Is the housing market being protected??

ThyKingdomCome

this is something that I was talking to my DH about the other day...
Please excuse my ignorance on financial matters. I got a C in my GCSE maths!!!

bear with me... is there a reason why house prices haven't fallen more than they have. My area despite being heavily affected by the downturn jobs-wise. Honda anyone? has seen quite modest falls, with prices starting to rise again recently.

Is the government, or some other agency trying its best for real price falls not to happen??

Surely it would be better that your house price falls significantly and then we have a better basis for economic recovery. The market would be stimulated and people could afford to buy at a fair price.

Is there a reason why this could or should not happen?

Please could someone explain this to me. I don't seem to have an understanding as to what is going on

jojo1964

Population increase, we all need somewhere to live.

Really2

Every house that goes in to negative equity is a high risk for a loss for the bank.
(because if the people default the house is worth less than the mortgage)

So if there was a big fall say 40% all the banks would be stuffed again.(basically it is all balance sheet stuff and I wont bore you)

The thing that holds up the housing market is demand, and the price is reflected in the stock meeting that demand.

Now less houses are coming on the market than demand the price increases.

I don't think any one knows what a "fair price" is but for sure a big fall would be worse for the economy than the current situation. It would most probably bankrupt the country.

ThyKingdomCome

so basically the banks can't afford for prices to crash, as much as homeowners can't afford it to happen?

What about people who don't already own a home? What do they do?

the_ash_and_the_oak

rent one? .

ThyKingdomCome

also. How then will we ever see more responsible lending if assets are valued so high? My mortgage is 130kish. The banks have an interest in my house being valued at more than that. (150k original purchase price).

StevieJ

ThyKingdomCome wrote: »

so basically the banks can't afford for prices to crash, as much as homeowners can't afford it to happen?

What about people who don't already own a home? What do they do?

So you bought a house fairly recently (2006) and now you want t know why the market has not crashed big style, mmmmm

ThyKingdomCome

StevieJ wrote: »

So you bought a house fairly recently (2006) and now you want t know why the market has not crashed big style, mmmmm

yup. I want to make sense of what the last decade. I was 24 when we got this place. Originally from London so mortgage was always cheaper than rent.(even with travel) I just want to learn more about the bigger picture.

Until the CCrunch i had never really thought about finances beyond my own pocket.

chucky

ThyKingdomCome wrote: »

bear with me...

ok - i can see where you're coming from already

ThyKingdomCome wrote: »

this is something that I was talking to my DH about the other day...

what did he think?

ThyKingdomCome wrote: »

Surely it would be better that your house price falls significantly and then we have a better basis for economic recovery. The market would be stimulated and people could afford to buy at a fair price

build and measure the state of economy on the value of property :rolleyes:

ThyKingdomCome wrote: »

Please could someone explain this to me. I don't seem to have an understanding as to what is going on

don't worry, neither do half the monkeys that use this forum - all they need to know is how to use a keyboard and mouse :T

ThyKingdomCome

chucknorris wrote: »

Are you perhaps suggesting the motivation to write the original post does not fit the alleged circumstances?

I have no motivation to write any post other than trying to make sense of what situation we (the country) are in. I watch the news and I saw some programmes about the creditcrunch and was just engaging in pillow talk with the other half. We can't really get our heads around things

Mini_Bear

also many mps and people in authority have more than one property. many of these people view these as their pensions. they hav a vested interest in keeping prices high.
i personally think if prices continue to rise the average person will be priced out to the point where they simply cant buy at any level. banks are tightening credit ie no self certs etc. houses will have to return to a lower price at some point. or houses wont sell. we could be yrs off this "correction" however.
the only way to get round this is cash everythin up and live off/partly live off the interest (not great) but we are planning on doin this with the interest on savings and economies of a shorter commute significantly helpin to pay the rent. plus no nasty interest bein paid on a mortgage - just a few hundred in the landlords pocket.
my advise would always be save save save. if there is a correction u would then be in a better position than buyin at this high level.
people who go on about shortages of housing make me laugh. there are one million empty homes in the uk. there are laws that if a house is empty for more than 6 months the govt/council can reclaim it and force the owners to rent it out. this isnt stuck to because they want the illusion of a lack of houses to drive up prices. they also dont want the additional hassle of court cases etc.