interest rates went through the roof and secondly a lot of jobs went down the pan.

And today:

Interest rates are going up all over the world.
Unemployment is going up in the UK.

I doubt all those laid-off Rover/Vauxhall/Peugeot workers are going to be buying houses any time soon, or the unskilled workers who've been laid off to be replaced by immigrants on lower wages.

IMHO we are looking at a new housing paradigm

And five years ago we were looking at a 'new paradigm' in the stock market as wesellcrap.com IPO-ed for fifty billion dollars. Not long after the market crashed and still hasn't recovered.

Can you explain how an entire generation can remain priced out of the housing market for the entire lives, in a democracy where they can vote in a government that will reduce house prices?

Mr_Proctalgia

But the truth is that houses ARE selling, there is a market, overall prices are still rising. I cannot believe that everyone is a muppet so something is going off that is being missed. A few unfortunate people are to lose their jobs over the next year or so (no news there then) but in the grand scale of things the numbers won't even register. Oh apparently manufacturing confidence is rising too and more firms are expecting to hire than fire.

Woby_Tide

Conrad wrote:

HPC view the masses as fairly ignorant.

What really gets them is the fact the masses accept the general consensus that 'prices always go up' and are the 'best' investment.

Firstly this is not the case, they went down sharply in the UK between 1989 - 1994/5.

But that's the point, if you start breaking it down to view it as a short term investment in terms of 5 or 6 years yes you're going to get huge disparity with massive gains and massive losses. Be realistic and view it in terms of (and quoting someone else) 'average priced houses' over an 'average mortgage length' and what are the long term historical trends? Down, static, or up?

Likewise comparing the economy of today with 10 years/20 years/30 years/40 years ago and using them as benchmarks for each other is also risky. The economy is constantly evolving and experiencing wildly differing circumstances every few years. Jobs/spending power/attitudes to cash/disposable incomes/housing market are all changing constantly, nothing is normal or average anymore. i.e. relative costs of holidays are much lower now, relative price of football tickets are much higher.

Mr_Proctalgia

A lot of younger people will not know how you bought house back in 70's - Firstly you had to save with the bank you wished to borrow from (10% at least and remember that a good wage was £15pw), then you had your finances gone through with a fine toothed comb and lastly you had to be very nice and polite to them. The bank/building society had the final say as to whether you got your own roof or not and it all took several years to achieve.

Part of the "I want it now" brigade are not prepared to go through the pain of paying for something, they will extend and remortgage but not do the right thing which is to go without something in order to get something they really want (I had to pay my mortgage at 15% for almost 2 years - that is pain, believe me) If you cannot afford to buy then rent or get a second job (like I had to) Remember that not all houses cost a fortune and it is not compulsory to live in the SE or London.
The whole way people live nowadays has changed, cars are seen as a right (I had a bike and 2 or 3 cars to a street was normal) foreigh holidays are seen as a necessity, eating out is fairly normal. As a nation we have much greater calls on our money now, just add up all the costs you have - I'll bet its several thousand a year. If you really want a house you'll find the means.

Wickedkitten

Jim_B wrote:

I don't think this holds water; if someone decided to sell their house three years ago and not buy another, they'd be smart enough to invest the money, and a number of investments have outstripped house price rises since then.

The vibe I get from them is not that they're greedy, but quite the opposite; they just want houses to be reasonably priced and seen as somewhere to live, rather than a vehicle for making money you haven't worked for. My concern is for the next generation; I really don't like the idea that if you haven't bought yet you never will, as it leads to the obvious conclusion that as time goes on more and more of the population will be paying rent to landlords who've done nothing to deserve the cash other than be in the right place at the right time. Gosh, you'd almost think I had some socialist leanings. Where's that Daily Mail gone; that'll fix me up!

That's why I bolded the some.

Wickedkitten

Mr_Proctalgia wrote:

A lot of younger people will not know how you bought house back in 70's - Firstly you had to save with the bank you wished to borrow from (10% at least and remember that a good wage was £15pw), then you had your finances gone through with a fine toothed comb and lastly you had to be very nice and polite to them. The bank/building society had the final say as to whether you got your own roof or not and it all took several years to achieve.

I was talking to my partners mum about this years ago and she said that their first flat after they had graduated from uni in the mid seventies was £2000 :doh:

I bet if there was a survey between people that are over the age of 50, and a survey between people under the age of 35, a lot of the former group wouldn't be saying their first house was a 3 bed semi which I also think is big part of the whole housing problem.

Lantik

That 'Eric' guy on the housecrash forum is a complete loon... makes for hilarious reading... don't think I've ever seen anyone so bitter and twisted about the housing market.... keep up the good work Eric