Housing market continues to slow....

deemy2004

interest rates are still technically low -

The problem is that at the end of every strong bull run i.e. the economy, house prices, there is ALWASY a correction to get rid of the froth... of which there is alot so its the natural economic cycle for there to now be a retracement as things have run away... i.e. house prices, both private and government debt..

Its just natural for there to now be a correction which may include a mild recession.

dougk_2

I take it the figures are based in monetary terms not "quantity" of goods?

With the real price of items i.e. food, clothes and electrical items falling (more competition between supermarkets for instance), Is it not a case that as much goods are being sold, just at lower prices?

Therefore perhaps people are spending less becuase The items they want are cheaper rather than buying less?

John_M_Business

deemy2004 wrote:

interest rates are still technically low -

Compared to what? Historical data from the UK in the last three decades... yes. But the Eurozone? ... NO! We are moving closer to the Eurozone year by year and therefore the Interest rates are likely to stay low for a while.

deemy2004 wrote:

The problem is that at the end of every strong bull run i.e. the economy, house prices, there is ALWASY a correction to get rid of the froth... of which there is alot so its the natural economic cycle for there to now be a retracement as things have run away... i.e. house prices, both private and government debt..

No, just a strong correction the last time. In terms of debt, we are HISTORICALLY moving from an age where borrowing was frowned upon to something that is managed. Of course there are people that end up bankrupting themselves or moving down the ladder (i.e. offloading debt on house sales), but most people manage some kind of debt nowadays - even if it is their mortgage. This COULD be a sign of impending doom, equally it could be a sign of mature financial management.

deemy2004 wrote:

Its just natural for there to now be a correction which may include a mild recession.

Perhaps... but maybe we have been in that 'correction' since early 2004 and because we didn't have the huge 'boom' of the late Eighties, we won't have a huge 'bust'. And, because we are in more stable conditions, the bust isn't going to happen. Maybe we're in a period of stagnation before the next rise. Economists are predicting an improvement next year - house prices may even go up!!!

ABCDiamond

bridiej wrote:

even though I seem to have deja vu of having this same conversation about house prices every week!!

Bridiej

Hi Bridie
It's the same everywhere isn't it

Just thought i'd pop in and say hello :beer:

deemy2004

John_M_Business wrote:

Perhaps... but maybe we have been in that 'correction' since early 2004 and because we didn't have the huge 'boom' of the late Eighties, we won't have a huge 'bust'. And, because we are in more stable conditions, the bust isn't going to happen. Maybe we're in a period of stagnation before the next rise. Economists are predicting an improvement next year - house prices may even go up!!!

Errr we have had a huge boom, which is manifested itself in record employment, record high house price multiples, and record breaking GDP growth

Infact the chancellor keeps reminding us, we have had the longest period of growth for over 200 years. You can't get much big of a boom than what we have had which has taken us from 20% behind France in GDP terms to ahead of France.

Now follows the bust... The PROBLEM IS that no matter how competant the BOE, chancellor maybe, things when they move into the bust phase tend to gather a momentumn all of their own and there is nothing much a goverment can do about it other than try and time to happen just AFTER they get re-elected ... hint... hint...

As we all know the housing market moves very slowly i.e. the stock market moves minute to minute, the housing market month to month !

Thus literally the timing can be off from half a year to several years ! But the trend is suggesting that the housing market year and year growth will go negative sometime this year, and trends tend to persist for a while.

The housing market will move lower, slowly... (apart from a sharp drop over 1 quarter), over several years, maybe as many as 4, maybe not more than a few % a year, but the drift will be lower and over a protracted period of time.

bridiej

ABCDiamond wrote:

Hi Bridie
It's the same everywhere isn't it

Just thought i'd pop in and say hello :beer:

Hey, good to see you over here

Yes, you're so right! If only we all had crystal balls eh?! LOL!

ReportInvestor

John_M_Business wrote:

In terms of debt, we are HISTORICALLY moving from an age where borrowing was frowned upon to something that is managed.

Something to factor in to the house price equation regarding first time buyers is rising student debt (which might or might not be managed). This is ongoing and has several factors ratcheting up the overall effect on housing up to and beyond 2020.

1) The student population doubled between 1990 and Tony Blair. Recent surveys suggest that graduate starting salaries are doing well if you have studied the right subjects at the right university - but there will be many others in the lower half who do not get a significant salary boost.
2) The first student fees 1K pa = 3K for an average course were introduced around 1997. These people are now joining the first time buyers hopefuls.
3) The first students to pay 3K pa = 9K total fees will start in September 2007 and hit the job market in September 2010 and the housing market in about 2015. Their average debt will rise to over 20K.

Even before this fully works its way through the system, banks and building societies are responding with more 100% mortgages e.g. Leeds BS yesterday, guarantor mortgages and shared mortgages [ugh!].

The overall effect might not be house price falls. We might just see a decline in the rate of owner-occupancy, in spite of the efforts and propaganda of our government.

meanmachine_2

I honestly don't know anyone of my generation late 20s/30s who doesn't have AT LEAST £15K's worth of "bad debt" - apart from me that is, and I'm regarded as some kind of tight freak.

Add to that mortgages x5 or even six times their salary, and suddenly you can understand why a teeny tiny rise of int rates has suddenly caught everyone by surprise.

God knows what would happen to this generation if they actually had to go through a recession. They simply wouldn't be able to. They'd go bankrupt.

No wonder bankruptcy has just been made easier - people know what's coming....

Self cert mortgages are the new "endowments", except banks have nothing to answer for as the borrower is the one who lied.

John_M_Business

Reporter wrote:

Something to factor in to the house price equation regarding first time buyers is rising student debt (which might or might not be managed). This is ongoing and has several factors ratcheting up the overall effect on housing up to and beyond 2020.

Sure. But Students straight out of Uni are not the same as 'First Time Buyers'. These are more likely to be:
a) Professionals 30-40 agegroup
b) Non-students who have been working since 18 years of age
c) Jammy dodgers with rich parents / inheritance

Reporter wrote:

1) The student population doubled between 1990 and Tony Blair. Recent surveys suggest that graduate starting salaries are doing well if you have studied the right subjects at the right university - but there will be many others in the lower half who do not get a significant salary boost.
2) The first student fees 1K pa = 3K for an average course were introduced around 1997. These people are now joining the first time buyers hopefuls.
3) The first students to pay 3K pa = 9K total fees will start in September 2007 and hit the job market in September 2010 and the housing market in about 2015. Their average debt will rise to over 20K.

Again, not everyone is a buyer. About half of my mates from Uni have not bought yet... and some don't even plan to in the near future. You don't need 100% first time buyers for a marketplace.

Reporter wrote:

Even before this fully works its way through the system, banks and building societies are responding with more 100% mortgages e.g. Leeds BS yesterday, guarantor mortgages and shared mortgages [ugh!].

Sure. But again that's because the range of options has increased to meet the needs of the marketplace. The FACT of the matter is (sorry, but this is a real fact, not a phoney one) that people are carrying more debt because there are more ways in which to do so, and more financial institutions willing to provide assistance. In the end, it's not a bad thing because all sides understand the possible ramifications.

Answer this: why would banks now be offering 100% mortgages, self-certification, shared mortgages, negative equity protection etc. if they DID think that the market was going to tumble?

Reporter wrote:

The overall effect might not be house price falls. We might just see a decline in the rate of owner-occupancy, in spite of the efforts and propaganda of our government.

Yes. But the reality is that we are seeing a NET fall in relation to the rest of the economy. Rather like the point the person made earlier regarding our performance v. France (i.e. 'we've gone up 20%')... no, we've gone up about 5-6% - they've plummeted 15%!!

£15k of debt should take the average sensible student about 3-5 years to pay back (depending on starting salary). If they don't then they won't be first time buyers in the foreseeable future. This doesn't even take into account that most are helped in some way or another by relations and parents in getting their first deposit down. NOR does this take into account that if a Graduate has a deposit they can usually secure a mortgage regardless of debts elsewhere (within reason). NOR does this take into account that historically Mortgages were secured on one salary and now it is on combined salaries.

ReportInvestor

John_M_Business wrote:

Sure. But Students straight out of Uni are not the same as 'First Time Buyers'.

That's why I suggested that the effects on the market would reach beyond 2020. A long overhang sort of impact.

why would banks now be offering 100% mortgages, self-certification, shared mortgages, negative equity protection etc. if they DID think that the market was going to tumble?

You've got a point. But the UK mortgage market is over-saturated with lenders - and most have short term targets to meet, on which directors' short term bonuses will be based.

£15k of debt should take the average sensible student about 3-5 years to pay back (depending on starting salary).

We'll see. How sensible is the average person? The £10K they will owe the government will be collected at a tax rate of 9% of salary on earnings over £15K (average graduate starting salary is about £21K so it will take longer than you say). I accept that the rate of interest on money owed to the government is very low (linked to inflation). It is the other debt that concerns me most. And the average total debt will go above £20K for those graduating in 2010.

NOR does this take into account that historically Mortgages were secured on one salary and now it is on combined salaries.

As you say, this change is already factored into the market.