House Price Crash Discussion Thread

codger

Lest anyone was still confused about what's happening, UK park homes manufacturer Tingdene Homes has issued a June newsletter which sets out the current situation in detail and provides reassurance for everyone:

"The market changed as early as 1st June 2007 when some high street lenders changed the criteria for people looking for a mortgage. In short, it became harder to borrow money. The market was slowing a little as a result of this, but this was not a new phenomenon, it tends to happen more than people outside of the industry know.

"The real issue was when the so-called Credit Crunch became a daily news article with the highest profile case being the "Northern Rock". They were not alone in getting their fingers burnt but certainly came off worst! Almost overnight the news was filled with horror stories of interest rate hikes and the likelihood of repossessions going through the roof. No news sells like bad news!

"What happens next is very much like a domino effect. The recovery, which is almost guaranteed, will be more gradual. The Bank of England have (sic) had a series of meetings with the lenders and have (sic) asked them to loosen their belts again. They (sic) have also pumped in large amounts of cash to stimulate confidence.

"The buyers are still out there. Once the lenders relax a little, things will eventually go back to normal, and we will wonder what all of the fuss was about!"


Nice to learn that things happen in the market "more than people outside of the industry know" (gosh: good job Tingdene is on the ball), that "what happens next is very much like a domino effect" (er, so you mean it hasn't happened yet?), and that a multiplicity of Banks of England have now told lenders to unbuckle their belts and have a nice sit down with a cup of tea.

All is going to be fine and dandy again and "we will wonder what all of the fuss was about!" (Though then again, we might also wonder what was meant by the ominous phrase: "The recovery, which is almost guaranteed")


I'm fairly certain this piece was not authored by an economics professor.

I'm less certain about the author's age.

irrelevant

I'm involved in trying to sell a house ... went on the market for £269K over a year ago. We accepted an offer of £250K earlier this year, got to exchange of contracts, and buyers asked for another £30K off ! Estate agent told them where to go, as he'd got another buyer lined up anyway... still, it's a pain in the neck as this makes selling atempt number three, each one bumping up the solicitors fees...

STEG_2

To be honest I do not have great understanding behind the housing market, but I have been watching the goings on both via the scaremongering Press and via MSE.

And trying my utmost to gauge the right time to buy, I am a FTB with my partner neither of us have ever owned our own home, but have rented for a number years.

Yesterday we wandered out and viewed our very first properties, the first was a home but a little to small, but the second I had to virtually drag my partner out of she put up a fight to leave!, the asking price is in the region of £200.000 but we are looking at giving a £160.000 to start the negotiation. We are not out to make a quick pound but looking to find our first home.

My question would be do you think we should cap our limit here we can afford in the region of £180.000, but with today’s market we just here “crash” this and “it’s all going to fall soon” that. We are confused about the whole thing and really do not want to take on the house “we” fell in love with (she made me type we J ). Just to find we are going to see a massive drop in a month and we could have bought it cheaper, and saved on our mortgage.

As seasoned pros in the housing market what would be your advice on this, all advice is greatly appreciated.

Thanks

_soapy_

I'd take care about asking for expert advice on this thread.

Having just read the 134 pages of argument, my eyes are very sore, along with my head.

With regards to your question, as a seller at the final stages of the rather terrifying yet utterly tedious process of selling his house, I'd suggest that you take a look at what your houses are selling for in the area you are buying in. Try and get one in the same street that is about the same, and as recent as you can find.

Now, I hope my buyers don't read this, but, currently, if you need to buy you are in a good position if you have the money, but if they need to sell, then you are in a very, very strong position. (I don't *need* to sell, but it was a long six months with an inept first agent. The second agents have sold it in a month. And it gets expensive paying for two places no matter how hard to work!)

Basically, I'd go for the option of having someone else put in a low-ball figure. Say £125k. This will set you up for your offer, of £150k. Remember, they can only say no, and you can always up your price a bit. If they are desperate to sell, then you will get them saying yes. After all, better they sell to you and clear the mortgage with £10k than have it disappear to the bank and auction house!

Note that if they bought the house in the last ten years, they might not be able to afford to sell it cheap. If, however, they got it off Maggie Thatcher in the 80's for £12k, then you are probably going to come out well ahead - but if they have no mortgage, they might not both selling...

So, there is no real answer without a lot more info from you, from them.

Hope this helps.

John_Pierpoint

Rent Rent Rent for 18 months.

mikelivingstone

STEG wrote: »

To be honest I do not have great understanding behind the housing market, but I have been watching the goings on both via the scaremongering Press and via MSE.

And trying my utmost to gauge the right time to buy, I am a FTB with my partner neither of us have ever owned our own home, but have rented for a number years.

<SNIP>
My question would be do you think we should cap our limit here we can afford in the region of £180.000, but with today’s market we just here “crash” this and “it’s all going to fall soon” that. We are confused about the whole thing and really do not want to take on the house “we” fell in love with (she made me type we J ). Just to find we are going to see a massive drop in a month and we could have bought it cheaper, and saved on our mortgage.

As seasoned pros in the housing market what would be your advice on this, all advice is greatly appreciated.

Thanks

STEG I am not setting myself up as a property expert, and actually I am very cynical of "property experts" most of whom are really just salesmen.

I have owned several properties over the course of the last 7 years (including Buy to Lets), so it is just long enough for me to remember being a first time buyer. Early 30s now.

My recommendation to you would be that you sit this tight for at least 18 months. Property has been badly overvalued since 2002, but property cycles are very long and this one just kept on running until it hit a wall. Even the main stream press is now reporting that prices will fall by 30% over 2 years. What you should do is keep saving and build a bigger deposit. The sort of house you seem to be looking for is a classic new development type, the builders have already begun to try and liquidate these, initially with incentives, but soon they'll have to admit they aren't worth the asking price and will have to drop the values.

If they are trying for £180k today, these will almost certainly be on for £125k late 2009. Its better the builders lose this money than you.

PS - Don't fall for incentives, like free furniture , cash back, guaranteed rental income etc etc. These are all just ploys to avoid dropping the price and lure in unsuspecting buyers who will end up overpaying. Eventually the builders have to sell or they go out of business, you are currently in a stronger position than them.:rotfl:

harryhound

Those of us lucky enough to live on the Eastern side of the country can tune in BBC World Service on a trannie at 648 medium wave.

I do like these programs, as they are delivered clearly and slowly in short words, for those without English as their mother tongue. So the swift and slick shallow thinkers no longer have the upper hand. Winston Churchill would have given them full marks.

There is a 10 minute program every day called Analysis and a 20 minute one called Business Daily.

Today Business Daily featured an interview with Israel's money man, who sounds a lot better qualified than anyone in our "tri-partide" system. To set the scene, this statistic was given "The increase in oil prices from 50 to 135 dollars per barrel, is transferring 2,600,000,000 dollars from consumers to producers (Yes each extra zero multiplies the figure by tenfold!) This is equivalent to putting a 4.5% tax on everything traded in the world". (and that is before we think about grain prices forced up by bad harvests, technical progress elsewhere, 1,300,000 extra mouths to feed every week, and easy money).

That set the scene as well for the ten minute Analysis of UK house prices that followed. In my opinion this ten minutes says all that needs to be said BUT it tries to end on an upbeat note about the economic outlook.
That is a shame because I cannot see how the world is going to adapt to a 4.5% + + levy on its standard of living, without serious inflation or a serious recession; probably both (Stagflation).

Logically the food imbalance should correct itself by capital investment, a switch to "inferior" food, (spuds with everything) and starvation of the poorest. However I doubt it is a perfect market and this result would be "achieved".

I cannot see such a simple solution to the the fossil fuel "shortage" - "green" energy is a low grade source of supply that will take 20 years to make an appreciable contribution.

Harry.

(At 09:00 I switched over to Radio 4 for an interesting discussion of the development of the Arab/Muslim empire 1,200 years or so ago. One of the tricks was to offer a 10% tax rebate to those prepared to get out their prayer mat 5 times a day. Now there is a thought. Perhaps Gordon Brown should offer the Saudi's some more tax kick back's for building mosques in the UK. That might keep our construction companies and their workers afloat.)

The World Service programmes are repeated on steam radio:
12:40 Business Daily
22:20Analysis
22:30 Business Daily
(so have an early night and curls up with the Ovaltine to hear the bad news)

Or you can use up some of your monthly band width and listen here:
http://www.bbc.co.uk/worldservice/programmes/analysis.shtml
http://www.bbc.co.uk/worldservice/programmes/business_daily.shtml

And just because I keep forgetting m00m00 's explanation of the stages of grief for the ending of easy money,
I've brought forward this reference:
http://en.wikipedia.org/wiki/K%C3%BCbler-Ross_model#Stages

Will the depression set in by next Xmas?

rizla01

In a good market people are only too pleased to have their prop put on the market for the value that their house WILL be in 3 mths time hence a prop worth 250k being marketed for 260k is not unreasonable and is common practice.


In a bad market vendors will NOT accept that their prop MUST be marketed at the price the property will be worth in 3 Mths time hence the undervaluing that people are receiving but unwilling to accept.

Human nature really.

What doesn't work here is that while the EA can likely predict the value in a rising market he is unable to predict a change to the drops that people are experiencing.

Also when the market (as now) is bad EA's aren't earning money so they will try to get you to put your prop on the market for well under market value so that they can turn a sale and make their buck.

Unfortunately it is they who are pushing the 'Facts' that tell us all that property is in a continual downward spiral. It is NOT as bad as they make out.

Newspapers have to carry bad news as it is what sells - we ALL know that - hence the scaremongering.

Banks are hanging on to their funds. This is simply an over-reaction to the Northern Rock fiasco. They are just being over cautious.

All of this has caused developers to stop building temporarily.

The drops will cease within the next six months and come the beginning of 2009, properties will start to sell again and not rise anymore for a year or two and then very cautiously.

Remember that Bricks will STILL cost 20p each and sand will STILL cost £30 a ton and all of the materials will cost the same (or more) and you cant build a house and sell it for less that it cost to build including the labour charge and the required profit (30%) to keep the builders afloat.

Greedy tradesmen such as Plasterers (£200 per day) and sparks, plumbers & chippies will HAVE to lower their charges so as to enable houses to be built and sold at realistic prices, enabling the developer to sell competetively priced homes, which will spur the property market on again.

Tradesmen and EA's are the enemy here.

In my view if you would like to get on the property ladder I wouldn't bank on much further decrease. Cash in NOW on peoples fear and offer £20- £30k under the asking in the hope of grabbing a deal. If you don't do it soon, you may well miss the boat.

Now continue the debate.:(

mikelivingstone

rizla01 wrote: »

<SNIP>
Also when the market (as now) is bad EA's aren't earning money so they will try to get you to put your prop on the market for well under market value so that they can turn a sale and make their buck.

Unfortunately it is they who are pushing the 'Facts' that tell us all that property is in a continual downward spiral. It is NOT as bad as they make out.

Newspapers have to carry bad news as it is what sells - we ALL know that - hence the scaremongering.

Banks are hanging on to their funds. This is simply an over-reaction to the Northern Rock fiasco. They are just being over cautious.

All of this has caused developers to stop building temporarily.

The drops will cease within the next six months and come the beginning of 2009, properties will start to sell again and not rise anymore for a year or two and then very cautiously.

Rizla01 - You are far to optimistic if you think this will be over by the beginning of 2009. Seriously have you not been reading some of the more informed press and comment by leading economists.

The UK is borrowed up to the hilt, and people can't afford the repayments. The banks know this and so are raising interest rates to cover current and future defaults. This will keep lending rates high irrespective of the base rate. Whilst on the subject of the base rate, this is going to hit 5.75% again as the BoE is forced to battle inflation. If it doesn't, then fuel will keep going up and so will the cost of food etc. As a result already stretched consumers and homeowners will be plunged further in to poverty, resulting in more defaults. So catch 22 really.

Where will it end? Once a good proportion of the debt has been cleaned from the system, either through default and bankruptcy or as people pay down debt. In the course of this happening house prices are going to fall by at least 35%, we are heading back to 2001, and some people can even foresee a 15 year bear market in property.

mikelivingstone

Here is a good article from today's Guardian which reinforces what I had written above. Basically the housing market is going to be a complete disaster for the next 3 years and will probably then take until 2015 to even start recovering.

http://www.guardian.co.uk/business/2008/jun/29/housingmarket.creditcrunch