50% house price falls

jubblyjimbo

What I find interesting about these threads is the reaction of people who think that house prices can't fall - either complete denial or total hysteria. I wonder why?

Let's get a few things straight. It is quite possible for house prices to dramatically decrease without an economic meltdown, food shortages, mass unemployment, zombie attack (to qoute a few earlier posters). They did in the early 90's and I don't recall riots or zombies. And people didnt starve. Just because you are too young to remember it happening doesn't mean it didn't happen or that it won't happen again.

Secondly buy to letters won't step in to snap up the properties as they will be the ones selling. BTL landlords may be quite happy pouring hundreds down the drain every month while capital growth more than compensates. However, after a few months of prices falling they wouldn't be quite so happy. In the early 90's repossessions at one point were running at a 1000 a week. That takes an awful lot of people to start piling in to change market sentiment.

Thirdly look at the people on here who are paying £600 in rent on a mortgage that would cost £2k a month. That's just not a rational market. At some point a correction is likely.

Fourthly why can it happen in the US but not here? If anything the subprime market here (self cert, interest only, landlords subsidizing their mortgages) is as bad or worse as the US.

It all reminds me a bit of the dot com crash. Stockbrokers justified ridiculous share prices by suggesting that prices were supported by a 'wall of cash'. People made fortunes just by buying shares. As soon as people realised the shares were overvalued the 'wall of cash' disappeared and everyone lost money.

Rant over!:rotfl:

ManAtHome

obsessed_saver wrote: »

As I see, Rightmove is blaming the price fall on the HPI... which could be plausible.

Do you mean HIP (House Information Pack) rather than HPI (House Price Inflation)?

Can't see why that would cause prices to fall - if you have to pay for a HIP, you'd presumably increase your price to cover it?

If you couldn't afford the £400 or so on your £300k+ property, you wouldn't put it up for sale which would reduce supply, so presumably push up prices?

David_beach

I was there the last time

I bought my first house in the early eighties for £21k it rose quickly to £80k+ till the "crash" which wiped 20k of it's value.

I needed somewhere to live so I took it on the chin, which in hindsight was the best thing I could have done.

A few years later I turned it into my first buy to let and it is now worth £190k.

The main difference I can see between then and now is that the mortgage rates rose to 15% + which caused the high repos

It does not seem likely we will see rates anywhere near that high and therefore I can not see the same kind of drop, but if it does I will buy buy buy as there is a massive house shortage and in time that will only get a lot worse.

Just my view

David

needtosavenow_2

god! i hope they fall then i might be able to buy my own place!!! no way i can ever afford it or buy as the market is now! its crazy!! 1 bed houses where i am going for 170k+!!!

seven-day-weekend

I can remember a friend of ours being in negative equity in London, I think it was the late 80s. I can also remember interest rates being at 15%.

Luckily we bought our house in 1976 for a song and still have it; it's been mortgage-free for over ten years and just weathers the storm.

If you are not going to sell your house it doesn't really matter does it? (to you personally I mean, obviously it affcts the economy).

Doc_N

needtosavenow wrote: »

god! i hope they fall then i might be able to buy my own place!!! no way i can ever afford it or buy as the market is now! its crazy!! 1 bed houses where i am going for 170k+!!!

You're absolutely right, and falling house prices would actually be good news for most people. It's a myth that rising house prices are good for people - the only people who gain are the investors screwing the rest of us, people downsizing, and the ones waiting for their parents to die so they can sell the house. For first time buyers falling house prices mean that they get a chance to get on the ladder, and for everyone trading up the 'gap' they need to fund gets smaller.

The sentiment is changing, and sentiment is the main thing driving this mad market. As more and more people realise that if they wait the price will be lower, prices will fall still further.

The situation at Northern Rock should really worry anyone thinking of putting money into property right now. As this spreads there will be less and less money around for house purchase, with a dramatic impact on the market. Less money = lower prices. Roll on the collapse so all our kids can buy houses for themselves again. And if some BTLs get their fingers burned, who's going to lose any sleep over that?

nelly_2

seven-day-weekend wrote: »

I can remember a friend of ours being in negative equity in London, I think it was the late 80s. I can also remember interest rates being at 15%.

Luckily we bought our house in 1976 for a song and still have it; it's been mortgage-free for over ten years and just weathers the storm.

If you are not going to sell your house it doesn't really matter does it? (to you personally I mean, obviously it affcts the economy).

Houses have gone up 300% in the last 10 years while wages havent been nearly as high, which means we dont need anything like 15% interest rates to cause the same problem

back then the average house ws what? 60 grand?

now its 200 grand 15% on 60 is nowt compaired to 15% on £200 000


Ps - I'd love a zombie attack

Walter_J

pinkshoes wrote: »

so if house prices drop by 50%, then there will be very few houses on the market to buy, and most rents will be hiked up to cover the negative equity.

What??????
Supply & Demand, dear. High demand + low supply = high prices.
Low demand + high supply = low prices.
Therefore if prices are low, supply will be HIGH.
There will be an excess of houses on the market, not a shortage. People will be desperate to sell at almost any price.The banks won't be lending so much, so no-one will be able to afford to buy at high prices. It has already started.

Doc_N

Walter_J wrote: »

</p>What??????Supply & Demand, dear. High demand + low supply = high prices. Low demand + high supply = low prices. Therefore if prices are low, supply will be HIGHThere will be an excess of houses on the market, not a shortage. People will be desperate to sell at almost any price.The banks won't be lending so much, so no-one will be able to afford to buy at high prices. It has already started.

Absolutely. Just wait till the BTL people start having to offload their properties to cover their mortgage payments as interest rates rise. First time buyers who can wait a bit are going to be so relieved to be able to get back into the market again - and the rest of us are going to be so amused watching the BTLs panicking to get rid of their second homes before prices drop still further.

Should be a good winter!

Alan_M_2

David_beach wrote: »

I was there the last time

I bought my first house in the early eighties for £21k it rose quickly to £80k+ till the "crash" which wiped 20k of it's value.

I needed somewhere to live so I took it on the chin, which in hindsight was the best thing I could have done.

A few years later I turned it into my first buy to let and it is now worth £190k.

The main difference I can see between then and now is that the mortgage rates rose to 15% + which caused the high repos

It does not seem likely we will see rates anywhere near that high and therefore I can not see the same kind of drop, but if it does I will buy buy buy as there is a massive house shortage and in time that will only get a lot worse.

Just my view

David

At the end of the 80's I was still a teenager, but desperate to get on the housing ladder before it got to a stage where the prices were so high I couldn't afford to buy a house. (ring any bells?).

I bought my first house at the end of the 80's for £72,000, 3 years later I handed the keys back when it was worth £48,000 and the mortgage repayments at 15% interest were more than my gross salary. I'd lost a £9000 deposit, £12,000 in renovations and had to continue paying for a property I no longer owned.

What you've highlighted is timing, nothing else, due purely to luck (I'd guess you're late 40's to early 50's) You were born 10 years before me, and bought at what was "the right time".

There are many thousands of people still buying BTL property this year.

In your case, you didn't take anything on the chin, you bought a property for £20,000, it's notional value is irrelevant unless you are unable to meet the mortgage payments or you need to sell for any other reason.

Basically the "value" of your house is always £20,000 until you come to sell it. You straddled the crash, many thousands of home buyers and investors won't.

Don't mistake your luck for shrewed investing, sit back and look at the bigger picture.