House Price Crash Discussion Thread

m00m00

dunnomate wrote: »

I thought that if prices dip, people snap up the houses, and the prices just go up ! Therefore - no crash !

that's assuming that demand remains constant, which it won't.


demand is partly driven by speculators and people who feel they have to get on the ladder/pyramid at any cost, or risk being left behind as prices continue to rise. This leads to them making non rational economic choices.

with a cool market, it takes a lot of this heat out of demand, and with the credit crunch limiting the money available, the notion of people 'snapping' up houses, is likely to be limited to cash rich individuals.

LisbonLaura

m00m00 wrote: »

the notion of people 'snapping' up houses, is likely to be limited to cash rich individuals.

Who, if smart, don't buy in a falling market.

movilogo

House buyers back out of property deals

http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/11/11/nhouse111.xml

alternative-answer

For anyone interested in falling house prices visit www.propertysnake.co.uk

Nenen

movilogo wrote: »

House buyers back out of property deals

http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/11/11/nhouse111.xml

Thanks for that link Movilogo... :beer: the Telegraph continues to give me a little bit of hope! :T However the prediction by Capital Economics of a further 3% decrease in house prices in 2008 is just not enough to make a big difference for us at the moment.

Realistically we need 15%+ drop to be able to afford something we'd actually like to live in... and I don't expect that to be a mansion either! I feel rather guilty about hoping for a HPC as I know that will cause misery for some people stuck in negative equity... but nevertheless I really do believe things cannot go on like this forever. I want my children to at least have a chance of owning their own place sometime in the not too distant future too!

movilogo

urther 3% decrease in house prices in 2008 is just not enough to make a big difference for us at the moment.
Realistically we need 15%+ drop to be able to afford something we'd actually like to live in... and I don't expect that to be a mansion either!

Although very small in numbers, I've seen quite a few houses reducing asking price by £10k [from £160k to £150k or so] after being on market over 3 months. Even then you can probably get another £5k off by bargaining. That makes nearly 10% off peak price.

So, there is hope!

abaxas

Nenen wrote: »

Thanks for that link Movilogo... :beer: the Telegraph continues to give me a little bit of hope! :T However the prediction by Capital Economics of a further 3% decrease in house prices in 2008 is just not enough to make a big difference for us at the moment.

Realistically we need 15%+ drop to be able to afford something we'd actually like to live in... and I don't expect that to be a mansion either! I feel rather guilty about hoping for a HPC as I know that will cause misery for some people stuck in negative equity... but nevertheless I really do believe things cannot go on like this forever. I want my children to at least have a chance of owning their own place sometime in the not too distant future too!

The value of the property is not as important to gaining a mortgage as the risk to the lender.

The risk is not based on the ability to pay back the loan BUT the ability to make money from the product. Up until recently (ie pre credit crunch) there was little or no risk to the lender, infact lots of sub prime lenders business models actually WANTED people to miss payments as they make more money through fees.

If property value is increasing by 10% a year there is next to no risk to the lender. They can lend to everyone and on default recoup the money and fees via repossession. A win/win situation.

However if property loses 3% of value next year the situation is different. The lender still wants the win/win situation so they only lend to people who can satisfy this.

So even a 3% drop in house prices would destroy lots of people's ability to obtain a mortgage, hence would destroy the housing market.

tr3mor

abaxas wrote: »

So even a 3% drop in house prices would destroy lots of people's ability to obtain a mortgage.

Leading to further falls.

It's a slippery slope now.

merlinthehappypig

Having reported some really big price reductions in earlier posts we went to see two houses yesterday where the vendors aren't prepared to shift by much at all, despite being fairly desperate to sell.

One is priced at £525000, which makes it even less desireable because of the stamp duty threshold and all she is prepared to do is pay the difference in stamp duty compared with it being priced just under £500000, if she gets offered the full asking price. This is despite the house having been on for over five months, with no offers. I wouldn't mind except that the agent is adamant that the house is worth the money and telling her not to reduce.

Of all the agents in the South West, they are the only ones whose prices are rising? In the meantime this poor woman is stuck with the house dreaming of spending her cash. Based on other houses we have viewed (about 20 now) the house is worth £450000 tops.

Daft thing is, if it was priced correctly we may have been interested.

Same goes for the other house. The agents are telling him to stick out for the asking price because they have a 'firm' buyer, explaining to us later that the buyer is selling through them and would we like to have a look at his house, it's very nice.........!

mystic_trev

The slowdown in the housing market is becoming more pronounced, says the Royal Institution of Chartered Surveyors (Rics).

http://news.bbc.co.uk/1/hi/business/7091469.stm

Looks like it's going to be a long Winter!