U.K. Home Prices Decline as Outlook Worsens, Hometrack Says

RenovationMan

Mallotum_X wrote: »

I agree that they havent lost anything, but many people would have been well aware of their peak value.

If Mrs Smith across the road sold at X, then in the homeowners house theirs is worth at least that, as theirs will be better in some way than Mrs Smith's house (have you seen her dreadful wallpaper).

So whilst common sense would say your view is correct I think human emotion will come in and many will see that drop in value as a 'crash' rather than soft landing.

As I said, it all depends on individual circumstances. The person who has 'made' £156k might regret not cashing in with £210k profit but will more than likely not be that bothered because they were not interested in selling in 2007 anyway . No doubt they would know that its impossible to catch a peak or trough because you only that they were peaks or troughs years later anyway. Against a backdrop of 350% increases, a 20% drop would seem rather paltry and only the most avaricious would be regretting the notional loss of £54k over the notional gain of £156k.

Time for some anecdotal evidence. I have a large-ish personal pension pot with various funds bought since 2007 (I saw the stockmarket crash coming and got out of equities and into cash before the crash). Many of these funds were approaching 50% gains. I have also bought into some new funds and shares more recently and have seen small gains or small losses. When the FTSE had a correction recently, the 50% funds dropped to something like 35% gains and the recently bought funds dropped to 10%-30% losses. I can honestly tell you that the funds that worried me were the ones that went red (i.e. minus) not the ones that stayed blue (i.e. positive). All my funds lost similar amounts, but only the red ones lost MY OWN money. That, to me, is the difference. My blue shares were corrected, my red shares crashed.

Graham_Devon

Well a fall wasn't much liked.

I had a lovely parsnip soup today.

Mallotum_X

RenovationMan wrote: »

As I said, it all depends on individual circumstances. The person who has 'made' £156k might regret not cashing in with £210k profit but will more than likely not be that bothered because they were not interested in selling in 2007 anyway . No doubt they would know that its impossible to catch a peak or trough because you only that they were peaks or troughs years later anyway. Against a backdrop of 350% increases, a 20% drop would seem rather paltry and only the most avaricious would be regretting the notional loss of £54k over the notional gain of £156k.

I dont agree, whilst the impact and the damage such a drop can do will be influenced by personal circumstances, human nature and the way Brits are somewhat obsessed by their house value would mean that they would be bothered by the fall.

You only have to look on Rightmove or say the House Selling and buying board to get an idea of how many people are aware of peak value and what they will want for their house. Estate agents we have all seen are often still valuing at close to peak.

Human nature being what it is many people people will have considered their house to be worth peak and any drop from that is a loss.

There are significant numbers of people who dont have to sell that are sitting things out, hoping for the recovery that the Express and Sibley are promising them.

It is more likely the earlier purchaser would be an older person who will know "houses only ever go up".

I believe that not many would take your own view about being happy with the gain, even if thats the sensible thing to do.

People in this country do not behave rationally with houses.

RenovationMan

Mallotum_X wrote: »

There are significant numbers of people who dont have to sell that are sitting things out.

There are even more significant numbers of people who don't have to sell and don't want to sell and are just getting on with enjoying their homes. These people have very little interest in the supposed value of their homes because they didn't want to sell in 2007, they don't want to sell in 2011 and they probably won't want to sell in 2020.

I realise that because we are on a property forum that we represent a more house price obsessed section of the community, but we are not representative of the country at large.

shortchanged_2

ukcarper wrote: »

The average terraced house according to Land Reg is £122k. Median full time male wage is £28k and for a female it is £22k making a total of £50k 2.5x is £125k.

That's not much of a house for people with a joint income of £50K particularly if they are mainly 2 or 3 bedroom houses.

Mallotum_X

RenovationMan wrote: »

There are even more significant numbers of people who don't have to sell and don't want to sell and are just getting on with enjoying their homes. These people have very little interest in the supposed value of their homes because they didn't want to sell in 2007, they don't want to sell in 2011 and they probably won't want to sell in 2020.

I realise that because we are on a property forum that we represent a more house price obsessed section of the community, but we are not representative of the country at large.

But those that are not selling now or any time soon wont care about current value. In their mind current value will still be peak, so you say will just carry on with their lives. I guess its just a slightly different persepective.

We may not be fully representative but do look at the popular press, this country is pretty obsessed over house prices.

RenovationMan

Mallotum_X wrote: »

But those that are not selling now or any time soon wont care about current value. In their mind current value will still be peak, so you say will just carry on with their lives. I guess its just a slightly different persepective.

We may not be fully representative but do look at the popular press, this country is pretty obsessed over house prices.

Got to agree with everything you say here. I guess as well as splitting people into 'soft landing' and 'crash', depending on their perspective we can also add in a third category called 'Peak' where they have so little interest in house prices that they have no idea that a correction has occurred.

To be fair, now that I think about it, I fell into that category. My previous house sold higher than 2007 peak price. Although I knew a correction had occurred, it certainly didn't impact me, except in as much as I got my current house much cheaper than I otherwise would have.

ukcarper

shortchanged wrote: »

That's not much of a house for people with a joint income of £50K particularly if they are mainly 2 or 3 bedroom houses.

But now we are getting at the root of the problem a 2-bed terrace is not good enough for two people on median salaries. The average price of a semi is £153 so with a 95% mortgage they would need a 3x joint not unheard of before the boom. They would take home about £3.2k a month and their mortgage at 6% would be about £977 so hardly unaffordable I would say.

shortchanged_2

ukcarper wrote: »

But now we are getting at the root of the problem a 2-bed terrace is not good enough for two people on median salaries. The average price of a semi is £153 so with a 95% mortgage they would need a 3x joint not unheard of before the boom. They would take home about £3.2k a month and their mortgage at 6% would be about £977 so hardly unaffordable I would say.

Or the average price of a 3 bed semi could come down to £130K. Now that would be better for all. A smaller mortgage, therefore more money to spend on other things in the economy.

Everyones a winner.

geneer

HAMISH_MCTAVISH wrote: »

I agree. Pre-boom lending criteria would be great.

I was offered a 95% mortgage in 1990, my parents were offered one in 1967, and 100% mortgages were available at least as far back as 1982.

Historically normal, prudent, sensible lending criteria would be a massive improvement on the absurd and abnormal mortgage rationing of today.

In fact, it would lead to lending doubling, if not tripling, were normal, pre-boom lending standards applied now.

So by all means, bring it on.

Great idea.

Really? Why haven't you mentioned this before. :rotfl: