HPC thread of the week

mwpt

One of the problems at HPC is many of them are still stuck in the thinking that sentiment alone can drive the housing market down. They look at prices, compare them to what they thought were high previously, and assume that nothing supports these prices. They expect that any day now, people are going to realise that prices are "too high", sentiment is going to change, people are going to start selling for lower prices and this will trigger more people to sell, and so on.

That can happen in other bubble markets, such as dotcom tech stocks and so on, which people did not need to buy and can easily cut losses and sell out of. They were pure speculation. But with houses, you have the underlying fact that people need to live somewhere and most people want to own.

I don't claim that we cannot see falls, I think we can, but there is definitely a fuzzy floor on prices at which point people who want to buy will do so, and this exerts upward pressure all the time.

I tried to point this out on the big London Crashing thread once but people turned nasty. I said that price falls of 30% in London, all else remaining the same (interest rates for e.g.) would make buying a no brainer for many people because the mortgage would be so low compared to rent. Yields would be huge and landlords would also snap stuff up.

Didn't go down well, as I say.

Out,_Vile_Jelly

I've just worked out that with the rate I've fixed at and the way I'm overpaying, if my London house crashed by 50% I would not be in negative equity at the end of my deal in three years. Oh and I'm still saving on the side, and will have surpassed my original deposit by then. So I'd sell at a minor profit and then buy a bigger house in a nicer area, that's now 50% cheaper. Surely loads of other Londoners would do the same, and landlords would go on a shopping spree?

mwpt

Out,_Vile_Jelly wrote: »

I've just worked out that with the rate I've fixed at and the way I'm overpaying, if my London house crashed by 50% I would not be in negative equity at the end of my deal in three years. Oh and I'm still saving on the side, and will have surpassed my original deposit by then. So I'd sell at a minor profit and then buy a bigger house in a nicer area, that's now 50% cheaper. Surely loads of other Londoners would do the same, and landlords would go on a shopping spree?

I am not overpaying my mortgage. Instead I'm putting extra money into shares and cash. My portfolio is generating returns far better than my paying off the mortgage can do, but of course it comes with risk so isn't the choice for everyone.

The same as you, now that I own my house I would not want to go back to renting and if prices crashed even 30% I'd look to sell and buy a bigger place. I'm in the market now, I don't want to be back out.

Ps. If the market crashed 30% tonight, I would be just above negative equity.

mayonnaise

Joeskeppi wrote: »

Yes, I got called a 50 year old virgin and then the mods went delete crazy.

Did we get a visit from anchovyfoxy then?

westernpromise

Out,_Vile_Jelly wrote: »

I've just worked out that with the rate I've fixed at and the way I'm overpaying, if my London house crashed by 50% I would not be in negative equity at the end of my deal in three years. Oh and I'm still saving on the side, and will have surpassed my original deposit by then. So I'd sell at a minor profit and then buy a bigger house in a nicer area, that's now 50% cheaper. Surely loads of other Londoners would do the same, and landlords would go on a shopping spree?

Yes, I would say you are right on all counts.

HPC is a mutually-applauding clique of financially illiterate tinfoil hatters whose whole business in life is speculating against property. For 13 years they’ve been egging each other on not to buy because it's about to crash, which has been an utterly disastrous, unrecoverable misjudgment.

To make the biggest buy you ever make into a great big punt in that way, because you cockily think you can catch a falling knife better than anyone else, makes it the antithesis of MSE. Insofar as there is one, the MSE view of house prices would be, I guess, to consider something you pay for over 25 years to be (astonishingly) a long term decision, and as such one that should be taken based on long term considerations.

Given the anger there and the relative placidity over here, it seems pretty obvious which is the saner outlook.

What you have done, OVJ, is a breakeven calculation. The tragedy of the hapless HPC crowd is they never did that, have never worked out what level of crash they need for holding off buying ever to look smart, and probably have not absorbed that the longer it is coming, the bigger their crash needs to be. Some of them have been short so long they now need a crash greater than 100% to break even (because they’ve spent more on rent than buying would have cost).

If that’s not an object lesson in the folly of speculating in house prices, I don’t know what is. Yet the HPC house view seems to be that those who bought to occupy are in fact speculators (and mugs), whereas they, who speculatively did not buy, are the only honest actors and also deeply shrewd.

Takes all sorts, I suppose.

Crashy_Time

carslet wrote: »

When are the 50% falls happening??

this was recorded 2015 so already a year out so far.

http://www.dailymail.co.uk/news/article-3429735/Landlords-flood-market-half-MILLION-homes-drive-house-prices-scramble-avoid-George-Osborne-s-buy-let-crackdown.html


When the Mail, Times, and shows like the Wright Stuff are banging on about this stuff, there has to be a knock on effect on sentiment? Most ordinary folks don`t frequent hidden forums where 12 or so financial gurus tell them that crash stories are not real.

Crashy_Time

mwpt wrote: »

One of the problems at HPC is many of them are still stuck in the thinking that sentiment alone can drive the housing market down. They look at prices, compare them to what they thought were high previously, and assume that nothing supports these prices. They expect that any day now, people are going to realise that prices are "too high", sentiment is going to change, people are going to start selling for lower prices and this will trigger more people to sell, and so on.

That can happen in other bubble markets, such as dotcom tech stocks and so on, which people did not need to buy and can easily cut losses and sell out of. They were pure speculation. But with houses, you have the underlying fact that people need to live somewhere and most people want to own.

I don't claim that we cannot see falls, I think we can, but there is definitely a fuzzy floor on prices at which point people who want to buy will do so, and this exerts upward pressure all the time.

I tried to point this out on the big London Crashing thread once but people turned nasty. I said that price falls of 30% in London, all else remaining the same (interest rates for e.g.) would make buying a no brainer for many people because the mortgage would be so low compared to rent. Yields would be huge and landlords would also snap stuff up.

Didn't go down well, as I say.

Well lets watch this theory in action in Aberdeen first, because that is looking like the first proper HPC (since the blip in 2008, quickly plastered over by a panicking PTB) then lets see how many ex-BTL`s get "snapped up" , and at what price, and finally, for the main event, lets watch how China, oil, EZ banking problems etc. affect banks and general credit, plus of course the sacred London market. Should be interesting

cells

Crashy_Time wrote: »

http://www.dailymail.co.uk/news/article-3429735/Landlords-flood-market-half-MILLION-homes-drive-house-prices-scramble-avoid-George-Osborne-s-buy-let-crackdown.html


When the Mail, Times, and shows like the Wright Stuff are banging on about this stuff, there has to be a knock on effect on sentiment? Most ordinary folks don`t frequent hidden forums where 12 or so financial gurus tell them that crash stories are not real.

It is wishful thinking and bad assumptions and guesswork.

Landlords always sell and buy, 90% of my purchases have been off landlords.

When you look at net movements, the rental sector grew by 440,000 units last year

I think 2016 is going to be +300,000 units to the rental sector

So instead of your awaited mass landlord sell off, there will be a continued mass conversion to rental property.


And that will continue so long as mortgages are rationed upto I think 45% renters 55% owners by 2025. That means landlords will buy a further net 3.5 million homes over the next 10 years

Crashy_Time

cells wrote: »

It is wishful thinking and bad assumptions and guesswork.

Landlords always sell and buy, 90% of my purchases have been off landlords.

When you look at net movements, the rental sector grew by 440,000 units last year

I think 2016 is going to be +300,000 units to the rental sector

So instead of your awaited mass landlord sell off, there will be a continued mass conversion to rental property.


And that will continue so long as mortgages are rationed upto I think 45% renters 55% owners by 2025. That means landlords will buy a further net 3.5 million homes over the next 10 years

When Mathew Wright is on air sounding like a HPC`er, there is little chance that your opinions on here are going to have much effect on mass sentiment, because that is what we are talking about, sentiment, not de-constructing graphs and stats to suit a pet narrative. How many purchases have you made BTW?

cells

Crashy_Time wrote: »

Well lets watch this theory in action in Aberdeen first, because that is looking like the first proper HPC (since the blip in 2008, quickly plastered over by a panicking PTB) then lets see how many ex-BTL`s get "snapped up" , and at what price, and finally, for the main event, lets watch how China, oil, EZ banking problems etc. affect banks and general credit, plus of course the sacred London market. Should be interesting

If in two years prices are no lower will you at least put your hand up and say you were wrong.

Short of a mass house building programs doubling the number of new builds or a crash in population growth from the +500,000 a year towards one third of that, there wont be a house price crash.