House Crash

pollyanna24

No, not another one of those doom threads, but just a general query about it.

When the last one happened, I was too young to take any notice of what was going on, and my parents have never owned their own house.

It's easy enough to look back at the graphs and the historical interest rates, but what was the actual feeling back then about what was going on? Was it a crash overnight? Were newspeople reporting on and on about houses and crashes? Did nobody see it coming? How long did interest rates stay high? etc. etc.

I agree that house prices can't go up forever, but do people not learn from mistakes? We are constantly going on about a crash now, but did people talk about one all those years ago? One point that I read on a thread somewhere, is that these days everyone is more clued up about crashes and house prices etc. cos of the power of the web.

thesaint

Someone asked this exact same question a short while ago, I shall try and find the thread for you later.

pollyanna24

Oops, sorry, I didn't realise. I shall try and look myself later and all. Thanks.

Ems*Honie

Blimey, I recon searching 'house crash' on this forum may cause the place to implode you'd get so many results!!

Generali

Link

In a crashing market, some properties were unsaleable at almost any price. Last time it was small 1 bed flats. Next time it'll probably be 2 bed 'executive flats'.

Enjoy!

pollyanna24

I've had a quick look at that link, and it is very helpful, but it's mainly about why we had the crash, and I was just wondering about things like how the media were portraying it all, were people worrying about it like they are etc.

King_Of_Fools

There is quite a lot of information floating around the web, but in general the general media impression at the time was that they did not expect it to happen and that when house prices did start to fall that they expected them to pick up quickly again. Then for the 3 or so years while house prices continued to fall all the reports continued to suggest that we had hit the bottom but the prices kept on falling. When the prices did stop falling it was quite a while before people would believe that to be the case as they had got used to prices falling.

Generali

Also, there was a common belief that houses would never boom in that crazy way again - that people had been sucked in to a bubble and wouldn't fall for it again. It was all the fault of Thatcher and Lawson and their 'greed is good' mentality.

Society moved on, we all became less greedy. We realised that the Labour Party could solve all of societies ills by throwing huge sums of money at them.

Today we are far more sophisticated than we were in the late-80s and realise that the current boom is a result of changed fundamentals and that house prices can never fall, not really. Perhaps stabilise for a bit but not really fall. Right?

alanobrien

It was a long time ago in a galaxy far far away. At least that what it seems to me these days. The mind is cloudy but i recall government dithering on fiscal policy had a lot to do with it. We entered the ERM, Soros made a mint and i was paying 15% for my mortgage, actually 15.5% on my top up. Scary times albeit short lived at that level.

Found this which is an interesting read.
http://www.economicsuk.com/blog/000182.html

abaxas

alanobrien wrote: »

It was a long time ago in a galaxy far far away. At least that what it seems to me these days. The mind is cloudy but i recall government dithering on fiscal policy had a lot to do with it. We entered the ERM, Soros made a mint and i was paying 15% for my mortgage, actually 15.5% on my top up. Scary times albeit short lived at that level.

Found this which is an interesting read.
http://www.economicsuk.com/blog/000182.html

You forget that rates went from 10% to 15%. We simple wouldnt have 15% rates now, if we did the majority if homeowners would have to default.

The issue we have now is that we have the same affordability at 5.25% as we did at 10%. If rates went to 7.75% we would have the same effect.

People are having difficulty at 5.25%, 7.75% would destroy almost all FTBs who have bought in the last couple of years. Unless of course we get pay rises to compensate _party_

Generali

alanobrien wrote: »

It was a long time ago in a galaxy far far away. At least that what it seems to me these days. The mind is cloudy but i recall government dithering on fiscal policy had a lot to do with it. We entered the ERM, Soros made a mint and i was paying 15% for my mortgage, actually 15.5% on my top up. Scary times albeit short lived at that level.

Found this which is an interesting read.
http://www.economicsuk.com/blog/000182.html

I think you're mixing up your crashes. In 1992, the pound fell out of the ERM as the British Government was no longer prepared to pay the price of defending the exchange rate against the market clearing rate.

The housing bubble popped in 1989 and prices fell until 1992. This was on the back of high interest rates, rising unemployment, a credit crunch and changing sentiment.