Experiences of the last housing market crash?

meanmachine_2

cwcw wrote:

No they didn't. Interest rates (base) went from 8% in April 1988 up to 13% in November 1988. October 1989 saw the peak of 15%, from which they crept back down to 14% in October 1990, with gradual 0.5% decreases until they reached 10% in May 1992. By November 1992, the base rate was down to 7%.

The 5% rise in rates in a 7 month period in 1988 almost certainly triggered the crash. It is an increase of 63%. If interest rates hit 8.15% in June this year then we would have an equivalent situation. However, I don't think even posters on HPC could believe this would happen.

So in 1988 they went to the dizzying heights of 13% - a hitherto unheard of level? Something that must have made homeowners blood run cold?

Funny. Because rates were bubbling around 13% just 18 months before that.

So homeowners must have been spectacularly stupid not to have budgeted for such an increase.

Much like many are today, I'd suggest.

meanmachine_2

If' I'm right, it wasn't so much interest rates, but a combination of rates, MIRAS ending annd MASSIVE HPI in that year - something like 30%.

Look at the Nationwide BS stats and the average property went from 50K at the start of the year to 60K by the end.

Thankfully, such madness has been overcome in these "sophisticated" times.

Now remind me again what the HPI was in N Ireland last year? 44% was it?

Very sophisticated.

bristol_pilot

I was a new graduate back in 1989 and desperate to get on the housing ladder before prices went out of my reach, just as many FTBs are today. Well within about 18 months the one bed flat that I bought was worth half what I paid for it and I eventually sold it 12 years later for about the same as the orignal purchase price.

My main recollection of that time however was not worry about falling house prices or struggling to pay the mortgage it was fear of unemployment: 80% of staff at my place of work were made redundant, luckily I kept my job. I remember some of my older colleagues saying it was "just like 1980", so I expect that there is a cycle of some sort going on here even if it is "different this time" to some extent.

cwcw

meanmachine wrote:

If' I'm right, it wasn't so much interest rates, but a combination of rates, MIRAS ending annd MASSIVE HPI in that year - something like 30%.

Look at the Nationwide BS stats and the average property went from 50K at the start of the year to 60K by the end.

Thankfully, such madness has been overcome in these "sophisticated" times.

Now remind me again what the HPI was in N Ireland last year? 44% was it?

Very sophisticated.

You can't compare a nationwide average increase with a localised increase to try to draw a comparison. That's very weak.

The phrase "it's different this time" is true - because it IS different this time. Whether the end result is the same or not, only history will reveal. But the other factors (interest rates, year on year house price rises, employment, overall economy, single person households, dual income households, etc) are all different this time.

cwcw

meanmachine wrote:

So in 1988 they went to the dizzying heights of 13% - a hitherto unheard of level? Something that must have made homeowners blood run cold?

Funny. Because rates were bubbling around 13% just 18 months before that.

No they weren't. Before November 1988, the last time rates were 13% was in March 1985. 1987 had rates between 8 and 10.5%, generally decreasing through the year.

roswell

regardless of the differance banks have been tightening credit over the last 12 months a quick look in the credit card boards shows the increases in rates charged, sudden drops in available borrowing, some banks have moved out the credit market eg cahoot. I beleive but cant proove the banks have been advised by the FSA to budget for a 40 % decrease in property value but cant remember where I saw that.

I believe the party has been going on for some years eg in 2000 i bought my first DVD player for £200 and was greated with contempt by the colleuge because £200 was a lot of money, those same people are now remortgaging to go on holidays new car big TV and a bit of paint for the house ... pay off some debts and apply for new cards, they then 12 months later remorgage again .. and the cycle is continueing they borrow on the belief that in 12 months they can borrow more.

The party is still there like it was in the 90`s its just a consumption party not a hippy party.

F_T_Buyer

Why don't you have a read of what the papers said during the last crash:

http://www.housepricecrash.co.uk/wiki/Read_what_the_Newspapers_were_saying_last_time_around

Now, look at the denial and nearly every month the vested interest reporters said house prices had hit the bottom.

Also, from reading different stats, it appears the boom before the last crash was mainly in the south, hence they were little falls in the north and no falls in Scotland.

F_T_Buyer

Here's a few snippets:

"House prices continued to rise dramatically in the South East and East Anglia after the Crash and more steadily in the rest of the country. In the year to October 1987, house price inflation was put at 14.5 per cent by the Halifax."

What was the date of this then? 10 Oct 1992, yet prices continued to fall all the way to 1995.

Now do you believe what the vested interests report? I.e. the mortgage lenders?

roswell

Now back to topic anyone else with experiances of the last crash ?

Alan_M_2

cwcw wrote:

No they didn't. Interest rates (base) went from 8% in April 1988 up to 13% in November 1988. October 1989 saw the peak of 15%, from which they crept back down to 14% in October 1990, with gradual 0.5% decreases until they reached 10% in May 1992. By November 1992, the base rate was down to 7%.

The 5% rise in rates in a 7 month period in 1988 almost certainly triggered the crash. It is an increase of 63%. If interest rates hit 8.15% in June this year then we would have an equivalent situation. However, I don't think even posters on HPC could believe this would happen.

The rates Peaked at 15% on 16th Septmeber 1992, commonly known as Black Wednesday, some 2-3 years after the property prices had begun to slide.