House Price Crash Discussion Thread

WTF?_2

Snafflepants wrote: »

Hiya,

I just wanted to confirm that when we have the price crash it'll will be on current values?

I want to get it straight in my head thats all.

So if we bought our house in 2004 for 72k and have a mortgage of around 58k, one terrace along the road which is not as nice as mine sold for 99k last month (was on the market for 104k) so taking the current value of mine at about 100k at the moment it would be worth about 70k if we had a 30% drop? Is that right?????

TIA

Should prices fall, as it looks very likely they will, they'll drop back from current levels. My guess it that they'll probably head back to the way they were around mid 2005. It'd be pretty surprising if they went back below 2004 prices though I wouldn't rule it out.

The implications are that many people will not be able to remortgage when their fixed deals run out as the value of their house has fallen to where the LTV of the mortgage is too high for the bank to risk. This means much much higher mortgage repayments. Also, people who find themselves having to move for one reason or another will be 'trapped' by the negative equity resulting from their mortgage.

And of course those who MEWed to get cash out of their property to fund extravagent lifestyles are really in the doo-doo :cool:

Lotus-eater

!!!!!!? wrote: »

And of course those who MEWed to get cash out of their property to fund extravagent lifestyles are really in the doo-doo :cool:

Remember that estate agent on that tv program? The one who had the hot tub in a shed in the back garden.
MEW'd all over the place, he said he would be in the crap if prices went down. Some people you just can't feel sorry for.

Snafflepants

!!!!!!? wrote: »

And of course those who MEWed to get cash out of their property to fund extravagent lifestyles are really in the doo-doo :cool:

What does MEWed mean?

Thanks

Toto

Hi all,

We've had our eye on a house for the past year or so. It's been priced at £365000 since the day it came onto the market. It's in a fantastic part of town and it's a lovely house. The thing is, it's been on the market for around 18 months. Now, either the sellers have refused to take offers or there is something dodgy in the survey, although certainly nothing that is obvious to look at. The house is in the old town which is hugely attractive and properties sell and seem to hold pretty premium prices so I'm not totally understanding why it hasn't sold yet. A house just up the road sold in december for £327000 but it is only a 3 bed (this one is 4). One in the same road sold in 2005 for £360,000.

We are in no hurry to move, are in rented and are just sitting waiting until something comes along that we plan to live in for many years, And we could see ourselves doing just that in this place, it ticks every box. So, we thought about putting in an offer and seeing what happens, obviously a cheeky one that will most likely be refused. I was thinking around £315,000 with room to negotiate up to £325,000.

I've got propery bee installed and have checked out property snake. There are a few reductions in our area but nothing to write home about, mostly around 5k. The biggest reduction on property snake is 6%. So with all of this in mind, I'm happy to let the vendor chase the market down waiting it out until they are sick of waiting to move. But I'd like to officially register our interest by making and offer. Of course if it were accepted we'd be happy as larry to proceed. We do have a AIP so are in a good position.

I've asked myself what is this house worth to us but that's a tricky question. I can only answer with my head and say I want to pay as little as possible for any house.

So, if you were to offer on a place which has been on the market for 18 months what would you offer?

Nenen

merlinthehappypig wrote: »

I'm not usually smug, but I allowed myself a day off yesterday..............

:rotfl::rotfl::rotfl::rotfl:

Great news Merlin.... I'm keeping everything crossed for you (and believe me there are a lot of body parts I can cross at my age ) that your house buying epic will soon be over!

kingkano

!!!!!!? wrote: »

The implications are that many people will not be able to remortgage when their fixed deals run out as the value of their house has fallen to where the LTV of the mortgage is too high for the bank to risk. This means much much higher mortgage repayments. Also, people who find themselves having to move for one reason or another will be 'trapped' by the negative equity resulting from their mortgage.

Hang on.... that doesn't sound like 'lower house prices benefits everyone' to me?

What does MEWed mean?

Mortgage Equity Withdrawal (-ed added to the abbreviation to make a word)

WTF?_2

kingkano wrote: »

Hang on.... that doesn't sound like 'lower house prices benefits everyone' to me?

[/font]

Mortgage Equity Withdrawal (-ed added to the abbreviation to make a word)

People who take on mortgages that they can't afford to repay unless the market continues to rocket by 10% p.a. ad infinitum get little sympathy from me, I'm afraid.

On the whole, many more people benefit from lower prices. Only those who bought in the last couple of years and need to sell up are going to be really reamed.

The sting in the tail this time around is that we are about to see a 'perfect storm' of messed up financial markets, a recession and a house price crash. You can blame the wonderful 'financial management' of our Western governments for that. Trying to keep the markets pumped indefinitely was never going to be a long term sustainable approach

merlinthehappypig

Toto wrote: »

Hi all,

We've had our eye on a house for the past year or so. It's been priced at £365000 since the day it came onto the market. It's in a fantastic part of town and it's a lovely house. The thing is, it's been on the market for around 18 months. Now, either the sellers have refused to take offers or there is something dodgy in the survey, although certainly nothing that is obvious to look at. The house is in the old town which is hugely attractive and properties sell and seem to hold pretty premium prices so I'm not totally understanding why it hasn't sold yet. A house just up the road sold in december for £327000 but it is only a 3 bed (this one is 4). One in the same road sold in 2005 for £360,000.

We are in no hurry to move, are in rented and are just sitting waiting until something comes along that we plan to live in for many years, And we could see ourselves doing just that in this place, it ticks every box. So, we thought about putting in an offer and seeing what happens, obviously a cheeky one that will most likely be refused. I was thinking around £315,000 with room to negotiate up to £325,000.

I've got propery bee installed and have checked out property snake. There are a few reductions in our area but nothing to write home about, mostly around 5k. The biggest reduction on property snake is 6%. So with all of this in mind, I'm happy to let the vendor chase the market down waiting it out until they are sick of waiting to move. But I'd like to officially register our interest by making and offer. Of course if it were accepted we'd be happy as larry to proceed. We do have a AIP so are in a good position.

I've asked myself what is this house worth to us but that's a tricky question. I can only answer with my head and say I want to pay as little as possible for any house.

So, if you were to offer on a place which has been on the market for 18 months what would you offer?

There is no easy answer apart from saying don't offer too much. You can always offer more, but will find it more difficult to negotiate a reduction after a price is agreed!

The fact that the house has been for sale for 18 months isn't actually a good thing, in our experience. It tells me that the owner isn't desperate to sell. If he was it would have been reduced and sold.

We have found that we have been able to negotiate bigger reductions on houses that have been put up for sale since the Northern Rock problems than those which have been on for a long time before that.

Recent sellers are probably more aware of the problems in the market. Long term sellers simply bury their heads in the sand and hope for an idiot to turn up.

merlinthehappypig

It's like the summer floods all over again at the moment with bad news.

House prices could fall by up to 20% over the next two years, a senior economist warned yesterday. The prediction from Professor David Miles, chief UK economist at Morgan Stanley, will dismay millions of homeowners.
At present, the average house price is about £200,000. If he is correct, it could fall as low as £160,000 by the end of 2009.


Contracts linked to the Halifax house-price index indicate the average property price will drop from around £200,000 to £160,000 by February 2010, when adjusted for inflation.

The figures quoted by Professor Miles are based on derivatives provided by brokers Tradition Group. The biggest losers will be those who have forked out a fortune to buy a home over the last couple of years.

However, Professor Miles, a former Government adviser, insisted such a fall would not be a catastrophe. He said at a housing conference in central London: 'I am at the pessimistic end of the spectrum, but I don't think it should be seen as the pessimistic end because there are as many gainers as losers.'

The winners, he said, will be first-time buyers and those on lower salaries who will finally be able to afford to buy. His warning comes as a mortgage debt crisis threatens to engulf millions of homeowners, bringing financial misery, repossession and an economic slump.

The storm clouds gathering over the property market bring with them the risk of a repeat of the crash of the early 1990s. Citizens Advice reported a 35% rise in those seeking help with mortgage arrears in the first two months of the year.

The finance website Moneynet said more than one in three home buyers is struggling to cope with repayments on a mortgage debt that is more than three times their gross salary.

It is also clear that banks and building societies are turning the screw. Yesterday, Britain's biggest mortgage lender, the Halifax, replaced much of its existing range with deals carrying higher interest rates or administration fees.
Real difficulties face the 1.7m who face a 'payment shock' when they come to the end of cheap fixed-rate home loans this year. They will face substantial increases depending on their credit ratings.

Industry analysts believe these increases lead to a sharp rise in the number losing the roof over their head. A study by the City watchdog, the Financial Services Authority, suggested that up to one million homeowners are at risk of defaulting on their mortgage.

Banks and building societies have reacted to the global credit crunch by tightening their rules on which customers they will lend to. They have withdrawn thousands of mortgage deals, particularly those offering 100 per cent plus of a property's value.

They have also axed deals that allow customers to borrow many times their salary and pushed up the cost of fixed rate and tracker home loans. The net effect is that thousands who are due to remortgage could find themselves re-classified as a credit risk and forced on to ruinously expensive loans.

Householders are already facing inflation-busting increases in the cost of gas, electricity, water and council tax bills. Teresa Perchard of Citizens Advice said: 'The latest figures suggest a significant number of households are struggling to meet their most basic living costs.'

In the 2006-07 financial year Citizens Advice dealt with 5.7m new inquiries, more than 1.7m of which concerned debt. Debt is now the number one issue advised on, accounting for nearly one in three inquiries - 6,600 every working day.

Research by Moneynet.co.uk shows 30% of the one in three buyers juggling with mega-mortgages are in danger of being classified as a credit risk. These people are worried they do not have sufficient income to convince a bank to give them a new home loan.

The website's chief executive, Richard Brown, said: 'Fewer and fewer lenders will be prepared to offer competitive alternative deals to anyone considered at risk of default. They will have little choice but to accept what their present lender is prepared to offer.'

The study found nearly one in ten homeowners fear they will miss a mortgage payment in the coming year.

kingkano

!!!!!!? wrote: »

People who take on mortgages that they can't afford to repay unless the market continues to rocket by 10% p.a. ad infinitum get little sympathy from me, I'm afraid.

!!!!!!? wrote: »

On the whole, many more people benefit from lower prices. Only those who bought in the last couple of years and need to sell up are going to be really reamed.

These 2 phrases do not add up to the same thing (they aren't identical). Somebody who bought in the last year or even 3, putting down 20% deposit and taking a 5yr fixed rate (considered exceedingly long in this country I might add) will be burned up and spat out just like the rest. (if you believe the 30-40% drops people are predicting). It all depends on how bad the economy gets.

That set of facts doesn't paint the picture of someone expecting prices to rocket 10%pa ad finitum I might add, and yet they will have trouble all the same. Actually it paints a picture of someone who wanted a home to live in, to raise the family, and went about it the right way in my mind.

!!!!!!? wrote: »

On the whole, many more people benefit from lower prices. Only those who bought in the last couple of years and need to sell up are going to be really reamed.

Not quite. Any of those who bought in the last few years (could be 5 depending on which story of impending doom you read/believe) will be 'reamed' when it comes time to remortgage, as they won't be able to. They will be reamed less if they had forethought to be able to pay the mortgage at 8% or so. If it turns into anything like the US they will be done in when their bank asks them to repay the mortgage in full within 30 days please.... you just can't plan for these eventualities!

But as I said - it doesn't sound like the often touted 'lower house prices benefits everyone', which I see you downgraded to 'more people than not', which I still don't think so - but it does depend on how much lower. It benefits those who don't own a house. Minor benefits to those trading up (assuming they paid enough into the mortgage or can cover any shortfall to the next properties mortgage). Everyone else gets screwed over.