How can we get the housing market moving?

paulmapp8306

Or banks could follow other models - lifetime mortages.

Basically, in Germany, you can get a mortgage over 100 years that passes down the generations. You buy a house capable of houseing all 3/4 generations of a family, adn eventually that family ownd that house.

Granted - that needs a change in lifestyle here as well - as generations of one family living together isnt how we do things.

Either way - if you want to buy a 4 bed house as your first home, at 25 - and keep that home for your lifetime why cant you take out a 40 year lifetime mortgage (even better if its a fixed interest rate over those 40 years). You would have enough space for a family to grow with you, and at retirement you own the home. You can then downsize in your retirement freeing up the capital to susstain you in old age.

Solves the housing AND the pension issues

wotsthat

shortchanged wrote: »

With regards to my statement that banks are not willing to lend enough I am basing on the fact that the volume of house sales remains very low with an increased level of cash buys over the past few years. To me I see very little appetite of the banks to lend at the current level of house prices. Call it mortgage rationing if you like.

There are so many factors at play I don't see how anyone can arrive at the lowest common denominator that prices are 'simply' too high. Your argument is easy to question - if banks won't lend at current house prices why was lending so much higher when houses cost more? Why were deposit requirements lower?

House prices are but one factor to consider.

baby_boomer

Why do we want to get the housing market "moving"?

We are in the mess we are in because democratic governments have endlessly tried to stimulate short term economic growth in order to get re-elected.

This year's students, starting out on £9K annual fees and a £55K debt at the end of 3 years, might be grateful if the housing market does not "move".

shortchanged_2

baby_boomer wrote: »

Why do we want to get the housing market "moving"?

We are in the mess we are in because democratic governments have endlessly tried to stimulate short term economic growth in order to get re-elected.

This year's students, starting out on £9K annual fees and a £55K debt at the end of 3 years, might be grateful if the housing market does not "move".

When I said moving, I don't mean prices rising.

the_flying_pig

CLAPTON wrote: »

It is a very very very good starting point to the question of 'what is the right price'?...

“Right price” is a difficult one because, well, to opine onthat someone out there has to reach a judgement on what’s ‘right’.

The willing buyer-willing seller thing gives you a goodapproximation of the ‘going rate’, but as you acknowledge the going rate is afunction of many different factors – for housing these include interest rates, lendingpractices, expectations about future price rises/falls, how scarce property is,& so on.

The person on this thread who opined that property was “overpriced”was using this word as a shorthand for something like ‘inflated by factorsincluding anomalously low interest rates at the moment & anomalously laxlending practices/irrationally inflationary expectations in the recent past‘.

All of these points are [arguably] debatable, but to go backto a willing buyer-willing seller definition in response is incrediblyunhelpful.

Linton

the_flying_pig wrote: »

“Right price” is a difficult one because, well, to opine onthat someone out there has to reach a judgement on what’s ‘right’.

The willing buyer-willing seller thing gives you a goodapproximation of the ‘going rate’, but as you acknowledge the going rate is afunction of many different factors – for housing these include interest rates, lendingpractices, expectations about future price rises/falls, how scarce property is,& so on.

The person on this thread who opined that property was “overpriced”was using this word as a shorthand for something like ‘inflated by factorsincluding anomalously low interest rates at the moment & anomalously laxlending practices/irrationally inflationary expectations in the recent past‘.

All of these points are [arguably] debatable, but to go backto a willing buyer-willing seller definition in response is incrediblyunhelpful.

The willing-seller/ willing-buyer market definition of a correct price is the only one that makes sense. It doesnt rely on categorizing all people in a particular economic role as evil or stupid nor on passing the real cause onto some factor which then needs to be defined (eg lax lending practices). It also has the benefit of providing useful predictions.

So with that definition I can predict that, for example, a government subsidy of £20K to FTBers will raise the price of FTBer houses by about £20K. It wont other than in the short term whilst prices are re-adjusting help anyone who cant buy a house now.

Try making a prediction with some other definition of what a correct price is.

Loughton_Monkey

Personally, I am convinced that the current slow market is very little to do with price. It is mainly to do with (a) our national disease of being slow/reluctant to save the deposit, and (b) a general uncertainty for the future - getting more ingrained the longer this recession goes on.

The fact that builders are building, and selling, is always a signal that prices are on (or about) the right price. If you say that the correct price is something like 20% below current values, that that's pure ignorance. Because what you are saying is that a builder could buy some land, build, and sell for roughly that price. They couldn't.

Similarly, they are not massively underpriced, otherwise all builders would not lift a single brick!

To me, the 'activity' now being seen in the building sector is the best thermometer reading there is that prices are 'about right'.

Loughton_Monkey

On the question of 'correct' price for any specific house, I'm with Clapton:

CLAPTON wrote: »

I think the correct price is that which a willing seller and a willing and able buyer agree on.

This can only be the correct definition. It is important to understand that prices are not static. They move. So every price is a price at one specific instance. Even when you get a ludicrous situation... imagine that house next door to you, that you are convinced is worth £250K. Three Estate Agents and another 30 observers agree with you.

Then it sells for £350K. But you all still think it's worth £250K because nobody will offer you a penny more for your house. The point is, that the market price for next door was £350K. At that specific instant. Fact! The £250K before, and the £250K after, cannot possibly be the 'value' at all. They are opinions of the value. Only the actual sale defines the true 'market value'.

homelessskilledworker

shortchanged wrote: »

http://www.bbc.co.uk/news/business-19989028

Even with a greater choice of mortgage products there is still little appetite for house buying at present.

So what does that tell everyone?

There is only two options I can see happening now...

1. Prices drop into the senstive £140k's(average UK price) and then the fun really starts, market forces take over and prices will reach a natural floor and then sales will rise.

or

2. There is years of flatlining where nominal prices remain the same and real prices drop for a decade at least.

CLAPTON

the_flying_pig wrote: »

“Right price” is a difficult one because, well, to opine onthat someone out there has to reach a judgement on what’s ‘right’.

The willing buyer-willing seller thing gives you a goodapproximation of the ‘going rate’, but as you acknowledge the going rate is afunction of many different factors – for housing these include interest rates, lendingpractices, expectations about future price rises/falls, how scarce property is,& so on.

The person on this thread who opined that property was “overpriced”was using this word as a shorthand for something like ‘inflated by factorsincluding anomalously low interest rates at the moment & anomalously laxlending practices/irrationally inflationary expectations in the recent past‘.

All of these points are [arguably] debatable, but to go backto a willing buyer-willing seller definition in response is incrediblyunhelpful.

I've already posted a reply to your earlier post
I will add however.

'Willing buyer/willing seller' is a 'shorthand' way of saying that in my view the market is working OK.

i.e. short for :-

-I don't share many of the views on this forum that talk about seller 'need' to reduce their prices.

-I don't think the government is conspiring about house prices (the FirstBuy, NewBuy etc initiatives are total political claptrap)

-I don't think there is a mortage drought although I do except that lenders want a decent deposit as a hedge against falling prices

-I don't think a seller is stupid if they freely choose NOT to reduce their price

-I don't think a buyer is stupid if they freely choose NOT to buy at a price they don't think is appropiate.

I think that the market is working reasonably in the circumstances.
I see neither an irrational bubble nor do I see an irrational reluctance to buy, so willing buyer/willing seller is a good description of the market