Ladders can be dangerous, especially housing ladders

Loopgames

Oooh this is fun let me see,

Using an anecdotal example, my parents bought into the London property market as follows:

1. 1988: Flat bought for £35k (ex-council)
2. 1994: Saved £20k to buy a house for £105k - they couldn't shift their ex-council flat which they tried to sell at £55k, no buyers so they were accidental buy-to-letters
3. 1999: Sold the house for £180k and increased their capital ot £100k. Obtained a mortgage for £175k and bought a house in zone 2 for £275k.
4. 2001: Sold ex-council flat for £140k. Paid of £75k of their current mortgage (down to £100k)
5. 2008: Sold their house for £565k and downsized to buy a smaller house for £325k - no mortgage for first time since 1988.
6. 2011: Looking for a bungalow at the same price.

Since 2008 - the markets have stagnated. They didn't continue up the ladder and they left before it got too dangerous. Although it was a close call as their income dwindled in the final 7 years. So I guess there is a way out when you have a property and living in dangerous times. Especially when you are up that dangerous ladder.

macaque_2

JonnyBravo wrote: »

"Ladders can be dangerous, especially housing ladders "

Absolutely. You should always have someone foot your ladder to stop nasty accidents.
Apparently there is a "glut" of tenants footing the ladder at the moment so all is good.

Alternatively do as monkey boy is indirectly suggesting and stay away from the ladder. Perhaps lean out of your parents bedroom window instead?

Tenants are footing the ladder but they are also keeping their toes clear as the rungs sink into the ground one by one. Over 80% of home buyers since 2007 are in negative equity.

julieq

Where does that statistic come from Macaque? I have a suspicion it's a misinterpretation but I'd like to know the source. It would have been very difficult to have bought in 2009 for example and be in negative equity, because prices have risen and you'd have needed a 25% deposit.

Interestingly we're also told by the bears that transactions are at record low levels, which means that the number of people who have bought since 2007 is small in proportion to those who didn't.

But let's not allow a sense of proportion get in the way of a good scare story, eh? Rungs sinking into the ground, lovely image.

julieq

Ah, ok, it's a moneypanic scare story. What the statistic is actually saying is that prices have dropped since peak. So the inference is that anyone who bought at peak has lost money. Kind of obvious really.

What it is CANNOT be saying is that anyone who bought since 2007 is in negative equity. Anyone who bought since the end of 2008 is very unlikely to be in negative equity for the reasons I stated.

And actually not everyone who bought in 2007 will be in negative equity either. Why? Because many of the transactions will have ported equity from previous houses which were sold in the chain. To be in negative equity you need a mortgage greater than the value of the house. Deposits or equity carried forward are a buffer against that. You may lose money, but you're not in negative equity.

So all the numbers in the article quoted ACTUALLY say is that prices are lower than they were in 2007, and that this increases the risk of negative equity for a proportion of homeowners (those with a high loan to value where the fall in prices has exceeded the margin).

Why is it that bears never actually read the articles they quote?

Thrugelmir

julieq wrote: »

Why is it that bears never actually read the articles they quote?

Plenty of concern in the real world.

The news comes as Richard Banks, chief executive of Crossflatts-based UK Asset Resolution (UKAR), warned a “tsunami” of homeowners faced falling behind on their mortgage repayments as soon as interest rates started to rise.

Mr Banks, whose organisation was set up to run the nationalised mortgages of Bradford & Bingley and parts of Northern Rock following the 2008 banking crisis, said he believed a “scary” number of families faced being repossessed unless lenders prepared for higher rates.

The chief executive said 23,000 of UKAR’s 750,000 mortgage-holders were more than six months behind with payments and warned the number could rocket when rates rise.

“You can see if you don’t do something about it, you can see a tsunami,” he said.

“If you don’t get into the hills you could get drowned by this. If you don’t manage this properly it could get very messy.”

The Bank of England interest rate has remained at 0.5 per cent for more than two years. However, international bank regulator The Bank of International Settlements, has warned officials that it needs to rise to control inflation.

A UKAR spokesman said homeowners who had mortgaged themselves up to the hilt just before the banking crisis would struggle to cope with rises

http://www.thetelegraphandargus.co.uk/news/9110380.Property_values_at_luxury_Bradford_apartments__have_halved_/

julieq

Thrugelmir wrote: »

Plenty of concern in the real world.




http://www.thetelegraphandargus.co.uk/news/9110380.Property_values_at_luxury_Bradford_apartments__have_halved_/

Anyone who uses terms like tsunami is operating in the realms of hyperbole, not fact. The only broad based study I've seen shows a few thousand additional people in difficulty, which measured against the total number of mortgages is chickenfeed. The numbers of people "mortgaged up to the hilt" is low in absolute terms.

Paradoxically, as base rates rise, the more likely outcome is mortgage rates falling due to competition for borrowers. You can see this happening already with rates sub 4% turning up on 5 year fixes because although the expectation is that base rates will rise - they can hardly not rise - it appears they will stay low for a very long period indeed.

There's frankly no reason why people who weren't in difficulties in 2007 would be in difficulties if base rates reached the same levels, at least in any significant numbers. I know there are bears slavering at the prospect of massive quantities of forced sales, but it's not going to happen.

Cleaver

macaque wrote: »

From a purley investment perspective there are 3 possible decisions to make.

1. House prices start from a low value and disposable incomes rise - Buy

2. House prices start from a high value and disposable incomes rise - Hold

3. House prices start from a high value and disposable incomes remain static - Sell

People don't generally buy houses from a purely investment perspective though, do they? So there's option 4:

4. I have a family and want to buy somewhere to live - Buy

peakoil_2

Cleaver wrote: »

People don't generally buy houses from a purely investment perspective though, do they? So there's option 4:

4. I have a family and want to buy somewhere to live - Buy

5. I have a wife/girlfriend/partner who does not want to wait a minute more before she can decorate & furnish her own home - BUY

Cleaver

peakoil wrote: »

5. I have a wife/girlfriend/partner who does not want to wait a minute more before she can decorate & furnish her own home - BUY

6. You sound a bit under the thumb - HOLD

peakoil_2

Cleaver wrote: »

6. You sound a bit under the thumb - HOLD

7. No sex until house bought - BUY