Families engulfed by negative equity

geneer

Families engulfed by negative equity





http://news.scotsman.com/news/Families-engulfed-by-negative-equity.6789092.jp

More than four in five Scottish homes bought since 2006 are now worth less than their purchase price, fuelling fears over negative equity.
House-price falls over the past three years have decimated property values in some parts of Scotland, with many homeowners facing difficulties selling their homes or securing a competitive mortgage.

Of more than 374,000 homes bought in Scotland since 2006, 306,000 are now worth less than the owner paid for them, according to research by property website Zoopla.

The picture is similar across the whole UK, where 3.5 million of the 4.32m homes bought in the past five years are today worth less than the purchase price. But Scotland fares better than many areas, with prices north of the Border typically less volatile than in some parts of the country.

Homeowners who bought at the market peak are the worst affected, according to Zoopla. More than 93 per cent of homes bought in 2007 and 89 per cent of those bought the following year are now worth less than the purchase price.

In contrast, more than half of the homes snapped up in 2009, when prices plunged, are now worth more.

Nicholas Leeming, business development director of Zoopla.co.uk, said: "There is an unprecedented number of homeowners 'stuck' with homes they bought in recent years with the expectation that prices would continue to sky-rocket. And as a result of not wanting to take a loss on their asset, many owners have been unwilling to set realistic asking prices to sell them."

The figures come weeks after Lloyds Banking Group, the UK's biggest lender, revealed about 150,000 of its mortgage customers were in negative equity.

The number of homeowners in negative equity could grow further over the coming year, with house prices expected to continue declining. The average Scottish house price has fallen by about £1,000 in the past four years and is now at the level of early 2007, according to Lloyds TSB's most recent Scottish House Price Monitor.

Estate agent Savills recently predicted house prices would fall in Scotland this year and said they were unlikely to rise before 2013. The latest report from the Royal Institution of Chartered Surveyors found a growing number of its members expected Scottish price falls over the summer, while lenders including Nationwide and Halifax have warned prices are unlikely to rebound over the coming months.

New figures published by the City watchdog yesterday revealed a decline in the number of families falling behind on their mortgage repayments. There were 337,000 families in arrears in the first quarter of this year, down from 360,752 in the same period in 2010, according to the Financial Services Authority (FSA). It also reported a slowdown in the number of new households falling into arrears - down 8 per cent from the end of last year.

Cleaver

It's funny reading all these stories about what houses are worth. The bottom line is that no one is buying houses at the moment anyway, so if I needed to sell my house tomorrow it's not the £10,000 here or there that'd be worrying me. What would worry me is finding someone who has the will and the means to buy a house at the moment.

The housing market in my area is dead. Sellers selling for 2007 prices and no one, obviously, wants to buy for that price. So sellers just stubbornly sit there and no one buys their houses. The occassional one comes on at a realistic price and gets snapped up, but this is very occassional.

I guess something either needs to give or we'll have years and years of low transactions until wages and inflation slowly rise and people start feeling that the current prices being asked are reasonable. My guess is the latter.

shortchanged_2

Cleaver wrote: »

I guess something either needs to give or we'll have years and years of low transactions until wages and inflation slowly rise and people start feeling that the current prices being asked are reasonable. My guess is the latter.

That may take quite some time Cleaver.

Cleaver

shortchanged wrote: »

That may take quite some time Cleaver.

Yeah, I would guess so too. I think we'll see stagnation at around these prices for at least five years. Obviously they'll be a few +/- 5% or 10% swings here and there.

Shupufski

Where is the wee scotsman? Or does this not apply to his neck of the woods?

Graham_Devon

Cleaver wrote: »

Yeah, I would guess so too. I think we'll see stagnation at around these prices for at least five years. Obviously they'll be a few +/- 5% or 10% swings here and there.

Depends if interest rates stay static for five years.

It's the biggest factor in prices. Even housing economists (real ones) state so. It's only interest rates making all of this possible.

And before I get pounced on about interest rates not being mortgage rates, I know. But in general, base rates go up, so do mortgage rates.

There are a lot of storys doing the rounds at the moment about the effects of kicking the can.

Greece are now being looked at, and the extra loan people cannot even justify, and are just suggesting it's buying more time and making the problem bigger. Another story today from Robert Peston about the problems with banks and mortgages, and how they have just kicked the can, but the problem is still there. An article on interest rates today suggesting the longer we hold off, the longer we don't acknowledge the problem, and the larger the problem gets.

Can this stuff all just be ignored, and the western world continue to simply stagnate?

Cleaver

Graham_Devon wrote: »

Depends if interest rates stay static for five years.

I wouldn't say that that's the only factor, but yeah, obviously depends on what happens. None of us can say for sure, but my opinion is that house prices will be around the same in five years as they are now (i.e. about £160k average). Just my opinion though, and I've rarely been right in the past!

I personally can't see base rates going up all that much over the next five years unless our economy gets in to better shape.

Pimperne1

Engulfed? The story doesn't really bear that out. As we all know and accept, if you bought since 2006 then your house is probably worth less than you paid for it (but most are probably not in negative equity). Seems like the biggest mortgage provider is saying that 150k of their customers are in negative equity (although how they know that I am not sure) but there are about 20 million households so the numbers in negative equity will be really quite small. Perhaps remove "engulfed" and replace with "water slopping round their feet"?

Viper_7

Cleaver wrote: »

It's funny reading all these stories about what houses are worth. The bottom line is that no one is buying houses at the moment anyway, so if I needed to sell my house tomorrow it's not the £10,000 here or there that'd be worrying me. What would worry me is finding someone who has the will and the means to buy a house at the moment.

The housing market in my area is dead. Sellers selling for 2007 prices and no one, obviously, wants to buy for that price. So sellers just stubbornly sit there and no one buys their houses. The occassional one comes on at a realistic price and gets snapped up, but this is very occassional.

I guess something either needs to give or we'll have years and years of low transactions until wages and inflation slowly rise and people start feeling that the current prices being asked are reasonable. My guess is the latter.

I'm selling - and I know my house is too expensive for what it is.
Yet similar properties in the area are of similar price.

I'm looking to move to a larger property - I simply cannot afford to lost 1000's for a quick sell with the prospect of rate increase and a large mortgage in the coming years. Vendors I'm potentially buying off are in the same predicament and won't drop the prices... hence Stagnation in the housing market.

Cleaver

Viper_7 wrote: »

I'm selling - and I know my house is too expensive for what it is.
Yet similar properties in the area are of similar price.

So in summary, all houses in your area are priced at prices that people are unwilling and / or unable to pay.

Viper_7 wrote: »

I'm looking to move to a larger property - I simply cannot afford to lost 1000's for a quick sell with the prospect of rate increase and a large mortgage in the coming years. Vendors I'm potentially buying off are in the same predicament and won't drop the prices... hence Stagnation in the housing market.

Yup, pretty much sums it all up.

Pimperne1

Viper_7 wrote: »

I'm selling - and I know my house is too expensive for what it is.
Yet similar properties in the area are of similar price.

I'm looking to move to a larger property - I simply cannot afford to lost 1000's for a quick sell with the prospect of rate increase and a large mortgage in the coming years. Vendors I'm potentially buying off are in the same predicament and won't drop the prices... hence Stagnation in the housing market.

I think what you describe is where the market is likely to change for the foreseeable. If you needed to move then you would be motivated to sell, as you don't you are not prepared to drop your price. What has happened is that the voluntary seller has dropped off the plot - hence not many houses are selling (and, really, not many actually have to sell - the 40k or so who are selling monthly at present will comprise quite a large proportion of distressed sellers in my view).