House price correction - Taking the hard route

macaque_2

1. High house prices = fewer jobs.
2. Fewer jobs = lower house prices.

Government and lenders have defended house prices valiantly but gravity cannot be defied indefinitely. By going down this route, the final outcome will be much worse.

It is not a question of if but when.

A ComRes survey for the National Housing Federation found that nearly four in five employers say the lack of affordable housing is stalling economic growth in local communities, with 70% warning it would affect their ability to attract and keep workers.

http://www.housefund.co.uk/2013/06/10/local-business-stifled-by-housing/

Generali

Welcome back monkey man.

wotsthat

macaque wrote: »

1. High house prices = fewer jobs.
2. Fewer jobs = lower house prices.

It doesn't say that - it's another thread confirming what we already know..

Our economic recovery is being held back because there aren’t enough homes in England today, and this lack of homes has pushed up prices and rents beyond people’s reach.

Too many people moaning about house prices, pretending to care about the next generation but doing nothing; yet this collective are routinely outfoxed by the odd pensioner who really likes rare newts.

We can probably add apathy to the bears list of props.

Thrugelmir

2. Fewer jobs = lower house prices.

More jobs however lower average take home pay.

purch

....and more house prices equal lower jobs :eek:

chewmylegoff

and more equally priced house jobs lowers everything

Tancred

macaque wrote: »

1. High house prices = fewer jobs.
2. Fewer jobs = lower house prices.

Government and lenders have defended house prices valiantly but gravity cannot be defied indefinitely. By going down this route, the final outcome will be much worse.

It is not a question of if but when.



http://www.housefund.co.uk/2013/06/10/local-business-stifled-by-housing/

Nonsense. House prices are driven by demand, supply and availability of mortgages. Also, it depends on the type of house - i.e. everyone wants to live in a 4 bedroom detached so prices of these properties tend to rise almost by the hour. Jobs are plentiful in the south-east and demand very intense, fuelled by constant immigration.

macaque_2

Tancred wrote: »

Nonsense. House prices are driven by demand, supply and availability of mortgages. Also, it depends on the type of house - i.e. everyone wants to live in a 4 bedroom detached so prices of these properties tend to rise almost by the hour. Jobs are plentiful in the south-east and demand very intense, fuelled by constant immigration.

Demand equals wanting to buy plus the means to repay the debt over a 20 year mortgage life.

There is no lack of mortgage availability but an acute shortage of credit worthy borrowers. Lenders offering mortgages when interest rates are at a 300 year low need to be sure that the borrower can service the debt when interest rates return to 5 or 10% (which has to happen at some point). If the borrower is not a safe bet at higher interest rates, the lender needs to see a big enough deposit to recover their money when things go pear shaped.

Demand equals desire plus the means to pay. At the moment there is plenty of desire for big houses but very little demand (due to the lack of people with the means to service debts at higher interest rates). When interest rates go up, house prices will start falling. This will increase the number of would be borrowers who can afford to service the debt. Ironically, that will be exactly the point when people will lose the desire to buy (as has happened in Ireland and Spain).

TruckerT

macaque wrote: »

Demand equals wanting to buy plus the means to repay the debt over a 20 year mortgage life.

There is no lack of mortgage availability but an acute shortage of credit worthy borrowers. Lenders offering mortgages when interest rates are at a 300 year low need to be sure that the borrower can service the debt when interest rates return to 5 or 10% (which has to happen at some point). If the borrower is not a safe bet at higher interest rates, the lender needs to see a big enough deposit to recover their money when things go pear shaped.

Demand equals desire plus the means to pay. At the moment there is plenty of desire for big houses but very little demand (due to the lack of people with the means to service debts at higher interest rates). When interest rates go up, house prices will start falling. This will increase the number of would be borrowers who can afford to service the debt. Ironically, that will be exactly the point when people will lose the desire to buy (as has happened in Ireland and Spain).

I'm not sure that recent events in Ireland and Spain allow us to use their property markets as typical examples.

Why are mortgages subject to a variable interest rate? Personal loans and HP agreements have a fixed repayment for the life of the loan. What is the difference between a new house and a new car?

TruckerT

grizzly1911

TruckerT wrote: »

I'm not sure that recent events in Ireland and Spain allow us to use their property markets as typical examples.

Why are mortgages subject to a variable interest rate? Personal loans and HP agreements have a fixed repayment for the life of the loan. What is the difference between a new house and a new car?

TruckerT

At leats 20 years when stuff happens.

The cost of the gamble will be unpalatable to the majority.

TruckerT

grizzly1911 wrote: »

At leats 20 years when stuff happens.

The cost of the gamble will be unpalatable to the majority.

Do you mean the majority of the lenders, or the majority of the borrowers?

The 'gamble' so far has been on the rate at which property prices will increase. Everybody lost!

TruckerT