House price reality

[Deleted User]

myhouse wrote: »

This makes no sense - or at least it makes sense in your case but not in the general market. Buyers don't need to directly force people to drop their price. The drops come from those who need to sell their house for any number of reasons. The price you have in mind is meaningless if those around you need to sell and the market only gives them SibleyDreamPrice minus x.
I have a price in mind for my RBS shares and can afford to wait for that price. Not ever likely to sell them at my dream price though.

I think one of the issues is that in the current climate people can't afford to buy a new house until they've sold the old one. When the old house is sold the family is homeless and they become desparate to buy.

While there are as many people desparate to buy as there are desparate to sell you aren't going to get widescale price drops. What I'm noticing is that houses that have something special about them are going for top prices (because the few people in a position to buy are competing for them) whereas houses that are ten a penny are dropping in value - but not by much. Because when all the best houses are snapped up you're still left with people desperate to find a home.

At the end of the day there are more people than there are houses. And house building has stopped which means the housing shortage is growing. That's in the seller's favor and will help keep prices up even when it looks as if prices should drop.

Not sure what happens in the long run. As time goes by there will be more and more people that find they really NEED to sell. But by the same token there will be more and more people getting heart sick of living with relatives or in rented accommodation and becoming more and more desperate to buy.

treliac

Deleted_User wrote: »

Not sure what happens in the long run. As time goes by there will be more and more people that find they really NEED to sell. But by the same token there will be more and more people getting heart sick of living with relatives or in rented accommodation and becoming more and more desperate to buy.

All very well in a thriving economy. However..... in today and tomorrow's this isn't going to be the case.

Those desperate to buy will need to be in a strong enough financial position to buy or they won't be buying.... and that's a huge ask of rather a lot of people nowadays, especially the young FTB who would be needed to kickstart the market.

Those desperate to sell will, in the main, have only one option.... to drop their price sufficiently to attract the few buyers out there.

The whole process will have an inevitable knock on effect until the market corrects to a point of sustainability.

[Deleted User]

treliac wrote: »

All very well in a thriving economy. However..... in today and tomorrow's this isn't going to be the case.

Those desperate to buy will need to be in a strong enough financial position to buy or they won't be buying.... and that's a huge ask of rather a lot of people nowadays, especially the young FTB who would be needed to kickstart the market.

Those desperate to sell will, in the main, have only one option.... to drop their price sufficiently to attract the few buyers out there.

The whole process will have an inevitable knock on effect until the market corrects to a point of sustainability.

People have been saying that for a couple of years now yet nothing has really changed in the housing market. We still have a situation where desirable properties are increasing in value and the price of average properties are staying fairly stable. Certainly no big drops in house prices.

It might well play out the way you say. But I see alternatives. If for example there are more desperate buyers than desperate sellers (likely when you consider the escalating housing shortage) then buyers will have to consider other options.

Lowering their sights for example. I'm sure there are lots of first time buyers out there looking at properties at 100k or even 200k. Yet there are lots of properties on the market for substantially less. They can afford to buy them and they will eventually buy them when they realise they can't afford anything else. Actually, this might even be the market correction that's needed. It used to be the case that first time buyers settled for very cheap properties and slowly worked their way up the property ladder but nowadays many first time buyers expect to walk straight into a nice detached house in a good area.

We have young friends that currently live in a council flat. It's a really rough area and they have to put up with fights in the street, beer cans thrown into their garden and abuse from neighbours. We were chatting the other day and they told me that they were desperate to get away from this place but needed to save a deposit of about £25k and that was proving difficult. Especially now that he was having trouble finding regular work. They'd figured that their first house would cost them about £120k. Yet in our area there's lots of very cheap property available. In the little village where I live there's an ex-council end terraced three bedroom house for sale for £70k. It's a nice street with miles of open country front and back. Nearly all the houses in the street are privately owned - nice neigbours. The house is in walk-in condition. But they weren't interested. They want to aim for the house they're happy to live in for the rest of their lives. They haven't yet accepted that they can't afford it and need to lower their sights.

treliac

Deleted_User wrote: »

Yet in our area there's lots of very cheap property available. In the little village where I live there's an ex-council end terraced three bedroom house for sale for £70k. It's a nice street with miles of open country front and back.

What's the job situation round there?

whatyadoinsucka

The council of mortgage lenders complain during the good and bad times, it is mortgage lenders who have wrecked the markets by allowing crazy borrowings to salary and 100%+ mortgages

As far as i can see if you are a FTB you are in a brilliant position, no chain with gives you the opportunity to ask for a discount of face value, if you have the 10% of what you are prepared to pay and you got to a strong bank (ie hsbc) you will get a mortgage.

The cml only complain because the banks that caused this recession namely rbs, hbos, northern rock et al
will not lend !!

myhouse_2

Deleted_User wrote: »

At the end of the day there are more people than there are houses. And house building has stopped which means the housing shortage is growing. That's in the seller's favor and will help keep prices up even when it looks as if prices should drop.

Not sure what happens in the long run. As time goes by there will be more and more people that find they really NEED to sell. But by the same token there will be more and more people getting heart sick of living with relatives or in rented accommodation and becoming more and more desperate to buy.

I'm going to disagree here...I have doubts about the supposed housing shortage - is there really such a shortage compared to e.g. 1999 when the market was more normal. In particular I don't think housing shortage was the reason for insane price increases over the last decade - the cause was excessive money lending.
On your second point, it's true that there will be owners who NEED to sell, and buyers who really want to buy. But the simple fact is that the buyers will not be able to raise money to buy as mortgage lending will not return to levels which sustained 2007 prices. It must therefore be the sellers who drop their prices. Most sellers will be able to drop their price as they made huge gains during the bubble. Those who are in negative equity and NEED to move will find themselves bankrupt or in grave financial trouble.
It will happen this way as there is no alternative - the money is no longer available to continue as we were.

[Deleted User]

treliac wrote: »

What's the job situation round there?

It's not bad. Obviously not as good as the city center but then we're only half an hour from the city center. And this house is less than five minutes from where our friends want to buy.

[Deleted User]

Sorry to quote and respond to all your points but it's the easiest way to answer!

myhouse wrote: »

I'm going to disagree here...I have doubts about the supposed housing shortage - is there really such a shortage compared to e.g. 1999 when the market was more normal.

One things for certain - around where I live new houses were being built left, right and center between 1999 and 2007. Then nothing for the past three years or so. So, if hoards of new houses were snapped up like hotcakes between 1999 and 2007 and old houses weren't sitting empty there was a need for lots of new houses then. It would be kind of strange if suddenly we can go three years without building any houses and not have shortage now.

In particular I don't think housing shortage was the reason for insane price increases over the last decade - the cause was excessive money lending.

Yes - it obviously has to play a big part. Yet inflation has remained pretty low in recent years. Don't you think if availability of money alone pushed prices up then wouldn't cars, holidays, groceries, clothes etc have shot up in price too?

Prices will go up when a) a resource is scarce, and b) those bidding for the limited resource have lots of money at their disposal.

On your second point, it's true that there will be owners who NEED to sell, and buyers who really want to buy. But the simple fact is that the buyers will not be able to raise money to buy as mortgage lending will not return to levels which sustained 2007 prices.

It must therefore be the sellers who drop their prices. Most sellers will be able to drop their price as they made huge gains during the bubble. Those who are in negative equity and NEED to move will find themselves bankrupt or in grave financial trouble.
It will happen this way as there is no alternative - the money is no longer available to continue as we were.

Is it really the case that money isn't available? My observation is that people with a deposit or those moving up the housing ladder are having no problem getting mortgages. They are willing and able to pay asking prices. Because of low interest rates mortgages are more affordable than they've been for a long while.

It seems to me that the real problem is that it's no longer possible to get a mortgage if you don't have a sizeable deposit.

I'm in my 40's. In 'my day' we expected or first time home to be very modest. Often a grotty flat with an alcove in the living room for a bed. Of course, houses were cheaper back then, but we needed a decent deposit.

In recent years first time buyers have been able to buy nice family homes with next to no deposit.

So (yes, there is a point), almost overnight first time buyers have gone from e position where they expect a nice house without having to save for it to perhaps having to get a not-so-nice house and save for years to get it.

They've now had two years to lower their sights and save a deposit. In that time house prices have stayed fairly level. I would have thought that we'll gradually start to see more and more first time buyers in a position to buy. And when they do that unlocks the chains and allows things to get moving again.

Of course, anything is possible!

THE_GHOULISH_CODPIECE

Popped in for my weekly chat and ended up having a very interesting discussion with my friendly local EA today. Apparently, and this is from the horses mouth so to speak, he has seen a large increase in the initial enquries from cash rich FTBs and also a substantial rise in the instructions from venders to raise the rents. This is all feeding into the pipeline for January. He repeated his warning to me that although its a great time for young couples to buy their dream homes this window of opportunity is fast closing. Publicly spirited I told him I'd pass on the advice to others.

Kohoutek

THE_GHOULISH_CODPIECE wrote: »

Publicly spirited I told him I'd pass on the advice to others.

You forgot to include where your area is...assuming that conversation happened in real life, not just in your head.