House Price Crash Discussion Thread

m00m00

there is no specific housing bubble, there is a massive generic DEBT bubble, housing is just one part of a much bigger, and gloomier picture. As a nation we have never been in more debt, and this is allegedly a boom time.

guidarufino

And this is a boom time. The economic growth of the past decade or so has largely been based on credit. Once upon a time, people saved up for stuff. Now they put it on their credit cards or remortgage their homes. Which is all well and good, nothing wrong with a credit lead boom until credit becomes more difficult or expensive to obtain.

m00m00

or the amount of credit is massively out of step with incomes.

there's virtually no doubt that the past few years have been a massive credit bubble, and there hasn't been a single bubble in history that has ended well, and this one will be no different.

the main issues now, are just how bad things are going to get in the short to medium term.

WTF?_2

pickledtink wrote: »

Although I'd agree on the whole with all you say there are other factors involved IMO.
The US sub prime crash had a knock on effect here as well. Also ours is not the only economy feeling the pinch which can't be laid at the door of the UK housing boom only.
Just not enough actual money to go round right now so nobody's buying.

The general drying up of money is because of the credit crunch -> which is a very direct result to the out-of-control lending linked to the booming housing market in the US .... and the inevitable resulting contraction when people (who borrowed way too much) started defaulting on their loans, en-masse.

So in a very real sense, crazy house price inflation has caused problems which have infected the global economy. Although I do realise that the house price inflation stemmed from a credit bubble, it's unlikely that a boom in say, gold, would have caused anything like the overall misery and knock on effect that a housing-market asset bubble and crash has done.

WTF?_2

m00m00 wrote: »

or the amount of credit is massively out of step with incomes.

there's virtually no doubt that the past few years have been a massive credit bubble, and there hasn't been a single bubble in history that has ended well, and this one will be no different.

the main issues now, are just how bad things are going to get in the short to medium term.

The answer to that is of course, very bad indeed.


Thanks to the out-of-control boom of the 'naughties' and the inevitable credit crunch from the collapse of the US housing market:

The banking/ financial services sector is going to be hammered by the crunch.

The retail sector will be decimated.

Life is going to get a lot more expensive and people are going to be struggling to make ends meet. Our living standards will fall noticeably.

We are going to see many, many people in negative equity and increasing numbers of repossessions because they borrowed too much to buy overpriced property.

But to really top it all off there is a not inconsiderable risk to the entire global banking system on which our way of life depends.


Yet idiots out there are still telling people to borrow 150k to buy their first house, not to worry just a blip in the market, it'll work itself out blah blah blah....

....totally bonkers. Totally irreponsible and arguably malicious if they are just doing so in the hope that new entrants to the pyramid scheme of HPI are going to give them the chance to get out or keep their illusory gains.

You know, there is not a lot than any individual can do to stop the slow-motion economic train crash but even a modicum of common sense towards joining in the HPI party would have left the average person in the UK a far better position at this moment.

As it is the only thing to be done is make sure that as few people as possible climb on board the sinking ship. Judging from the fact that we now have a proper group (instead of a single thread) and the media has finally turned, looks like the message is getting out at last. I just hope it's not too late.

pickledtink

!!!!!!? wrote: »

The general drying up of money is because of the credit crunch -> which is a very direct result to the out-of-control lending linked to the booming housing market in the US .... and the inevitable resulting contraction when people (who borrowed way too much) started defaulting on their loans, en-masse.

So in a very real sense, crazy house price inflation has caused problems which have infected the global economy. Although I do realise that the house price inflation stemmed from a credit bubble, it's unlikely that a boom in say, gold, would have caused anything like the overall misery and knock on effect that a housing-market asset bubble and crash has done.

Although it could be said this is a 'chicken- egg' scenario I think the provision of insane easy credit still has the edge. It's not only houses which people were buying with pretend money. We became a nation of shopaholic consumer wasters.
Now it's payback time.

On a personal note I never did it.A thrifty 'poor' childhood having made me deeply distrustful of getting into debt.
I only ever had a Mortgage and owe nothing else at all. However so prevalent in our society has been the 'spend spend spend and party on' mentality that I have felt slightly embarrassed at my anxious miserly ways.
Spending on plastic felt right because everybody was doing it without seemingly harmful effect. It became the norm.
I am now so relieved and grateful I didn't get swept up in it but many are going to be in dreadful trouble. Houses will be the least of it in some ways. Broken dreams and sorrow perhaps. Worse however is that some will find themselves without means of realistic support.

guidarufino

I myself have been guilty of living way beyond my means through credit in the past and am still paying for it now, though my house sale and the money I've made in the past 5 years is going to pay it all off with some left over for a deposit. And I think that's typical of a lot of people who got heavily into debt and relied on making money on their houses to pay it off. It's been all too easy to do that in the past and I think a massive readjustment in people's attitudes is needed.

I also think the whole borrow and spend thing is symptomatic of a deeper problem in our society that people think that money and buying stuff makes you happy. I know so many people who earn very respectable salaries, couples who earn £70k plus between them and still think of themselves as being skint!! It seems to me that, with a lot of people, no matter how much they earn, it's never enough because they're always going to want a bigger telly, a newer car, a swankier holiday, more clothes etc etc etc. I think you can drive yourself mad by buying into the whole consumerist myth. Buddhists have the right idea on this one!

pickledtink

Also everything was so cheap wasn't it? Food, booze, travel, clothes....
And plenty of free money to buy it all with.
Suddenly prices of the basics have rocketed too so even those who had some sense of budget are left reeling and scrimping

WTF?_2

pickledtink wrote: »

On a personal note I never did it.A thrifty 'poor' childhood having made me deeply distrustful of getting into debt.
I only ever had a Mortgage and owe nothing else at all. However so prevalent in our society has been the 'spend spend spend and party on' mentality that I have felt slightly embarrassed at my anxious miserly ways.
Spending on plastic felt right because everybody was doing it without seemingly harmful effect. It became the norm.
I am now so relieved and grateful I didn't get swept up in it but many are going to be in dreadful trouble. Houses will be the least of it in some ways. Broken dreams and sorrow perhaps. Worse however is that some will find themselves without means of realistic support.

Yeah - I managed to get myself in a position earning decent money about 7-8 years ago after a long time of living pay cheque to pay cheque. I had a good time over the last few years but have lived well within my means and now, at a time when things are looking mega-grim generally, it's paying off for me.

Now I've actually started to open the spending taps a bit. Have looked at my finances and decided I can afford a few luxuries .. and there are some great bargains out there at the moment thanks to retailers needing the business.

Assuming I keep my job in the coming recession (nothing I can do about that so no point worrying) I should be able to buy outright with no mortgage a couple of years down the line (worst case, 20% LTV). Will probably get a BTL shortly after that as an investment that'll pay off when I retire but only when the sums make sense.

Sooo glad I didn't jump into the housing market 18 months ago. I'd hate to think that someone reading MSE today might make a huge mistake like buying a house even in the current climate, so will keep putting the message out to wait until the time is right.

WTF?_2

dolcevita wrote: »

That's because people who invets in gold tend to do so with their own money and not with money they think is theirs, but is, in fact, borrowed.


Leverage is a double-edged sword which can cut you severely when it turns.

Agreed.

As pointed out by another poster here, there's a world of difference between spending on plastic/ overdraft etc. and actually handing out cash that you have worked hard to save.

It makes you think a lot harder about the value of things and in particular, the value of what you are buying.

And of course 'value' does not equal 'cash price'.