January Nationwide MoM -0.1% YoY -1.1%

IveSeenTheLight

HAMISH_MCTAVISH wrote: »

AVerage wages have increased every year since 2007. And continue to do so today.

The thing is, with the tightening of credit, increasing deposit requirements, restrictions on supply of housing, increasing population etc, the likelyhood is that the demographics of those that can afford to buy is likely to be squeezed into the higher earning households, thus negating the comparison with average wages (increasing though they are)

Were likely to see a reduction in owner occupancy and an increase in the rental market.

joguest

HAMISH_MCTAVISH wrote: »

You want house prices to fall, don't you?

Where did I say I wanted prices to fall? I do have a small vested interest in lower prices, as I would be able to trade up to a larger house for less money, but it doesn't particularly bother me given that I'm sitting in a mortgage-free house at the moment.

Whereas the only way you'll get your crash is for an increase in forced selling driven by mass unemployment and/or bankruptcy, and the resulting reposessions and human misery as families get evicted.

That's just your opinion and one that isn't borne out by the recent declines in prices that have occurred without an attendant increase in unemployment or repossessions. It is perfectly possible for prices to fall much further without those factors, given that the majority of homeowners in the UK have relatively little or no mortgage debt. There's no reason why most homeowners shouldn't sell at significant percentages below the 2007 peak. A recent example of such a seller was someone in the street where I own a second house - they accepted 40% less than the peak selling price in November, which was still substantially more than they paid for the house a decade ago.

Your debt-servicing percentagaes of after tax income in 1990 and the present seem grossly exaggerrated as they do not seem to take into account the fact that houses are more expensive in real-terms than 1990 and that interest rates being offerred to FTBs aren't particularly close to base rates. You haven't mentioned the fact that the FTB will have to stump up a higher percentage deposit of a price that is higher relative to their income and also the fact that wage inflation is much lower than 1990, meaning the debts of existing mortgage holders and new FTBs are not being eroded at the same rate.

IveSeenTheLight

joguest wrote: »

A recent example of such a seller was someone in the street where I own a second house - they accepted 40% less than the peak selling price in November, which was still substantially more than they paid for the house a decade ago.

Property valuations are set by the margins.
Would you accept that your property is now also valued at 40% lower than the peak selling price?

joguest

IveSeenTheLight wrote: »

Property valuations are set by the margins.
Would you accept that your property is now also valued at 40% lower than the peak selling price?

I'd be completely deluded if I didn't accept it's worth 40% less than the 2007 peak.

IveSeenTheLight

joguest wrote: »

I'd be completely deluded if I didn't accept it's worth 40% less than the 2007 peak.

Out of interest, where is your second property? Northern Ireland?

How much do you consider that your main property is now valued as a percentage of peak?

joguest

IveSeenTheLight wrote: »

Out of interest, where is your second property? Northern Ireland?

Derbyshire

How much do you consider that your main property is now valued as a percentage of peak?

Similar houses are advertised at around 20% less than peak and they aren't shifting. So I'd say lower than 80% of peak.

HAMISH_MCTAVISH

joguest wrote: »

Where did I say I wanted prices to fall?

You're a regular on house price crash...... The clue is in the name.

I do have a small vested interest in lower prices,

Yes, we know.

That's just your opinion and one that isn't borne out by the recent declines in prices that have occurred without an attendant increase in unemployment

Really? Pretty sure unemployment has risen over the last 6 months.

It is perfectly possible for prices to fall much further without those factors,

It's never happened in UK house price history, it's not going to happen now.

the majority of homeowners in the UK have relatively little or no mortgage debt. There's no reason why most homeowners shouldn't sell at significant percentages below the 2007 peak.

9% are in negative equity now, another 17% would be in negative equity if prices fell significantly. That would remove a quarter of the housing stock from potential supply, and the remainder then would have no need to sell for less.

We already saw what happened when prices fell in 2008/9, supply reduced markedly, and prices soared again.

We're now already seeing supply falling markedly again, with only tiny price falls this time around.

Your debt-servicing percentagaes of after tax income in 1990 and the present seem grossly exaggerrated as they do not seem to take into account the fact that houses are more expensive in real-terms than 1990 and that interest rates being offerred to FTBs aren't particularly close to base rates.

They're not my percentages, they're Halifax's.

You haven't mentioned the fact that the FTB will have to stump up a higher percentage deposit of a price that is higher relative to their income

Oh I mention it all the time. Terrible thing for FTB's, locking an entire generation out of home ownership. But the fact remains it doesn't make all that much difference to the figures. The average deposit size in 2007 was around 13% from memory, and around 24% today.

The 68% of income in the early 90's was a MASSIVE burden compared to what people today pay, and changing the deposit size doesn't make much of a difference.

and also the fact that wage inflation is much lower than 1990, meaning the debts of existing mortgage holders and new FTBs are not being eroded at the same rate.

The wage inflation argument is an hpc myth. Wage inflation always lags general inflation, so you're always a year behind for new purchasers. I do agree that existing mortgage holders benefited from it, as they do today, and whilst wage inflation was greater then, the costs of essentials also were a far higher percentage of income, so the net position was far worse.

I bought in 1990, and mortgage costs back then were crippling, for everyone I knew. MUCH easier today.

wherediditallgothen

HAMISH_MCTAVISH wrote: »

Really? Show me all these people on a 0.5% mortgage....

You don't read too well do you? What happens when base rate goes up?

Percy1983

HAMISH_MCTAVISH wrote: »

Mortgage payments for FTB's now at just 29% of after tax income, versus 68% in 1990.

Gosh, it must be miserable paying half the amount our generation had to for housing.... And having all the benefits of mostly everything else being cheaper and better as well.

I wonder how they cope.....;)

Was the 1990 BOE IR around 13%, so yes as a FTB I will be looking at around 6% (way above base, but anyway) what was the average mortgage rate when IR's where 13%, even if the mortgage is matching the BOE rate it will still cost a lot more.

Also what incomes are you using, is it average household? average single wage or average joint wage.

I don't think we have an apples to apples comparison here.

joguest

Really? Pretty sure unemployment has risen over the last 6 months.

It's been fairly flat and I see you ignored the bit I said about repossessions which have fallen, although I suspect they will start to rise over the coming year given spending-cuts, tax-rises, changes to support for mortgage interest payments, etc.

It's never happened in UK house price history, it's not going to happen now.

As far as I'm aware house prices have never started rising sharply during a recession, yet they did during 2009 whilst GDP was still contracting. Just because something hasn't happened before doesn't mean it's not going to happen in the future.

9% are in negative equity now, another 17% would be in negative equity if prices fell significantly. That would remove a quarter of the housing stock from potential supply, and the remainder then would have no need to sell for less.

No they're not. In 2009, when prices were near the bottom of the trough, I remember seeing estimates of 7% to 11% of mortgage-holders in negative equity - N.B. mortgage-holders, not home-owners. The number of home-owners in negativity equity at the moment is certainly a lot lower than 9%.

We already saw what happened when prices fell in 2008/9, supply reduced markedly, and prices soared again.

Prices fell sharply in 2008 when there was a buyer's strike, but as prices fell so did the sales volumes, indicating there were less people willing to sell at the lower prices. On such low volumes, it didn't take many buyers to jump in and cause prices to start rising again. However, that rally has finished and volumes (BoE figures from today showing a large fall in mortgage approvals) and prices are falling again as buyers are pulling out of the market at a faster rate than sellers (some data was published a few days ago that backs this up). Presently, we have a buyer's strike. At some point it is likely to be replaced by another rally or stagnation but, in my opinion, that won't happen until the indexes are showing prices lower than the trough of 2009.

We're now already seeing supply falling markedly again, with only tiny price falls this time around.

The price falls over the last six months are very similar in magnitude and timescale to the falls that began in late 2007. What happened then was a period of ~10 months of consistently large falls as positive feedback came into play - i.e. a buyer's strike, with buyers delaying purchase. If things follow a similar pattern this time then the big falls will start soon. That's my guess. I may be wrong, but only time will tell.

The wage inflation argument is an hpc myth. Wage inflation always lags general inflation, so you're always a year behind for new purchasers. I do agree that existing mortgage holders benefited from it, as they do today, and whilst wage inflation was greater then, the costs of essentials also were a far higher percentage of income, so the net position was far worse.

Wage inflation has a greater bearing on the percentage of gross salary required to pay off a mortgage over the term than the interest rate on the principal. It's not a myth, it's a mathematical fact.