Housing market continues to slow....

deemy2004

Back to our favourtie topic - HOUSE PRICES !

According to the latest reports .. House price inflation has continued to slow dropping from 7% to 5% in May 05, this as last years mad house bidding frenzy moves out of the indices...

We are fast approaching the critical point when year on year house price inflation turns NEGATIVE !

Perhaps around October this year the first house price falls year on year will be recorded which are likely to send shock waves through the economy... Eventhough they know its coming... it does not register until it happens.

Why October ? Well October is a good month statistically speaking for financial shocks ! So would time well with a hit on the financial markets... though not to get sidertracked too much no I'm not talking about a crash for if I knew in June that the markets are going to crash in October I would be an instant billionare...

bridiej

Oh no, just a few more months is all we need, hopefully house going on the market July............

Welsh_John

Once the pace of people losing their jobs picks up as surely it will and the difficlties set in,then the market will become more negative as time goes on. The government & Financial Institutions will not say this will or could happen for fear of causing a panic. Stash the Cash as Cash is King!!!!

meanmachine_2

The thing is though that house prices *are* still rising, plus these figures are seasonally adjusted (downwards, I'm guessing), so in actuality the rises could be a little higher.

Naturally it's in my interests to see prices come down - and come down hard - but I still can't see the trigger that is going to cause this.

As vendors on this board keep explaining, they're really in no great rush to sell, no forced sellers, so tiny reductions here and there sound like a stagnant market to me, which helps no one.

If prices stay flattish for the next few years, while wages slowly catch up everyone loses out. Of course the biggest loser will be estate agents, and I can live with that.

deemy2004

The trigger will be the actual negative house price growth headlines !

At the moment house owners / sellers still have not shaken the mindset of rising prices.. hence they are NOT dropping asking prices... As long as year on year growth is positive they are reluctant to cut prices as in their mind house prices are NOT falling.

When it goes negative, which it will for that is the direction we are trendign towards ... CRUNCH !!!!

And once some start dropping asking prices, so will follow others.. Like I said in several posts... The crunch will be a fall of some 6% or so in just one quarter ! As their will be a change in sentiment amongst the majority who still percieve rising prices as a against falling prices.

Its the reason why financial markets suddenly plunge when a support level is broken ... for no other reason then that break of a support level leads to a change in sentiment amongst the majority from bullish to bearish, usually at the time the media picks any piece of bad news to explain the drop - but the truth is the reason for the drop IS the break of the support level not the NEWS !.. THAT major support level for the housing market is YEAR on YEAR growth...

meanmachine_2

Fair enough, although I think the money markets are a little different to the housing market. For one thing, property is bought and sold by punters (ie non-experts!)

But weren't house prices flatlining in 2000/1? And what did the government/BoE do? They slashed int rates.

I can see the Bank doing exactly the same thing again this time, plus coupled with SIPPS next year, isn't that going to keep the market from crashing?

(I hope I'm wrong, by the way)

dougk_2

There is a big difference between static or small increases (under 2%) and price falls.

If prices do not physically drop over the year (i.e go negative without any seasonal adjustments) then I can't see there being to much of a problem. A 1% increase is just that a 1% increase.

kinesin_2

1% is 1% - Which is still below inflation. i.e real price fall

Looking at the nationwide report for today shows that house price grow for the past quarter is below inflation. :T

lady123_2

i can't see a crash ahead as interest rates are low but it wont be a bad thing if the slow down continues, prices are just up on last year according to my estate agent,(who is a friend) but not much, he was saying that the market is slower than last year but still ticking along ok in my part of london for bottom end propert's priced up to 250,000 as buyers dont really want to go above the 3% stamp duty, he did say that house's priced up to £1m are haveing to lower there asking prices by bigger percentage of asking price as buyers are affraid to commit to that level of debt.
i think demand will increase towards the end of the year due to the new pension rules but dont think that will mean a rise in the market, prices are leveling out but we are still stuck between what sellers want and what buyers are willing to pay

dougk_2

Kinesin , however 1% of £157,000 average house is £1,570

3% inflation on a £25,000 salary is £750.

Therefore unless you have the substantial savings the house still "pays out" more than just sitting and waiting.

Also many people today do not save money - they spend all they earn in one way or another.

deemy2004

LOL

3% is applied to every thing not to pick and choose.

Okay 160k invested in a savings growth over 3 years at 5% = a real terms growth of £10k in todays money.

1% growth in house prices over 3 years = a realterms fall of £10k in todays money.

Hence a £20k difference !

Like I say the real crunch will come when theres a shift in sentiment from greed to fear - That will come when people realise that house prices are actually falling year on year... It will probably occur sometime later this year...