House Price Crash Discussion Thread

carolt

And very sorry, BACKFROMTHEEDGE, if I offended your clearly very delicate sensibilities, but have you thought of hanging out somewhere less stressful?

As house prices crash, I expect the language - not from me particularly, as I have nothing to lose - to get increasingly heated.

In the meantime, we'd love to hear your opinions on the matter in hand. Where do you think house prices will go in say, the next year or two? Have you been personally affected by the falls announced/credit crunch, or are you likely to be?

We'd all really love to hear your opinions. Genuinely.

Mr._H_2

chucky wrote: »

the credit issues are with the sub-prime market

This is not correct. The mortgage credit issues in this country have spread market-wide. It is definitely not limited to "sub-prime". Many lenders now require 80% LTV, which if it lasts for a couple of years, will have serious consequences for anyone who bought or re-financed during the last 12 months and currently have >80% loan to value. It could also be having serious consequences for people currently re-mortgaging, depending on how house prices have changed in their area in the last two to three years.

Those people will then find that they cannot switch providers and therefore have no option but to start paying their current lender's Standard Variable Rate. This will stretch some people too far.

The critical questions are:

• How many people are remortaging now and really need >80% LTV?
• Will the 80% LTV requirement remain two years from now?
• How many people wouldn't be able to afford their current lender's SVR?

Mr._H_2

chucky wrote: »

you're wrong again...

Again? When was I wrong before? Presumably we're only using "wrong" to talk about factual statements rather than opinion; it's opening a can of worms to call someone's opinion "wrong". And in this thread I have a much better track record with factual statements than you, because I can read properly.

You said that credit issues are only sub-prime (an alleged fact, not an opinion), I said that actually, the problems are market-wide (again, an alleged fact, not an opinion).

What proportion of the market do you think was sub-prime? Did you know, that as of last Saturday, 40% of all mortgage products on the market had been withdrawn (according to the Guardian, quoting moneyfacts or moneysupermarket IIRC)? Did you not hear that Halifax increased their rates on new mortgages by 0.5%? Did you not hear that First Direct (not a sub-prime lender) withdrew entirely from the market (temporarily)?

Maybe when you said "issues", you actually meant something else. As it stands, what you said is wrong because there are demonstrably "issues" outside the sub-prime area of the market.

carolt

chucky wrote: »

i love Wednesdays.

Lovely sunny day, isn't it?

To anyone who has just joined due to the link in Martin's weekly email - welcome! :wave:

To all the regulars - we're famous....

Looking forward to lots of traffic on here in the coming weeks.

So - do you think house prices are going to crash, fall by a little, stay static, or have you just not read the papers?.....

My little joke.....;)

dudleyboy

I think that as long as everyone remains calm, as long as everyone remains vigilant and as long as everyone remains prudent, this current blip in the housing market will be completely containable. The UK currently has low inflation AND low debt levels and there is absolutely nothing to worry about.

Don't believe me? Then ask our Prime Minister...

http://news.bbc.co.uk/1/hi/uk_politics/7336642.stm

He used to be Chancellor of the Exchequer, don't you know, so clearly knows what he's talking about. Thanks, Gordon: it's good to know you've got your finger on the nation's economic pulse and I can't tell you how happy I am that I voted for you to be our PM.

Dan:_4

carolt wrote: »

House prices are falling, and posting lies/errors (delete as preferred) won't change that one little bit.

That could be regarded as a lie. Read the Halifax report and you will notice that some regions have risen or remained flat during March.

Dan:_4

Mr._H wrote: »

Many lenders now require 80% LTV, which if it lasts for a couple of years, will have serious consequences for anyone who bought or re-financed during the last 12 months and currently have >80% loan to value. It could also be having serious consequences for people currently re-mortgaging, depending on how house prices have changed in their area in the last two to three years.

...any many lenders require 95% LTV

merlinthehappypig

[FONT=Verdana, Arial, Helvetica, sans-serif]From Money Morning:[/FONT]
[FONT=Verdana, Arial, Helvetica, sans-serif][/FONT]
[FONT=Verdana, Arial, Helvetica, sans-serif]House prices saw their biggest monthly fall since September 1992 in March, Halifax reported yesterday.[/FONT]

[FONT=Verdana, Arial, Helvetica, sans-serif]A whole 2.5% in a single month – that’s £4,909 off the value of the average house, using the building society’s figures.[/FONT]

[FONT=Verdana, Arial, Helvetica, sans-serif]But don’t worry. Prime Minister Gordon Brown reckons everything will be fine. After all, “we’ve seen house prices rise by 180% over the last 10 years and they have risen by about 18% over the last three years, so a 2.5% fall is something that is containable.”[/FONT]

[FONT=Verdana, Arial, Helvetica, sans-serif]That statement is such nonsense, it’s hard to know where to begin criticising it. [/FONT]

[FONT=Verdana, Arial, Helvetica, sans-serif]But let’s have a try anyway…[/FONT]

[FONT=Verdana, Arial, Helvetica, sans-serif]The 2.5% fall is just the beginning[/FONT]

[FONT=Verdana, Arial, Helvetica, sans-serif]Mr Brown’s reassuring statement is simply disingenuous. Sure, house prices have jumped by 180% in the past ten years. But this 2.5% fall happened over the course of just one month. If you annualised that (multiply by 12), then that would be a 30% fall in house prices over the course of a year. [/FONT]
[FONT=Verdana, Arial, Helvetica, sans-serif]Of course, you can’t do that – the monthly figures are volatile, and I fully expect the Halifax index to see some sort of bounce (or at the very least, a much smaller drop) for this month, simply because the March fall has been so big.[/FONT]

[FONT=Verdana, Arial, Helvetica, sans-serif]The point is that – yes, a 2.5% fall would be containable if that was the end of it. But it won’t be. This is just the beginning of the crash. Certainly, we can’t expect the government to acknowledge that immediately. After all, it took at least a year and probably longer for the US authorities to begin to admit that there was no end in sight to the house price crash over there. But as that experience also shows, politicians can’t prevent bad news from happening simply by going into denial mode. [/FONT]

[FONT=Verdana, Arial, Helvetica, sans-serif]The bigger lie, however, is a much more fundamental one. Mr Brown’s statement suggests that the 180% rise in house prices over the past decade is a good thing. It’s not. It’s a bad thing. And it’s a bad thing regardless of what you believe has driven prices higher.[/FONT]

[FONT=Verdana, Arial, Helvetica, sans-serif]If you think that house prices have risen because of a supply and demand imbalance, then it shows that the property market is failing in some way. A rising price in this context warns producers (in this case, builders) that we need more of something (in this case, houses). The fact that prices have risen so far and for so long suggests therefore that our mechanism for satisfying housing demand is sorely lacking. That’s a failure of government ultimately, because it comes down to bad planning and confused building regulations.[/FONT]

[FONT=Verdana, Arial, Helvetica, sans-serif]If, as we do, you think the rise in house prices has much more to do with the availability of cheap credit, then that’s also a bad thing. Because it’s discouraged saving, and encouraged breath-taking levels of risk-taking behaviour amongst financially naïve consumers. I suspect that the carnage set to ensue due to the number of 100%-plus, interest-only and six-times-salary mortgages taken out in recent years will dwarf any mis-selling scandal we’ve seen in the past few decades. Certainly, I find it hard to believe that the property industry will escape this crash without having stricter regulation imposed on it.[/FONT]

[FONT=Verdana, Arial, Helvetica, sans-serif]House prices are now falling year-on-year[/FONT]

[FONT=Verdana, Arial, Helvetica, sans-serif]By the way, not many people pointed this out, but if you look at the raw data, house prices are now falling year-on-year. Halifax takes the three-monthly average and comes up with annual growth of 1.1%. But taking the March average house price of £191,556 alone, reveals a 1.3% fall on March 2007, when the average price was £194,094, and a whopping 4% fall on August last year.[/FONT]

[FONT=Verdana, Arial, Helvetica, sans-serif]So when the Halifax argues that we’ll see “low-single digit” price falls this year – well, we’re already there. Are things going to stabilise in the next few months? I doubt it. Expect to see that forecast downgraded to “high-single digit” before the end of the year.[/FONT]

dudleyboy

Extra help for first-time buyers

http://news.bbc.co.uk/1/hi/business/7335817.stm

"...
The government has announced new measures to encourage first-time buyers and key workers to participate in its affordable housing schemes.

There will be £1,500 grants to help qualifying buyers with costs such as solicitors' charges and furniture.
..."

OMG - I'M RICH!!! RICH BEYOND MY WILDEST DREAMS!!!!!! OH THANK YOU, GORDON!!!! THANK YOU!!!!!!!

Without wanting to burst anyone's bubble (oops - sorry! - figure of speech), this "initiative" is about as helpful as all the others this useless government has introduced (or tried to) over recent years to keep demand up and house prices inflated. £1,500 for solicitors' charges and furniture? Really? Really, Gordon?? Is that REALLY what you think will make everything alright?? Because, no offence, but I can AFFORD furniture! I can AFFORD solicitors' charges! Unfortunately, there's one thing I can't afford: any guesses what that is...?!

"...
Those who qualify include social tenants, key workers and some first-time buyers.
..."

Ah... I see!!! The same poor people whose taxes you've just increased! How very clever! With a master number-fudger like you in charge we'll be on the road to economic recovery in no time!

Again, how very pleased I am that I voted for you to be our Prime Minister.

Mr._H_2

merlinthehappypig wrote: »

The bigger lie, however, is a much more fundamental one. Mr Brown’s statement suggests that the 180% rise in house prices over the past decade is a good thing. It’s not. It’s a bad thing. And it’s a bad thing regardless of what you believe has driven prices higher.

Indeed. It's quite distressing how the media equate house prices with success of the economy. Rising house prices are a bad thing for most people. It only really benefits people who ultimately want to down-size, and people who've invested in the housing market (and got out at the right time = about 6 months ago or earlier).

For everyone else, it just increases the amount of money you have to spend to buy your home.

The media seem to enjoy making vague implications that a housing market crash is synonymous with recession. The two needn't go hand-in-hand.

merlinthehappypig wrote: »

If you think that house prices have risen because of a supply and demand imbalance, then it shows that the property market is failing in some way. A rising price in this context warns producers (in this case, builders) that we need more of something (in this case, houses). The fact that prices have risen so far and for so long suggests therefore that our mechanism for satisfying housing demand is sorely lacking. That’s a failure of government ultimately, because it comes down to bad planning and confused building regulations.

Why does everyone approach this from the "we must satisfy demand!" angle? What about suppressing the demand instead? We've only got one planet, we can't keep on building houses for ever and ever.