Housing market continues to slow....

Woby_Tide

meanmachine wrote:

In a stagnant or falling market the only people "throwing money down the drain" (what a deliberately emotive term) are the homeowners who bought in 2003/4/5. Everyone can see that.

2003/4/5 probably only relevant for those buying in the South, in Northern regions buying up to Q2 2004 still shows 15-20% rises in prices on the indices to current figures, buying in 03 sees increases up to 50%+.

GingeG

This is really frustrating.

Me and Misses Ginge are trying to buy property where we live in Hampshire all the vendors are refusing to drop prices even though they have been on the market since January. I dont want to be silly and buy at the peak but I feel I have no choice does anybody have any tips on negotiating prices?

Should I bypass the EA and go to vendors? I offered 195 on a 199 house and EA said he wasnt going to bother telling vendors!! !!!!!! I thought they had too

meanmachine_2

GingeG wrote:

This is really frustrating.

Me and Misses Ginge are trying to buy property where we live in Hampshire all the vendors are refusing to drop prices even though they have been on the market since January. I dont want to be silly and buy at the peak but I feel I have no choice does anybody have any tips on negotiating prices?

Should I bypass the EA and go to vendors? I offered 195 on a 199 house and EA said he wasnt going to bother telling vendors!! !!!!!! I thought they had too

My honest opinion this is that paying 97% in a falling, or even stagnant market is daft.

Whatever I think, what matters is the thought processes of the majority of proles. Homeowners have enjoyed 8 years of rising prices. They're in that mindset. If you must buy now, then you're going to have to pay top dollar.

But by Autumn the tabloids will be reporting negative house price indices, and your job might be easier. But to have a property on the market for 5 months and not to consider an offer like that is !!!!!! greedy/insane.

I do sympathise.

nelly_2

meanmachine wrote:

But to have a property on the market for 5 months and not to consider an offer like that is !!!!!! greedy/insane.

QUOTE]

Greedy is true! and funily enough the "greed is good" atitude was just in front of the last crash too.

Kenny4315

At present it is cheaper to rent than to buy, especially if you are a first time buyer. The mortgage on a property is more than the rent. Sure it would be fine buying in a rising market but you'll lose more than 12 months rent on a £200k house if the market falls by only say 5% to 10%, and you still have the mortgage to pay.

I have a friend in Reading he's been working in Brazil, and his company has been paying his rent until recently, the landlord now wants to sell the place offering him first refusal. The mortgage payments are more than the rent ! With prices stagnant and expected to fall, there ain't no point taking the plunge if your a first time buyer. Keep your nerve and hold it, these jokers who think houses will suddenly just level off for years are in for a shock, after a 100%+ increase in 4 years a correction is inevitable.

Pal

Personally If I was desperate to move I would wait until September/October before looking at houses. Wait until the market is starting to slow down for the end of the year and start making offers around November time when some people are getting desperate for their chain to complete for xmas. Others will be getting worried when the negative house price stats are coming through, and others will be getting worried that the number of viewings has fallen off and there are no other offers on the table.

The problem in the market at the moment is that the people selling their own houses are generally still convinced that houses are fairly valued. As a result they have probably offered full price for the house they are trying to buy, and so are refusing to drop their price on the house they are selling: they need the money to buy the house they want.

It is only when those "higher up" the chains start negotiating large price cuts that the price drops will filter through to the FTB's at the bottom of the chain.

The market is "holding its breath". Whether the eventual exhale is a sigh of relief or a rollercoaster-style full on scream is yet to be seen.

grebbo wrote:

You're presuming that people are going to want to sell if there's a price "crash". Why?

People are still going to need somewhere to live so why not stay in their home? People who get themselves into difficulty by borrowing too much might have to sell/get repossessed but these homes will be the minority.

The answer to this is simple. If the price of their house is falling, then the price of the house they are buying will also be falling. As a result, a house price crash for most people with reasonable equity in their homes will make little difference. When the housing market crashed in 92/93 there were still lots of houses being bought and sold, there were just a few more sellers than there were buyers, and a few people were being bankrupted so houses were being sold off cheap by the lenders, further reducing the market statistics.

The only people who will be hugely negatively impacted from a future crash are those who have bought in the last 5 years or so, who face the prospect of negative equity. A number of these people will be going bankrupt, and others will not be able to move even if they want to because of their debt.

This is the real danger of buying as a FTB at the moment. House prices are not going to rise significantly in the next 5 years or so. Where will the extra money come from? Prices might (in theory) bounce along at their current level for a while, but that is an economic conjouring trick that no Government in the history of the world has ever managed with any type of financial market, so is unlikely. All it takes is one external shock (rapid Chinese currency revaluation, oil supply problems, war with Iran/Syria, Embargo on chinese goods following invasion of Tiawan, collapse of the Euro... etc etc)

This makes house price falls a reasonable bet for a person to take. Even if house prices remain stable, with rents currently lower than mortgage interest payments, there is little sense in buying on financial grounds when money could be in the bank earning interest.

What many home owners seem to forget is that houses are not going to increase in value except by encouraging people to borrow even more. That puts the economy at even more risk of recession in a few years, which will damage the housing market to a far greater extent when it inevitably crashes again. An interest rate cut at this point MIGHT safeguard a few jobs in the retail industries for a short time, but it brings with it a far greater danger of deflation, job losses and massive housing market corrections in a couple of years.

Personally if I was a home owner (I was until December, now renting), I would be wanting interest rates to stay the same or increase another half a percent or so. House price rises do not benefit house owners unless they die or are selling to rent, as any paper profit is simply pushed back into the new house they are buying, the price of which was similarly inflated.

A slowly falling housing market, a minor recession and a healthy but controlled price correction is in the interests of the entire economy. Further increases in house prices are not.

Kenny4315

I agree with Pal views on the matter it is naive to suggest people will stay in their existing house if the market crashes, life will continue, moves will occur, jobs will change, family circumstances will alter, but prices will tumble as people wake up to reality. Some will have no choice in the matter of moving as the assumption that prices will rise continually does to materialise.

Had a bit of a laugh at one section of your mail though Pal.

Pal
'House price rises do not benefit house owners unless they die or are selling to rent'

Once I'm dead house prices won't worry me to much, I'll be concentrating on pushing up daisies, and they certainly won't be of benefit to me.

Pal

It increases the value of their estate, which some people might view as a benefit. Personally I don't care what Pal Junior inherits though!

Someone will mention people downsizing in retirement shortly, but that is an idea that has only started taking off in the last few years when stock markets have fallen and people have realised that they have not saved enough in their pensions. In practice if everyone decided to do it, there would not be enough people to buy the houses and so prices would fall.

Pal

Also, please note that I am not suggesting that house prices will crash. I am simply saying that the risk of house price falls (significant ones) is high at the moment, and the financial consequences of a house price fall outweight the possible gains from an unlikely (IMO) rise. The risk adverse option is therefore not to buy at the moment, but to wait and see what happens.

Of course the thing for all FTB's to do is to move back in with their parents for a year or two. That way rents will collapse as well as prices, forcing BTL landlords to sell up or be made bankrupt, and forcing house prices even lower.

However the number of Maternicide/Infanticide cases might rise dramatically!

EdInvestor

Also, please note that I am not suggesting that house prices will crash. I am simply saying that the risk of house price falls (significant ones) is high at the moment, and the financial consequences of a house price fall outweight the possible gains from an unlikely (IMO) rise. The risk adverse option is therefore not to buy at the moment, but to wait and see what happens.


There are 3 possibilities to my mind:

1)Prices resume upwards march

2)Prices stagnate for some time

3)Prices crash

1)requires a big cut in interest rates and IMHO instead we will get a gently tweak, so I think this is unlikely nationwide for a while

2) is quite a strong possibility overall IMHO, absent any major economic nastiness,though I wouldn't be surprised to see price corrections in some areas ( eg provincial city new build apartments). London and the SE have already been in stagnation mode for 3 years. Zzzzzzzz....

3) would require either major economic nastiness and/or further interest rate rises.Given that interest rates are widely perceived as having peaked,this seems unlikely. Also, if there was an outbreak of nastiness ( eg like the stockmarket bust in 2001-2), the Bank would be likely to cut interest rates, not raise them.

It should be clearer by the end of the year, so I agree the low risk strategy is to sit tight for now.

Always remember that all property is local and it's the extremes that make news in the media.Most people actually hardly experienced any change at all in the last crash - and some people's property went up in value over that time. Monitor your own area closely - it's behaviour might be quite different from the national trend.