What are the real implications of falling house prices?

reheat

Whether house prices go up or down it is presumably as a percentage of value. To me this suggests the following scenarios if prices fall.

First time buyers - good news.

Moving to property of similar value, both of which have fallen similarly in value. Not a problem that I can see.

Trading up to a higher value property. Good news surely, because both properties have fallen by similar percentage, so the actual difference in £s is smaller. Less extra money needs borrowing therefore.

Trading down to release capital. Bad news, because now the smaller difference means less £s released back into your bank account. You really have lost money.

Is this broadly correct, or am I overlooking something important?

Reheat

Get-real-buy-real

Over the last 10 yrs you could have asked what are the real implications of house prices going up too much? The answer is obvious when you see the mess that it has caused.

reheat

I agree with you. But I asked about prices going down.

CLAPTON

reheat wrote: »

Whether house prices go up or down it is presumably as a percentage of value. To me this suggests the following scenarios if prices fall.

First time buyers - good news.

Moving to property of similar value, both of which have fallen similarly in value. Not a problem that I can see.

Trading up to a higher value property. Good news surely, because both properties have fallen by similar percentage, so the actual difference in £s is smaller. Less extra money needs borrowing therefore.

Trading down to release capital. Bad news, because now the smaller difference means less £s released back into your bank account. You really have lost money.

Is this broadly correct, or am I overlooking something important?

Reheat

several issues

1. for people with either negative equity or even just a high mortgage to value ratio.

for these its virtually impossible to move or sell
so if you separate/divorce, need to move with job, experience financial difficulty etc etc simply selling up or mvoing house may be not possible

2. obviously lenders don't like lending on something what will be worth less next year than this so demand high deposits; often first time buyers don't have very high deposits

3. not too many people will buy a property knowing it will be cheaper if they wait so builders stop building new stuff



-so for FTB bad news unless you have large deposit
-movers bad news if your loan to vaule ratio is not good
-forced sellers often end up with debts after the sale (if they are allowed to sell)
-no new builds and so housing crisis gets worse

reweird

As people feel poorer and have less opportunity to release equity from their homes they spend less causing the economy to collapse leading to recession, further job losses, increased homelessness and restrained spending. Rinse and repeat. It's a vicious downward spiral.

reheat

Thank you. Yes, I'm tending to see it from my own specific situation, which is that of relocating because of job move, and looking for somewhere of similar value to my current property, or very slightly more. I only have about £23K mortgage left to pay, but that will still take about 6 yrs.

CLAPTON

reweird wrote: »

As people feel poorer and have less opportunity to release equity from their homes they spend less causing the economy to collapse leading to recession, further job losses, increased homelessness and restrained spending. Rinse and repeat. It's a vicious downward spiral.

how I dislike that phrase 'release equity'
better to say increase secured mortgage debt to spend on junk and assist the next debt fuelled credit crunch

nearlynew

reweird wrote: »

As people feel poorer and have less opportunity to release equity from their homes they spend less causing the economy to collapse leading to recession, further job losses, increased homelessness and restrained spending. Rinse and repeat. It's a vicious downward spiral.

And here we have, in one little paragraph, proof that HPI cheerleaders are just debt-junkies in disguise.

Jimmy_31

reweird wrote: »

As people feel poorer and have less opportunity to release equity from their homes they spend less causing the economy to collapse leading to recession, further job losses, increased homelessness and restrained spending. Rinse and repeat. It's a vicious downward spiral.

You cant release equity that doesnt exist.

reweird

Jimmy_31 wrote: »

You cant release equity that doesnt exist.

Where did I say that one could?

buglawton

Prices really did fall in the U.S. if you want an example.

The number of defaulters was hugely greater than UK.

In UK, house prices are being propped up by planning regs, immigration, quantitative easing and low interest rates. Each one of which is a politically decided factor rather than a real market force. Each one could change.

Go figure.