Worrying omens for the housing market

harpoboy

Capital Economics are quoted in this morning's Sunday Times as saying house prices will rise by more than 5% next year.


The last time they were so bullish was in mid-2007, just as the house market was about to crash.


Indeed, even the HPC extremists are all violently agreeing that the market will rise steadily next year:
http://www.housepricecrash.co.uk/forum/index.php?showtopic=195522


If the last of the bears have hit the point of capitulation, this is very concerning and could signal a turn in the market.


All we need is brit1234 to predict house prices up 50% by Christmas 2014 to know we are all dooooomed

Loughton_Monkey

The period September 2006 to August 2007 saw actual house price increases that averaged 9.7% [range 8%/11%] and so a prediction of 5% increase for the following 12 months was not what I would call 'bullish'.

We then saw a world liquidity crisis of unprecedented proportions, which, unsurprisingly, threw every prediction on every financial indicator totally out of the window. As far as I know, nobody considered that any 'bubble' [if exist] in UK house prices was the cause of the crash.

The only surprise is the rather small forecast of 'only' 5%, although it does say "or above". Double digit inflation was the norm for the first 4 years of this millennium.

michaels

harpoboy wrote: »

Capital Economics are quoted in this morning's Sunday Times as saying house prices will rise by more than 5% next year.


The last time they were so bullish was in mid-2007, just as the house market was about to crash.


Indeed, even the HPC extremists are all violently agreeing that the market will rise steadily next year:
http://www.housepricecrash.co.uk/forum/index.php?showtopic=195522


If the last of the bears have hit the point of capitulation, this is very concerning and could signal a turn in the market.


All we need is brit1234 to predict house prices up 50% by Christmas 2014 to know we are all dooooomed

I know this is posted in jest but actually in terms of the psychology of bubbles it may contain more than a grain of truth....

AndyGuil

Nothing will change until lots of houses are built.

AndyGuil

Scrootum wrote: »

Lots of houses will not be built if i will suppress prices though.

That and there are so many hurdles and costs that make feasible/profitable house building difficult.

Loughton_Monkey

AndyGuil wrote: »

That and there are so many hurdles and costs that make feasible/profitable house building difficult.

.... whcih in turn will ramp up the HPI to double figures at least...

Satoshi

The worrying omen is interest rates going back up and the shock of people not being able to afford their mortgage payments.

grizzly1911

Satoshi wrote: »

The worrying omen is interest rates going back up and the shock of people not being able to afford their mortgage payments.

Lots of peeps (sockies?) post saying it won't be problem. They are overpaying the mortgage and banks are using fat margins. Both can easily be wound down to accommodate base rates increasing.

Whether either can actually happen in the real world who knows. The former may be true for the few, the latter who knows as banks seek to recapitalise and government seeks to remove the props.

Loughton_Monkey

Satoshi wrote: »

The worrying omen is interest rates going back up and the shock of people not being able to afford their mortgage payments.

Whilst very few of us want interest rates to increase, those with mortgages will tend to absorb the costs and live within income because they don't want to lose the house.

This is, of course, not easy, but oldies will all recall times when literally half net income was going into the mortgage, and rates well up into double digits.

Those (and there are many) who have not yet learned the 'easy' way that it is vital to spend far less than you earn, will learn the 'hard' way that they can live on much less (after mortgage repayments). Once rates go down, they might then find themselves actually saving money. Probably too late, but better late than never.

Graham_Devon

Loughton_Monkey wrote: »

Whilst very few of us want interest rates to increase, those with mortgages will tend to absorb the costs and live within income because they don't want to lose the house.

This is, of course, not easy, but oldies will all recall times when literally half net income was going into the mortgage, and rates well up into double digits.

Those (and there are many) who have not yet learned the 'easy' way that it is vital to spend far less than you earn, will learn the 'hard' way that they can live on much less (after mortgage repayments). Once rates go down, they might then find themselves actually saving money. Probably too late, but better late than never.

Key difference then was that many had taken loans at 3x wages, approximately.

That has changed now, with 5/6 x wages not uncommon, especially pre-2007 mortgages. Makes smaller interest rate rises harder to cope with than in the time you talk of.

SaulB_23

I was a first time buyer in feb 2008 and took out a mortgage of £172,000. I work in construction and had earnings of between £60-£75000 the previous 3 years so payments were easily affordable but since the crash my income has dropped to around £30000. This year its on course for £25000 before tax and with my mortgage on the SVR payments are £980 a month so its a massive struggle to find the money. Im praying we have no interest rate rise!