What would happen if there was a crash?

derbyshirenick

The thing we have to keep in mind as well is that we are all looking at the situation with experience of different areas. i.e. Here in the mids, in the peripheral towns/villages you can currently by a 3 bed terrace for 100-110k, a semi for 125-140k in "good" areas.

You would pay 180-190 for a similar house up in the real must have areas boarding the peak district.

FYI I call them good areas based on the crime stats. When researching I used police.uk and did a month by month look at the crimes reported within 1 mile (circle tool) of the postcode of the places we looked at. Those prices above were in areas with 10-25 crimes reported within 1 mile a month. This is a pretty low figure compared to many hot, desirable areas where figures were coming in at 300-600, admittedly some were more populated which skews it slightly.

Anyway... my point is that I can understand why somebody who needs to pay 300k for a hole would think that the market is just stupidly high. While down south income is greater its not so much more than in the mids and t'up north, however in the mids and up north you can very easily get a starter or modest family home for less than three times income. As I said before, certainly here its not the house price, its the deposit. After all, excluding SD selling to buy is always mostly relative.

MobileSaver

stator wrote: »

With 95% mortgages and 30 year mortgages the 'norm' it won't take much to push the first domino over

I think your (wishful?) thinking is wide of the mark by quite some way.

If first time buyers can't afford to buy then all that will happen is there will be even more pent-up demand until either wages or Bank of Mum and Dad catch up with house prices.

At worst prices may drop a fraction to become affordable again on 30 year 95% terms but in reality they'll probably just stagnate for a while. Anyone waiting for a "crash" will be sorely disappointed and there'll only be distressed sellers and the worst properties available to buy - as has happened before sellers of the best properties will simply wait it out until prices increase again.

stator

Bank of Mum and Dad are starting to get wise to the fact that it might be wise to hang on to their money, seeing their parents squandering in filthy degenerate care homes, no-one will want to be old and poor.

Crashy_Time

Snakey wrote: »

The interesting thing about a crash now would that there are, if you believe the media, literally millions of would-be buyers who are living at home or in flat-shares, saving every penny they have and in some cases sitting on fairly large deposits (and, because they are older, with larger incomes than they would have had before), desperate for that flat or starter home so that they can finally get their life plans back on track.

Despite all the media fascination with comparing the wage-to-house-price ratios of the 1950's or whatever, we are not going to need to drop all the way back to the average house price being three times the average salary of one person before people can start buying again. Times have changed and I don't think prices would have to drop far at all, even in London, before a critical mass of buyers would find they now have enough.

The other thing is that with interest rates being so low over the last few years, many people have been paying huge chunks off their mortgages and will not therefore be anywhere near negative equity or a forced sale (even if interest rates rise). And if a crash happened now it wouldn't be as a consequence of a recession and so you won't get people who have to sell because they've lost their jobs - that happened years ago and low interest rates saved them.

Anybody expecting that a crash will result in just themselves, alone, skipping at their leisure from property to property while desperate owners beg them to name their price, may find they're out of luck. There is a backlog of people wanting to buy, while sellers can afford to wait it out - or even (depending on what sort of a crash you are postulating) buy their new property while keeping their old one to rent out.

On the other hand, maybe things are not so rosy?


http://www.theguardian.com/society/2015/jan/05/missing-rent-mortgage-payments-shelter-interest-rate-housing-costs

Johnandabby

stator wrote: »

Bank of Mum and Dad are starting to get wise to the fact that it might be wise to hang on to their money, seeing their parents squandering in filthy degenerate care homes, no-one will want to be old and poor.

But you have to be really, really rich to avoid that when you're old, when care costs run into tens of thousands per year... I really don't see how giving £10k-20k to a son/daughter for a deposit is really going to change that reality when that money is only going to postpone the inevitable for a few months!

Crashy_Time

MobileSaver wrote: »

I think your (wishful?) thinking is wide of the mark by quite some way.

If first time buyers can't afford to buy then all that will happen is there will be even more pent-up demand until either wages or Bank of Mum and Dad catch up with house prices.

At worst prices may drop a fraction to become affordable again on 30 year 95% terms but in reality they'll probably just stagnate for a while. Anyone waiting for a "crash" will be sorely disappointed and there'll only be distressed sellers and the worst properties available to buy - as has happened before sellers of the best properties will simply wait it out until prices increase again.

What companies do you expect to lead the charge with wage rises? And remember, BOMAD is mainly based on property prices, in a crash that bank closes down.

Southend1

This thread should be in the debate house prices board

wolfplayer

Linton wrote: »

If there was a "crash" houses wouldnt sell and the asking prices would steadily fall over many months until a new balance between buyers and sellers was found. So not a crash type crash, more a gentle descent.

However, this would only happen if the number of available buyers fell drastically. For example because mortgages dried up, mass unemployment, or just fear of mass unemployment leading to a general avoidance of major expenditure. Under such circumstances why do those people waiting for a crash think they would be immune from the conditions affecting everyone else?

Superior business ability, and economic foresight, in positioning ourselves for the crash?

Huge amounts in savings to buy family house cheap, and, to pick up business assets cheap from those in distress.

Can easily see older owners of prime houses, who though the hpi was all locked in, crying and begging for people to buy their homes, as other sellers bring down values by transacting at ever lower prices. Too many prime family houses owned by older owners, with empty bedrooms. Some will sell, at lower prices, bringing market down.

Cloudydaze

wolfplayer wrote: »

Superior business ability, and economic foresight, in positioning ourselves for the crash?

Huge amounts in savings to buy family house cheap, and, to pick up business assets cheap from those in distress.

Can easily see older owners of prime houses, who though the hpi was all locked in, crying and begging for people to buy their homes, as other sellers bring down values by transacting at ever lower prices. Too many prime family houses owned by older owners, with empty bedrooms. Some will sell, at lower prices, bringing market down.

Don't forget that current homeowners have been experiencing exceptionally low interest rates on their mortgages. The mortgage interest I pay is about one fith of renting a similar property. I'm sure I'm not the only one saving the difference.

My parents live in 'prime' family home. They've not long paid off their mortgage and have no plans to move so can't see them 'crying or begging' in the event of a crash.

wolfplayer

Cloudydaze wrote: »

Don't forget that current homeowners have been experiencing exceptionally low interest rates on their mortgages. The mortgage interest I pay is about one fith of renting a similar property. I'm sure I'm not the only one saving the difference.

My parents live in 'prime' family home. They've not long paid off their mortgage and have no plans to move so can't see them 'crying or begging' in the event of a crash.

True, but there are also many who are spending.

Market prices move at the margin, on prices.

Your parents might have paid it off and have no intention of moving or selling, but you don't know if the older guy next door or across the road looks to sell, finds no buyers at high price, and then cuts and cuts his price, accepting a low offer. Guess what, the lower price paid brings down values for other owners of houses on the road. That is how markets work.