House Price Crash 3

PoorDave

mrsS wrote:

but negative equity only crystalizes when you sell the house.

As long as you can afford the mortgage repayments the fact that the house now may be worth less than you paid for it only affects you if you sell. If you stay put for 3 years and it goes back to what it cost how does this make you lose your home?

being unable to afford the repayments on your mortgage (and being repossessed) is a result of rising interest rates-not falling house prices.

Quite right. Negative equity is only a problem if you have to sell.

lypsey

You say "Lypsey, are you waiting to be a FTBer by chance? "

No I am not , I am a STR'er . I am luck enough to have enough money in the bank to buy tomorrow with a relatively small mortgage.
Lets face it :-
Interest rates are on there way up (forecast 6%) , unemployment is going up , bankruptcy's are on the way up , the BTL market is saturated , FTB paying record amounts , but most importantly the ratio of salary to mortgage is now a record multiple of 6.8 times. Traditionally this is near 3.5 times.

If my house I owned for three years (before I STR) went up over 100% I am sure as the sky is blue that the market can come down 50% over the next 5 years

Warren Buffet always said when he traded shares " I can never buy at the bottom and sell at the top but if I can get close to that then I always win" .That may not be his exact wording but you get the gist

meanmachine_2

lush_walrus wrote:

Unfortunately, out there in the EAs (at least in London, Essex, Herts and Berks) all I can see still is a shortage of property and a rise in prices, same as has been for the past 5 plus years.

But do you not think this "shortage" is because moving has become so expensive? Stamp duty, mortgage fees and of course EA fees.

Estate agents have helped drive prices so high that supply is being choked?

Or is this not your experience?

Jim_B_3

lush_walrus wrote:

Unfortunately, out there in the EAs (at least in London, Essex, Herts and Berks) all I can see still is a shortage of property and a rise in prices, same as has been for the past 5 plus years.

Come to Hampshire. The EA windows here are full of places for sale.

leftieM

Is negative equity really a 'problem' if you sell? The house you buy will also have dropped in value. You'll have a loan greater than the value of your home whether you stay or move. In their own interests surely the banks had some mechanism in place to allow transfer of negative equity within a certain limit to try and prevent total stagnation? Or am I talking through my derriere??
I'm a bit sceptical of the whole 'negative equity' arguments. You pay x a month for your house and you pay that whether the value of your house goes up or down. The big scary is interest rate rises.
If you've consolidated debts based on the equity in your house then that's another story.

abaxas

leftieM wrote:

Is negative equity really a 'problem' if you sell? The house you buy will also have dropped in value. You'll have a loan greater than the value of your home whether you stay or move. In their own interests surely the banks had some mechanism in place to allow transfer of negative equity within a certain limit to try and prevent total stagnation? Or am I talking through my derriere??
I'm a bit sceptical of the whole 'negative equity' arguments. You pay x a month for your house and you pay that whether the value of your house goes up or down. The big scary is interest rate rises.
If you've consolidated debts based on the equity in your house then that's another story.

A peadophile has more chance of getting a job working with kids than a person with negative equity of getting another mortgage.

Harsh but true, banks want to make money. They dont like too much risk.

Not having any way out for them is a huge risk.

sm9ai

mrsS wrote:

but negative equity only crystalizes when you sell the house.

As long as you can afford the mortgage repayments the fact that the house now may be worth less than you paid for it only affects you if you sell. If you stay put for 3 years and it goes back to what it cost how does this make you lose your home?

being unable to afford the repayments on your mortgage (and being repossessed) is a result of rising interest rates-not falling house prices.

But if you have negative equity the banks will lend at an extremely crap rate. So your payments would go through the roof.

So negative equity most definatly affects all home owners.

lush_walrus

meanmachine wrote:

But do you not think this "shortage" is because moving has become so expensive? Stamp duty, mortgage fees and of course EA fees.

Estate agents have helped drive prices so high that supply is being choked?

Or is this not your experience?

Perhaps, to be honest MM I havent given that side of it much thought. Problem is that while people are still looking to buy and property is still scarce then prices will still rise.

There are definately not BTL people buying anymore, well perhaps a couple of them as margins are getting too low, but you only really have to look around the boards to see that there are still numbers of people moving, trying to move and FTBs.

Another thing I have noticed is that areas, such as Islington, which had sat completely dormant pricewise for the last 4 or 5 years are now rising again, so areas are shifting. Someone I work with has a flat in Islington, valued £480,000 5 years ago that every year is put on the rental market and up for sale, has until this year never had a bite from the sales side so ended up renting it year after year. This year, they did exactly the same and put it up for £480,000 and now there are 2 buyers slogging it out, outbidding each other on the same property that now has an even shorter lease (38yrs at the moment). Now, they have pushed each other up past the £500 stamp duty bench mark. So, I guess the effect of costs depends on how marginally you can afford to move one way or the other.

Personally, I think prices are ridiculous, but none of us on our own dictate the market, and personally I remain unconvinced that a great big crash is on its way. There are far too many people desperate to buy, and far too few properties available.

lush_walrus

Jim_B wrote:

Come to Hampshire. The EA windows here are full of places for sale.

Interesting, perhaps the cheaper home counties are coming up to match Hamps prices!!

leftieM

abaxas wrote:

A peadophile has more chance of getting a job working with kids than a person with negative equity of getting another mortgage.

Harsh but true, banks want to make money. They dont like too much risk.

Not having any way out for them is a huge risk.

They have that risk when you stay put too.