50% house price falls

kingkano

carolt wrote: »

Remember - noone ever HAS to buy. But people do HAVE to sell. And in a downturn, that becomes much harder. Potential buyers can always sit it out and wait till prices are right - sellers such as those facing repossession etc, can't. And if you thought prices would be say, 10% cheaper in 6 months, would you buy? Really?

Only trouble is people have been saying this for 5 years (prices will be 10% cheaper in 6mths). They may well be right one day, how do you know when this day will be??

Assuming prices do start dropping, how do you actually call the bottom?? At some point these buyers will just say, the house I want is at a price I can get the mortgage for and I can afford the repayments, prices may drop a little but its my home not a blinkin investment. And then they will buy.... as people always have throughout history.

Im not sure today can really be compared to the 90s althought people continually want to....

Generali

Well, we might find out what happens if house prices start to fall according to this the price of new homes is starting to drop.

-15% YoY in London (doesn't seem right to me actually - we'll know when the LR figures come out in 3 months).

carolt

Only trouble is people have been saying this for 5 years (prices will be 10% cheaper in 6mths). They may well be right one day, how do you know when this day will be??

Assuming prices do start dropping, how do you actually call the bottom?? At some point these buyers will just say, the house I want is at a price I can get the mortgage for and I can afford the repayments, prices may drop a little but its my home not a blinkin investment. And then they will buy.... as people always have throughout history.

Im not sure today can really be compared to the 90s althought people continually want to.... (Kingkano)

I don't know when this will happen, obviously - but personally, I have been convinced enough recently to make that decision for myself. Other people may disagree and continue buying. But, anecdotally (and data from the most recent surveys seem to back this up) the balance has changed and the numbers buying are now shrinking relative to the numbers not prepared to buy.

I would love a home that I was 100% sure was mine, not the landlord's or the bank's - but that security doesn't come from taking out a huge loan on a ridiculously overpriced property in a falling market. Instead, I have decided to give up my dreams of a secure roof over my head and instead make the house I currently live in as pleasant as possible. As someone with young children, security is incredibly important to me, and I'm not prepared to take the risk of huge negative equity. I'm old enough to remember the serious downside of negative equity last time, in the early 90's, which I'm not sure all posters on these threads are (eg those with 1979 or 1975 in their names may give a clue...).

Of course, people will argue that prices have since gone up hugely. And for those who can afford to sit it out long term, they will (probably) be fine. But for all those, like me, who'd be buying at the peak of the market, with no cushion of equity to shield us, at hugely stretched multiples of income, we would be precisely the ones to be hardest hit by any falls and find it hard to survive - the last downturn lasted ten years in some areas, or more, which is a long time to put yourself through it if you don't need to.

I repeat, what FTB would buy until they were sure prices had stopped (largely) falling? Obviously, at some point, that will be reached - when as in the mid-90's, it became 50% cheaper in most areas to buy over renting, then buying made obvious economic sense. I'm not suggesting, kingkano, that there will be no bottom to the market! Just that it may take some time to reach it - and we're certainly not there yet.

[SIZE=-1]As to why it is worth looking back at the early 90's - "those[/SIZE][SIZE=-1] who do not learn the lessons of history are destined to repeat them".....[/SIZE]

tr3mor

carolt wrote: »

[SIZE=-1]"those[/SIZE][SIZE=-1] who do not learn the lessons of history are destined to repeat them".....[/SIZE]

More aptly, "The only thing we learn from history is that we learn nothing from history".

But, of course, Gordon Brown cares nothing about history, or the future. He only cares about conditions in the month before a general election so that he can get another five years of his powertrip.

kingkano

I say it again, how will joe bloggs know when this 'bottom' is reached and its now the best time to buy?? Why will they wait until its 50% cheaper?? Nobody knows thats they key..... If we could all call the bottom as you describe it we'd all be very rich people. Or consequently perhaps there'd never be any bottoms lol.... shrug.

Generali

kingkano wrote: »

I say it again, how will joe bloggs know when this 'bottom' is reached and its now the best time to buy?? Why will they wait until its 50% cheaper?? Nobody knows thats they key..... If we could all call the bottom as you describe it we'd all be very rich people. Or consequently perhaps there'd never be any bottoms lol.... shrug.

In the 90s, it ended up that it was much cheaper to buy than rent. At that point, brighter sparks realised that capital losses didn't matter a jot until you came to sell.

As prices had come down a lot in real terms, more people could afford to buy something they would live in for a very long time so selling prices would be less important.

carolt

kingkano, you seem to desperately want reassurance that prices won't fall 50%. Well, maybe they will, maybe they'll fall 10% or 90% (as in Japan). Noone can say.

Your post makes no sense as you seem to presume that falling prices happen only in a market in which noone buys - obviously some Joe Bloggses will buy in a falling market, because they need a bigger house, just come into some money, etc, but the point is, the numbers will be smaller than the number of sellers so the laws of supply and demand dictate prices will fall.

The point at which more buyers than sellers hit the market, ie when prices start to rise again, your 'bottom' of the market, will be the point at which it makes sound financial sense to buy for either investors or those buying their own home (which it doesn't at the moment, except for downsizers), and when sentiment moves strongly in that direction. In the past few years, people have taken on huge and potentially unwise mortgage debt in the belief prices would rise further and pull them out of a risky hole. If people stop believing that, and banks refuse to lend them that, then prices can only fall. But sentiment is a fickle thing. Some huge tax giveaway by Mr Brown, for example, or another huge drop in interest rates could easily reverse sentiment - who can say. Certainly 50% is no magic number and i - along with most FTB's, I would imagine, am not waiting for that as such, just for the point when I can buy a property I like, in a location I like, at a reasonable income multiple - or failing that, for the cost of buying to equate with or be less than the cost of renting - and for prices not be widely expected to crash!

Just a footnote - I know that the market is going to crash because even my mum, who for years has been telling me that I should buy now because 'property prices only ever go up' has stopped telling me to buy and agrees that prices are silly now and I should wait. She changed her mind this month when a house in their street (ordinary London zone 3, nice big family houses but nothing special) came on the market and she phoned the estate agent, being nosey, and was told 'you won't get anything on that street for under a million'. Even she could see that was loopy - Monopoly money. To put it in context, the house next door to them sold about 15 years ago - around the 'bottom' of the last crash, at £180K. Do the maths and then try and explain how that's sustainable. There may have been some economic growth in the last 15 years but we're not all a nation of millionaires (except paper ones) yet. Who is supposed to be able to afford that? (Not many Russian oligarchs in zone 3, I don't think....).

And why is it that people who have no problem with property prices trebling (or more, as above) in a decade, have such a problem with prices falling 50% over a possibly similar timespan? For someone who'd sat it out the whole way through, ie bought a house for 100K in 1997, gone up to 300K in 2007, down to 150K in say 2010, they'd still have a house worth 50% more than they paid for it! Not so bad, is it.:)

bargainbarmy

carolt wrote: »

kingkano, you seem to desperately want reassurance that prices won't fall 50%. Well, maybe they will, maybe they'll fall 10% or 90% (as in Japan). Noone can say.

Your post makes no sense as you seem to presume that falling prices happen only in a market in which noone buys - obviously some Joe Bloggses will buy in a falling market, because they need a bigger house, just come into some money, etc, but the point is, the numbers will be smaller than the number of sellers so the laws of supply and demand dictate prices will fall.

The point at which more buyers than sellers hit the market, ie when prices start to rise again, your 'bottom' of the market, will be the point at which it makes sound financial sense to buy for either investors or those buying their own home (which it doesn't at the moment, except for downsizers), and when sentiment moves strongly in that direction. In the past few years, people have taken on huge and potentially unwise mortgage debt in the belief prices would rise further and pull them out of a risky hole. If people stop believing that, and banks refuse to lend them that, then prices can only fall. But sentiment is a fickle thing. Some huge tax giveaway by Mr Brown, for example, or another huge drop in interest rates could easily reverse sentiment - who can say. Certainly 50% is no magic number and i - along with most FTB's, I would imagine, am not waiting for that as such, just for the point when I can buy a property I like, in a location I like, at a reasonable income multiple - or failing that, for the cost of buying to equate with or be less than the cost of renting - and for prices not be widely expected to crash!

Just a footnote - I know that the market is going to crash because even my mum, who for years has been telling me that I should buy now because 'property prices only ever go up' has stopped telling me to buy and agrees that prices are silly now and I should wait. She changed her mind this month when a house in their street (ordinary London zone 3, nice big family houses but nothing special) came on the market and she phoned the estate agent, being nosey, and was told 'you won't get anything on that street for under a million'. Even she could see that was loopy - Monopoly money. To put it in context, the house next door to them sold about 15 years ago - around the 'bottom' of the last crash, at £180K. Do the maths and then try and explain how that's sustainable. There may have been some economic growth in the last 15 years but we're not all a nation of millionaires (except paper ones) yet. Who is supposed to be able to afford that? (Not many Russian oligarchs in zone 3, I don't think....).

And why is it that people who have no problem with property prices trebling (or more, as above) in a decade, have such a problem with prices falling 50% over a possibly similar timespan? For someone who'd sat it out the whole way through, ie bought a house for 100K in 1997, gone up to 300K in 2007, down to 150K in say 2010, they'd still have a house worth 50% more than they paid for it! Not so bad, is it.:)

I'm really sorry to have to say this to you CarolT but you are talking through your proverbial. I am asurveyor and know the trends of the market inside and out. there is not going to be a crash. Prices will level out , possibly drop 5% but that's it. If, as predicted, interest rates level and possibly go down , the market will get used to those rates and prices will go staedily up after say a year. The crash you are looking for is NEVER going to happen. You had better realise this now as all that money you are paying in rent is going down the drain and you will never see anything for it. My advice to you is to buy something, anything, possibly not even for you to live in but to rent out. You could even continue to live in your council house butat least you would have a foothold on the market.
No disrespect but I think you are making excuses for yourself why you haven't bought yet. You know you have missed the boat and you are hiding behind this fact by saying you think the market is going to crash. No market has crashed by 50% ever. The words 'wake up' and 'coffee' are coming to mind !!! Also unless your mum is some renowned property mogul I wouldn't base your facts that the market is going to crash just because she says so!!!

tr3mor

bargainbarmy wrote: »

I'm really sorry to have to say this to you CarolT but you are talking through your proverbial. I am asurveyor and know the trends of the market inside and out. there is not going to be a crash. Prices will level out , possibly drop 5% but that's it. If, as predicted, interest rates level and possibly go down , the market will get used to those rates and prices will go staedily up after say a year. The crash you are looking for is NEVER going to happen. You had better realise this now as all that money you are paying in rent is going down the drain and you will never see anything for it. My advice to you is to buy something, anything, possibly not even for you to live in but to rent out. You could even continue to live in your council house butat least you would have a foothold on the market.
No disrespect but I think you are making excuses for yourself why you haven't bought yet. You know you have missed the boat and you are hiding behind this fact by saying you think the market is going to crash. No market has crashed by 50% ever. The words 'wake up' and 'coffee' are coming to mind !!! Also unless your mum is some renowned property mogul I wouldn't base your facts that the market is going to crash just because she says so!!!

Is this irony...? I honestly can't tell!

m00m00

No Market has ever crashed by 50% ?

you obviously have not even a vague grasp of economic history.