House Price Crash Discussion Thread

Generali

!!!!!!? wrote: »

Bear Sterns about to go bang, having to be bailed out by the Federal Reserve and JP.Morgan.....

http://news.bbc.co.uk/1/hi/business/7296678.stm

JPMorgan were a conduit for the deal. They haven't put anything in and they have no risk as far as I can tell. There've been rumours for the past 2 days that Bear Stearns were looking for Chapter 11 protection (a kind of insolvency in the US).

merlinthehappypig

neverdespairgirl wrote: »

I'm putting my money where my mouth is, and predicting a 12 - 15% drop minimum between Jan and Dec 2008, for hte average house in England and Wales.

I've been an advocate of the 2-3 year decline in prices, coupled with higher inflation, scenario leading to a 25-30% drop in real terms.

I have to say that these last two weeks of finacial data and news, the FTSE decline, the strength of gold and commodities, the weak dollar, the underlying note to the budget & now the Bear Stearns problems, which won't be the last by any means, make me revise that somewhat.

I still think that we will be looking at a slow start to the decline in prices. It's going to be like turning round an oil tanker IMO. A gradual slowing down of the annual rate of increase which is likely to be nil by early summer (depending of course on which index you use) so HPI coming to a complete stop. Then once the media start reporting actual losses over the last 12 months (bear in mind that many people think that prices are still going up, albeit by a smaller percentage, because of the way the media report things) things could well accelerate.

The realisation that the bubble has burst coupled with the increasingly gloomy economic data ought to start the decline speeding up from late summer onwards, but it is going to take a long time for people to accept this. We have a whole generation who think that buying a house (then borrowing against it's value) is the answer to all their financial problems.

I still thinks that there will be a big gap between 'motivated' sellers and those who don't have to sell which will skew the average price somewhat. With so few people able to buy, it's entirely possible that these people might be having to take 15-20% cuts in today's value to sell over the next 8-10 months, whilst less motivated sellers will still be hanging on to the dream of achieving close to the current 'value'.

It's difficult to make a prediction because of all these factors, but I think 12-15% is a little optimistic (or pessimistic depending on your viewpoint). Certainly it is very possible that a good number of houses will have reduced their price by this amount or more to sell, whilst their neighbours might still be up for sale for the 2007 price. I don't think a real terms drop in value of 10% is impossible by the end of the year, though.

Whilst we don't have the unemployment of the late 80's/early 90's it remains to be seen just how many people won't be able to re-mortgage to a better deal this year and are stuck on a SVR that they can't afford. That's the key to prices IMO, not BTL. How many people have 'lied to buy'? Will the lenders look at these applications again and use the fact that the buyers have lied to force them to sell if the lender is in financial difficulties themselves?

Of course, if we do have a recession then all bets are off. It could make the early 90's look like a walk in the park.

Generali

Well, I got the gen on Bear Stearns/JPM/The Fed.

It seems that it's hard for The Fed to lend directly to Bear Stearns as they're not a bank. They've used a process they claim was set up in the 30s and was last used in the 60s and are refusing to say how much was lent.

This is really very scary stuff IMO. Its all very well saying as some do on this forum, "Yeah, recession Bring it on! I've got GBPxxxk ready to buy a house". Its not much use if the bank that holds it has gone bust.

I'm not given to sensationalism but I'm starting to think that the only way of being sure of holding on to your assets is going to be farmland or a fistful of Krugerrands and a luger.

As Sgt Whatsit from Hill Street Blue used to say, "Hey, be careful out there".

merlinthehappypig

Generali wrote: »

I'm not given to sensationalism but I'm starting to think that the only way of being sure of holding on to your assets is going to be farmland or a fistful of Krugerrands

Make it sovereigns - no CGT on them , but I'm inclined to agree with you.

dolcevita

merlinthehappypig wrote: »

Make it sovereigns - no CGT on them , .

or britannias (if you can get hold of them).

merlinthehappypig

I've had to look brittanias up - I didn't know what they were so I've learnt something today. They are mentioned in the CGT manual as well.

WTF?_2

Generali wrote: »

Well, I got the gen on Bear Stearns/JPM/The Fed.

It seems that it's hard for The Fed to lend directly to Bear Stearns as they're not a bank. They've used a process they claim was set up in the 30s and was last used in the 60s and are refusing to say how much was lent.

This is really very scary stuff IMO. Its all very well saying as some do on this forum, "Yeah, recession Bring it on! I've got GBPxxxk ready to buy a house". Its not much use if the bank that holds it has gone bust.

I'm not given to sensationalism but I'm starting to think that the only way of being sure of holding on to your assets is going to be farmland or a fistful of Krugerrands and a luger.

As Sgt Whatsit from Hill Street Blue used to say, "Hey, be careful out there".

Gold is of course another traditional way to hold your 'money' when financial systems look shaky. Gee - it seems to have been rocketing in price over recent months. I wonder why....

I'm looking at putting of much of my cash as I can into NS&I products. They're the only 'guaranteed' way to hold sterling cash assets ... well, I suppose Northern Rock might be too but I really don't trust the govt to make good on their 'guarantee' there.

Glad to see you're finally coming around to the view that this will be very, very bad indeed. You've always seemed quite optimistic until this point.

I know exactly what you mean about the misguided notions of people who are seemingly looking forward to the coming recession as they think it will provide good opportunities for them. It might, for a few. For most people it's going to be at the very least an extremely uncomfortable and unsure time. That's why those who think a house price crash will be avoided by buyers jumping in once prices fall a little bit are going to be proven wrong.

merlinthehappypig

!!!!!!? wrote: »

well, I suppose Northern Rock might be too but I really don't trust the govt to make good on their 'guarantee' there.

I have most of mine in the NR 6.9% bond. I figured it was the next safest bet to NS&I. Unfortunately I can't tie it up at present so the NR bond's rate guarantee together with the no penalty instant withdrawals was a better option than NS&I.

Whilst I don't trust anything any Govt says personally I think that the NR guarantee is as good as the NS&I one. If things get so bad that the Govt. don't honour the NR guarantee then the currency isn't going to be worth squat anyway.

Of course the guarantee can always be removed, but the three month notice period will be enough to move it elsewhere.

We seem to be heading for a scenario that only the most pessimistic could have thought possible a few months back and it is frightening. A recession would be awful, but it's a real possibility.

It does seem to be a time when land and other commodities look the best option. Agricultural land prices down by us have rocketed in the last 12 months, £8000 an acre isn't unusual with some small acreages fetching up to £20000 an acre. This isn't building land, just somewhere to grow stuff or keep a horse.

exil

If you had to nail me to a figure I would suggest a drop of about 10% over the next couple of years. But things are so volatile I wouldn't be surprised if I was 20% out either way.

I wonder how many people are confidently predicting a crash can put their hands on their hearts and say that in 1995 they predicated the housing market would have headed upwards for 12 years without a break.

neverdespairgirl

exil wrote: »

I wonder how many people are confidently predicting a crash can put their hands on their hearts and say that in 1995 they predicated the housing market would have headed upwards for 12 years without a break.

I was 17 then, and paying no attention whatsoever!