House Price Crash 3

Chrysalis

the affordability argument is credible but not fully.

Including interest rates in the affordiability calculations makes it look cheaper but they done when interest rates are bottomed out and mortgages last decades, its hardly affordable if 5 years into the mortgage agreement the payments arent manageable.

Wouldnt be covered by salary increases as low inflation will see to that.

mrsS_2

hi Chrysalis-

I think I must have given wrong impression in my post- sorry

There is no way I think there is no boom or bust-bought first property in 1986 and sold in 1990 and again in 1996 and every single penny I had ever made on property market vanished into thin air!

what I was trying to correct was the idea that you get repossessed just because you have negative equity-you dont

if you can afford the repayments then just sit tight and it will eventually sort itself out

what causes all the problems are interest rate rises so people cant afford the mortgage AND people with negative equity (who can afford the mortgage) who panic sell- which is waht happened in the early 1990s.

i absolutely agree that if interest rates go up, house prices will fall.

roswell

Market orical, can you post that graph with a graph of personnal debt over the same period.

gallygirl

I'd also be interested to see the graph with personal debt overlain.

IMHO it's not the property prices per se that stop people buying - it's the amount of personal debt they have which means they can't afford the repayments. And a lot of this is lifestyle borrowing, not trying to survive. E.g. colleague moaning no way could he afford £900 mortgage payments so will stick to renting for £500. However, he pays £450 a month for a car loan (for a Merc!!!), £150 for leather sofas, £120 plasma tv etc. And then moans he can't get on property ladder . Also, given a choice between flying sleezyjet @ £25 or BA at @ £125 he'll happily fork out the extra for a 90 min flight. Go figure......

Too many people wanting too much NOW - what happened to saving for something THEN buying it . I still have kitchen table & chairs I got seller to leave in house 9 yrs ago. Will replace when I think it's worth parting with my hard earned cash - younger folks would buy now 'cos you're not really paying for it if it's over 2 years, it's not like you're forking out £600 all in 1 go' - no you muppets, it's costing you £800, not £600!!!!!

Sorry, rant over, will crawl back under shell......

greencat_2

ali007 wrote:

younger folks would buy now 'cos you're not really paying for it if it's over 2 years, it's not like you're forking out £600 all in 1 go' - no you muppets, it's costing you £800, not £600!!!!!

I'd rather you didn't tar all young peeps with same brush.

My new computer chair (a nice professional office one with more levers and buttons that I can count) was rescued from a skip last night and I carried it on the back of my bike the 8 miles home. Net cost - nowt.

Frankly I can see why some people blow their hard earned on junk, boozing and holidays - because they can't see themselves ever being in the position to borrow enough money on a sustainable basis to buy somewhere.

seraphina

I've been reading this thread with interest. I'd like to point out that just because people are still buying it doesn't mean that house prices are necessarily affordable - it just means that banks are lending people more to keep up with rising prices. And just because the banks will lend it to you, doesn't mean it's affordable - a quick look on the DFW board will attest to that.

BobProperty

Couple of points mainly to Market Oracle. I have a lot of respect for chartists but that graph of your is based on your weightings of a number of factors. I suspect it could look a lot different if you changed the weightings.
If you do change/add to it like several people have asked, please add the data from say 1969/1970 onwards. If you did that, I suspect that house prices were difficult to afford in say 1972, but buying then would have been one of the best moves of the 20th century.
House prices are still affordable because the money is in the system and lenders are lending much higher earnings multiples than ever before. This can not continue, (see my 9.5 x earnings mortgage comment elsewhere).
House prices depend on two things, affordability and sentiment. At present both are at a high. When they turn, the market will turn, it's not called a cycle for nothing.

Market_Oracle

Despite personal debt etc... There are too many variables supporting house prices, the chart showed a few, but others are -

Money supply growing at 13% - The Goverment is printing money ! Hence inflation is on the rise.

Influx of immigration from Eastern Europe with associated demand for housing

Strong Economy - You may beg to differ bu the economy is STILL growing, and would require a recession to impact on housing.

China Factor - Where we have had consumer goods deflation, okay this 'may' be coming to an end, and thus impact the consumer and hurt house buyers going forward.

On the other hand we have council tax rises, and energy costs that are and likely impact housing going forward.

But the KEY is INTEREST RATES AND a Growing Economy. Those two variables need to take a hit ! I.e. Interest rates above 6% And the economy slowing to below 1% or going into a recession. Thats what would hit house prices.

Given that the trend in interest rates is higher, the pressures on future house prices gains are increasing with each rate rise, but so far have not reached a level to crack sentiment or affordability.

roswell

Any chance of that chart then ?

Market_Oracle

roswell wrote:

Any chance of that chart then ?

Debt, Average Earnings growth, and Money Supply etc. it would soon fill up with overlays

If you want a chart that suggests rate rises are going to go much higher than most expect, then i can give you this one



http://www.marketoracle.co.uk/Article88.html