House Price Crash Discussion Thread

Jazzypap

The BOE matters little. House prices are inflated but people aren't buying because mortgages are so expensive. This is explains the slow down in the housing market. House price drops are minimal compared with real increases - still 5% more expensive than they were this time last year.
I've seen posts that date back to 2005 harking on about the 'crash' and the same posters are back (if they ever left!) droning on again. If mortgage rates were back at 4.2% etc. people would be back in their droves to buy a property, regardless of the price. Given the hype from the media, I would imagine they would try to grab a 'bargain' but sellers will just hold out on stupid price reductions and wait until the market turns in their favour, which at some point it always does.

tradetime

Jazzypap wrote: »

The BOE matters little.

In the short term that would be correct.

Jazzypap wrote: »

House prices are inflated but people aren't buying because mortgages are so expensive.

That would only be partially correct because it ignores the fact that far less credit is available, banks are unwilling to lend at previous levels, if you require a multiple of 5x your salary it doesn't matter how "cheap" mortgages are you're not getting one.

Jazzypap wrote: »

This is explains the slow down in the housing market. House price drops are minimal compared with real increases - still 5% more expensive than they were this time last year.

I believe that's probably inaccurate, assuming you are talking about the UK as a whole, but even if it were accurate it will have reversed by the end of the summer.

Jazzypap wrote: »

I've seen posts that date back to 2005 harking on about the 'crash' and the same posters are back (if they ever left!) droning on again. If mortgage rates were back at 4.2% etc. people would be back in their droves to buy a property, regardless of the price.

Couldn't say, wasn't here, again, the rate is irrelevant if the creditors are not willing to lend, and economic activity cannot support the debt.

Jazzypap wrote: »

but sellers will just hold out on stupid price reductions and wait until the market turns in their favour, which at some point it always does.

Those who can likely will, those who can't won't, as for the market, yes it always turns in someones favour, however that is little consolation if by the time it does it is miles away from where it was.

baby_boomer

The cause of the price fall is that you can't borrow the money.

It's not as if we all go round with £250K stuffed in our back pocket as loose change .

Lending has collapsed as much this year as it did between 1989-92. And prices will head south more rapidly, too.

tradetime

rizla01 wrote: »

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.

Human nature, and human ignorance, they fail to realise they are operating in a market, and whether they like it or not markets are cyclical, they go up and down.

rizla01 wrote: »

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.

EA's are just as able to predict value in a declining market as they are in a rising market, it's just that their clients don't want to hear it so they don't.

This is an example of what I mean about failing to understand markets. "Market value" is set by the market, it does not have some arbitrary value decided solely by the seller or the buyer. When a buyer and a seller meet and agree a price,that is market value, it is irrelevant what it was before or what it will be later, prices rise because those transacting agree that their prices should be higher. All that everyone else - including those who own some of that asset and those who do not - need do is nothing.
Conversely, for prices of assets to fall, it takes only one seller and one buyer who agree that the former value of an asset was too high. If no other bids are competing with that buyer's, then the value of the asset falls, and it falls for everyone who owns it. If a million other people own it, then their net worth goes down even though they did nothing. Two parties made it happen by transacting, and the rest of the people made it happen by choosing not to disagree with their price.

rizla01 wrote: »

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

I think this one phrase sums up your complete inability to comprehend what is unfolding in front of you.

rizla01 wrote: »

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.

There's more chance of England winning Euro 2008 tonight, than this being over in 6 months.

rizla01 wrote: »

Tradesmen and EA's are the enemy here.

Possibly, but they're only a symptom, not the cause, the cause was a combination of reckless lending by financial institutions and greed and ignorance by the participants

rizla01 wrote: »

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.

Here I can actually conditionally agree, if the property is priced in the £100k - £120k mark. As for the "boat" the only one sailing now is the Titanic, there'll be safer boats later, unless of course you can get the aforementioned discount in which case you'll have a seat reserved on one of the lifeboats and some warm weatherproof clothing.

neverdespairgirl

Jazzypap wrote: »

If mortgage rates were back at 4.2% etc. people would be back in their droves to buy a property

If wishes were horses, then beggars would ride....

moanymoany

Even if interest rates were down the new criteria would force out many would be buyers.

If someone has a large debt to support, with the increases in all other prices - food and oil products, fuel etc. it is difficult to see them wanting to add an outgoing they can't back away from.

If they are renting they can downsize or even move back home if it all hits the fan.

John_Pierpoint

Roger Bootle (of Capital Economics fame) has been on the box, resisting the temptation to say "I told you so", in response to the news that the volume of mortgages is down 66% over a year ago.
Rogers latest forecast is "Down 15% this year and 35% within 3 years.

tradetime

John_Pierpoint wrote: »

Roger Bootle (of Capital Economics fame) has been on the box, resisting the temptation to say "I told you so", in response to the news that the volume of mortgages is down 66% over a year ago.
Rogers latest forecast is "Down 15% this year and 35% within 3 years.

As I watch the situation unfold, I can relate to those figures.

Melgard

Hi, I'm new to this forum and I've been trying to read all the posts but there are so many on this topic so sorry if I'm repeating previous questions. Myself and my partner are first time buyers and we've seen a house we both love and is ideal for us to live in for a long time. It's on for £275,000 but we've been told he will take an offer. Do you think it would be sensible in today's financial climate to make a very low offer (say £220,000 then possibly go up to £240,000 if he doesn't accept)? Do you think the first offer is too low? Or is it a totally wrong time to buy? We live in the South East if that makes any difference.
Thanks for any advice.

codger

Melgard wrote: »

Hi, I'm new to this forum and I've been trying to read all the posts but there are so many on this topic so sorry if I'm repeating previous questions. Myself and my partner are first time buyers and we've seen a house we both love and is ideal for us to live in for a long time. It's on for £275,000 but we've been told he will take an offer. Do you think it would be sensible in today's financial climate to make a very low offer (say £220,000 then possibly go up to £240,000 if he doesn't accept)? Do you think the first offer is too low? Or is it a totally wrong time to buy? We live in the South East if that makes any difference.
Thanks for any advice.

Depends on when the property was put on sale and what the original asking price was. If it went on at £275k several months ago then the price reflected market strength and general economic factors prevailing at that time so is way off now. If it went on at £325k several months ago then the price now reflects market weakness and prevailing economic factors. If it went on at £275k yesterday then ditto, also.

As you'll see, it's all about timing. If you don't know a sale price provenance, you're flying blind. As is anyone who may wish to help you.

As to offering, say, £220k and going up to £240k: again, if you're flying blind, then any figures you're coming up with are going to be finger-in-the-air rather than finger-on-the-calculator.

For example: in the following scenario, I'd be looking to buy at £51,000 below the asking price. Huh?

1) £275k house, been on market several months, no price drop between listing and now. Factor in 5% "market value" drop. So "actual" price is 5% off the original: £261,250.

2) £261,250 still incorporates negotiating head-room built into original figure. So factor in 5% head-room drop. House now down to £248,187.

3) The £248,187 may indeed be the figure the seller has in mind. But it shouldn't be yours. That's because the question of timing comes into this yet again: the seller's financial condition now; the buyer's financial condition tomorrow. Thus, the following questions:

Are you going to be better or worse off or in still the same financial position six months hence?

Is the UK as a whole going to be ditto?

Well, as your own household purse is going to be hit progressively harder by rising food and fuel costs over the coming months, the answer is: your finances are in as much of a downturn as the UK economy.

You're going to need more money available for non-mortgage payments than you do now. So that means, a mortgage taken on today must legislate for the level of disposable income needed tomorrow. So:

4) To hell with that £248,187 commitment. I need it to come down by 5% so my mortgage repayments don't eat so far into my income that I can't afford all the rising costs I'm going to face elsewhere. So: £235,777.

5) Ah. And now it's just dawned on me, I'm not unique. I am not The Last Person In The UK who is looking to buy a house. Other people will be looking to buy in a few months' time when domestic purses will be being stretched even more than they are now. Which means yet further downward pressure on UK house prices. So:

6) To hell with paying out £235,777 now for something that won't be worth that tomorrow. I want another 5% off today to contend with value drops tomorrow. So: £224,000.

£51,000 off.

Question: is that "realistic"? Answer: No-one knows. Because there is no definition of "realistic" value in the housing market, and never has been. Over all the long years of UK home ownership, only one truism has consistently applied:

A House Is Worth Only That Which Someone Else Is Prepared To Pay For It.

Ends.

So, in the above scenario -- which for all I know doesn't apply anyway if that £275k property only came on the market last week -- I'm going to make a self-protective offer of £224,00. And the seller is going to make a self-protective rebuttal of: clear off. (Or not.)

And then someone else is going to come along who needs a much lower mortgage than I do, can therefore afford to finance a higher purchase price than I can, and that's it, all over: house sold for £230,000. Or £235k. Or £240k. (Or not.)

Or: it now turns out, the house came on at £275k last week and identical properties in the same area were £325k only a short time ago. So all the above math is wrong anyway.

Bottom line: where actual figures are concerned, no definitive guidance can ever be given to any individual because every individual purchaser's circumstances, and every individual seller's circumstances, are different. And, as mentioned above, if you do not know the purchase price provenance, you're stuck anyway.

All that can be said is that -- contrary to whatever woolly thinking continues to manifest itself on this particular thread -- the UK economy is in trouble, lenders are in trouble, and the long-overdue cyclical downturn in a ludicrously over-valued UK housing market is only in its early stages.

If you don't need to buy now, then rent. And wait, and watch, because as New Labour never said, way back in 1997:

"Things can only get worse. . . Things can only get worse."

Good luck (and welcome to the MSE boards!)