House Price "Crash"

Graeme7777

Hi,

As someone who doesn't watch house price movements nor the prophecies of either the optimists or the pessimists, I'm afraid that I'm at a loss as to how the current situation can be described as a "crash". Newspaper headlines blaze that some survey has recorded that the average house price is something like 5% cheaper than it was a year ago. Given the stellar price rises during the past few years, why are such small downward moves such a big deal?

Or am I totally missing the point?

Thanks!

m00m00

because -5% is a big drop from 10%, and the issue has been the massive change in sentiment.

the year on year figures will get a lot more interesting when we get to the anniversary of the credit crunch period.

Lotus-eater

Lets call it a small spot then, which could grow into a massive humongous white puss filled thing hanging off your face.
Or that fantastic miracle cream called "interest rate cuts" could come along and clear it up....... only for it to re errupt a year later, now much angrier due to being held down.

Erm, does that help??


Please don't say interest rate cuts won't stop it now :rolleyes:

PasturesNew

A crash is a long-winded, slow thing. It starts with what we've seen recently - and either continues to tumble down, a property here, a property there ... a bit at a time, or it just bumbles along doing not much for quite a while.

At the moment all you can hear is the crack of the ice on the deck of the Titanic. The band stopped playing, and have now been told to play on. A few people are up on deck checking out the large lumps of ice. But we know where this story's headed.

bankersmug

PasturesNew wrote: »

A crash is a long-winded, slow thing..

That's exactly what a crash isn't!

Surely the term "crash" is used to signify an abrupt drop in House prices, or at very least a steep decline?

IveSeenTheLight

Graeme7777 wrote: »

Hi,

As someone who doesn't watch house price movements nor the prophecies of either the optimists or the pessimists, I'm afraid that I'm at a loss as to how the current situation can be described as a "crash". Newspaper headlines blaze that some survey has recorded that the average house price is something like 5% cheaper than it was a year ago. Given the stellar price rises during the past few years, why are such small downward moves such a big deal?

Or am I totally missing the point?

Thanks!

I agree with you, You need to look at individual properties and posibily regional areas to find if their property prices have crashed.

At the moment it is still a lot of speculation (as to how far prices will drop by). No-one really knows.

I guess trully, you can only call it a crash after you have the detailed figures for the property but as you say, if you compare with the recent rises, maybe correction is a more "PC" term.

If you have a property that goes into negative equity, but you can still afford the monthly payments, then there really is not an issue for you. When you buy a property you secure it at that price, of course the paper valuation may go up or down, but you have agreed to service that loan.

Some people will say the smart thing was to sell your property and move to rent, securing a higher capital for you to re-invest in. This is just market speculating, it could work fantastically in that you could by back a similar property and have less capital to pay resulting in a shorter amortization period.
Again you have to speculate for this. Good if you did this at the right time and make a packet, I applaud you:T :T :T , not so good if you misstime the speculation and have seen prices continue to rise in the last few years and now are hoping for a larger drop to ultimately proove your decision to be correct.

Of course, you have to weigh up rent costs and other associated issues regarding renting and not owning your own place.

Some posters regard that the rent to mortgage interest ratio is a good indicator and I could agree with this. It does however sound like there are area where the mortgage is way over what they are paying in rent and they may find that themortgages never drop below the rent for a property a LL secured many years earlier. Will they retn forever, or will they re-evaluate at some point if their desire to become a home owner increases. Only each individual can assess that

Getting back to your post, in a falling market, it may make sense to wait before investing until the market stabilises, so you have less capital to repay. Again, this is a decision needs to be taken individually as there are other factors to consider both personal issues and securing mortgages / higher interest rate deals

The key thing in all of this is affordability, both for capital and for monthly payments.
People will start buying again when they view both as affordable

PasturesNew

bankersmug wrote: »

That's exactly what a crash isn't!

Surely the term "crash" is used to signify an abrupt drop in House prices, or at very least a steep decline?

Houses are an illiquid asset. As each is individually owned and marketed, you don't get somebody arbitrarily writing down the prices by 20% overnight and it being taken on board.

It takes months for sellers to market their house, find out there's no interest, then be talked into dropping the price by the agent. This happens house by house. And still new sellers enter the market place wanting their house to be put up for sale at the highest price any EA suggests they might get for it.

Hence it is slow.

Even if all the newspapers tomorrow announced "it is now illegal for any mortgage to be issued at more than 3x a single salary, and this will never ever change" sellers would still begrudgingly knock a bit off here and there over a long period of time. So it's all very very slow.

beingjdc

bankersmug wrote: »

That's exactly what a crash isn't!

Surely the term "crash" is used to signify an abrupt drop in House prices, or at very least a steep decline?

Then we didn't really have a crash in 1989-1995 either. Because even then prices 'only' fell 9% in a year from the peak.

This time they're down 6% in 6 months.

mystic_trev

Stuart Law - CEO of Assetz, the man who predicted House prices would continue to rise YOY (even in April!) has conceeded that they are actually falling, but can't use the word:rotfl:

We are in a period of weakness

http://news.assetz.co.uk/articles/4210.html

dannyboycey

Lotus-eater wrote: »

Please don't say interest rate cuts won't stop it now :rolleyes:

They wont.

abaxas

dannyboycey wrote: »

They wont.

Exactly,

The prices is irrelevant if the item is out of stock.