How can house price's fall so much??

Hairy_2

I cant help but notice that there seems to be loads of scaremongering on this site. People saying house prices will drop by over 50% in some cases.

I may be wrong here, but how is that possible. Let me explain.

If you owned a house worth £300k and all you could get for it was £150k you simply wouldnt sell. So how the heck are house prices going to drop that much? People simply wont sell. Even if prices drop by 25% I doubt many people would sell, they would stay put, surely?? I am by no means an expert, but isnt this common sense??

m00m00

the same way they can rise as much as they have

there's no intrinsic economic reason for houses to be any price

Bogof_Babe

I just hope the HPC is not as dreadful as the millennium bug was - remember that, it wreaked absolute havoc.... erm, didn't it?

chrisandanne

Hairy wrote: »

I cant help but notice that there seems to be loads of scaremongering on this site. People saying house prices will drop by over 50% in some cases.

I may be wrong here, but how is that possible. Let me explain.

If you owned a house worth £300k and all you could get for it was £150k you simply wouldnt sell. So how the heck are house prices going to drop that much? People simply wont sell. Even if prices drop by 25% I doubt many people would sell, they would stay put, surely?? I am by no means an expert, but isnt this common sense??

If all anyone would pay for it was £150k then it wouldn't be 'worth' £300K would it....surely somethings only 'worth' what someones willing to pay for it.
Ax

butterfly72

Hairy wrote: »

People simply wont sell. Even if prices drop by 25% I doubt many people would sell, they would stay put, surely?? I am by no means an expert, but isnt this common sense??

Some people have to sell.. divorce, redundency, deaths, bankruptsy (spelling! mind u, glad I can't spell this word!!), relocation.....

PasturesNew

How come houses went up so much?
That's the real question.

The answer was unlimited, freely available, cheap credit was flooded out to anybody with a pulse that asked for it.

Did you buy your house with 3x a single salary? No. You wanted to borrow more and you were allowed.... and thousands more were allowed.

All of a sudden a house was worth the most somebody who wanted it could borrow.

But money has to be paid back. And those being lent the money weren't paying it back. They had borrowed too much. They went on holidays, borrowed more, had a new kitchen, borrowed more....

... and with no money being paid back the banks looked around and thought "Oh dear. If it's not coming back .... I can't lend any more out until I borrow some more ... and oh ... people have realised nobody's paying it back. That's a bigger risk, so now I have to pay more for the money I borrow that I then lend out to people for houses".

And so that's how it happened.

People were lent too much; they couldn't afford to pay it back. They stopped paying.

Now nobody can borrow the money.
Now people can borrow less.
Now people have to give a bigger deposit.

This is to try to ensure that new money lent out will be coming back...

And that's one part of the story.

jazzyjustlaw

Sorry but Im someone who "just wont buy unless house prices fall by 50%" so where does that leave us?

ruggedtoast

Some people dont have a choice about selling, homeowners are dying all the time, popping their clogs and having their estates carved up in short order by their children and the government. People are repossessed and the banks sell for them, some people have to move because their job does.

Local prices are set by a relatively small number of transactions, plenty of people have owned their property so long that falling prices wont bother them if the place they want to buy falls as well. Anyone who bought a new build in Thamesmead for £250,000 in 2005 is pretty screwed however.

WTF?_2

Hairy wrote: »

I cant help but notice that there seems to be loads of scaremongering on this site. People saying house prices will drop by over 50% in some cases.

I may be wrong here, but how is that possible. Let me explain.

If you owned a house worth £300k and all you could get for it was £150k you simply wouldnt sell. So how the heck are house prices going to drop that much? People simply wont sell. Even if prices drop by 25% I doubt many people would sell, they would stay put, surely?? I am by no means an expert, but isnt this common sense??

Do you accept that market prices can rise by 100% over the course of a few years?

Yes? Good, then recognise they can also fall by 50%.

As for 'not selling', well it might come as a surprise to you but the housing market isn't comprised of people selling for fun. Irrespective of falls it will continue as people find themselves moving or having to sell for various reasons. So long as you have equity in your existing house, there's even an incentive to 'trade up' as falling prices make the next step more affordable.

Hairy_2

The fact is, if you own a £300k house owe £250k to the bank, your not gonna sell for 50%. People just wont move. Unless they are forced to. Those dreamers waiting for a 50% drop I feel will be waiting an awful long time.

Hairy_2

!!!!!!? wrote: »

Do you accept that market prices can rise by 100% over the course of a few years?

Yes? Good, then recognise they can also fall by 50%.

NOT the same thing. if your house goes up, you dont owe that extra equity to the bank.

Patronising T**T