How can house price's fall so much??

Kez100

PasturesNew wrote: »

Many people have no choice about sitting tight.
gf/bf leaves them
somebody dies
job finishes
it was all just a stretch too far when they lied on the form to get the mortgage
property was supposed to go up and they only bought it to flip it
etc

These days people want to move on/have to move on more frequently than they seemed to do in the last crash in my experience. Back then most people were buying houses for 5-10 years, now people seem to buy them with a 2-3 year timeframe only.

Additionally in the last crash - I was there - people didn't remortgage. Most of us were on SVR as there weren't that many 'deals' available (we used to get a discount for year one or something then were tied to SVR for a few years) and I am sure the SVR was more competitive than we have nowadays. So, apart from general interest rate rises, sitting tight was pretty easy to manage from an economic viewpoint. There were no remortgage processes to go through every so often, with new valuations and checks on credit historys and incomes. So long as we could actually pay each month and keepupwith the general interest rate rises, everything was easy to ride out.

It was, however, dreadfully hard on those that couldn't pay and they would lose their homes and the banks would sell. Yes, Banks did take very low offers. Yes, many not desparate to move didn't drop prices but, guess what, they didn't get a buyer either. There were very few buyers and, when you were one, you made damn sure you got a bargain - hence repos sold (cheaply) and desparate sellers sold (cheaply). Others just kept EAs windows looking pretty, moaned a bit but continued to pay their mortgage and stayed where they were.

This time lots of people are on deals and will need to remortgage when in negative equity. That means sudden higher rates just for being in negative equity, and then there are the fees they incur. Add to that, high personal debt - we had none in the 1990's and most people didn't apart from, perhaps, a car loan. Add higher living costs sprialling. All things that will push repos up. They will sell (cheaply) and desparate sellers will sell (cheaply)....oh, here we go again......

The question is how low before FTBs jump on the ladder.

Personally, I think there are far more impatient FTBs out there this time and it won't fall as low as they will flood the market a bit quicker than what could potentailly be the bottom of the market - if allthings stay teh same that is. However, bank lending, deposit requirements and the interest rate will effect that a great deal and none of us actually really knows what will happen there.

Lotus-eater

Hairy wrote: »

This site is laughable! Money saving experts my !!!!! My friends were right when they said the internet was over run with numptys! Adios and keep dreaming you bunch of nomarks!

Was that our troll for the day

Can we have one from HPCuk next please, to even it out.

neverdespairgirl

Hairy wrote: »

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??

How did "common sense" allow prices to rise so much?

The thing is, some people *have* to sell. They lose their jobs, or split up, or have 3 children in a 1 bed flat, or inherit a house, or need to move to a new area. They are the people who set the market price.

dopester

Hairy wrote: »

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

Patronising T**T

Methinks someone here bought near the top of one of the biggest asset bubbles in the history of the world / galaxy / universe..

Nice way to snap at people who are giving you logical answers to your question.

neverdespairgirl

Hairy wrote: »

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.

Some people will move, so people might not buy *your* house for £150k, but a different house.

neverdespairgirl

Hairy wrote: »

I am in the process of buying another property, I am renting out my present one, and I completed on the sale of another for full asking price last week. Things will get bad I agree, but I doubt it will get nearly as bad as everyone is saying. Most of the over-reaction is caused by the media, as well as a few people on boards like this.

No, the market conditions are caused by (1) a drop in lending, the previous silly credit bubble having burst; (2) inflation, esp in energy and food, picking up; (3) fears of job losses. Among others.

neverdespairgirl

amcluesent wrote: »

True to some extent. In a previous post I asked how many blow-hards had shorted the housing market to profit from decline they were certain was coming. None had. Some STRs had not lost a paper gain.

I have a bet on with Ladbrokes that prices will fall, it's looking good.

First bet I've ever made, apart from £1 on the Grand National!

Paul_N_4

Dan: wrote: »

It's only a problem if you NEED to sell - The majority don't and wont.

Who's this "majority" you speak of?

You mean the majority of home owners that could be in negative equity during this crash? Its only these that may "sit tight" (albeit for a long time I suspect).

The overwhelming majority of home owners bought over 8 years ago (when the boom really started to get going) and have a huge amount of equity in there homes so that a crash of 20-30% wouldn't make any difference to their financial status should they wish to sell.

This "majority" you speak of is in fact a minority of home owners. MOST home owners will still be able to sell their houses post crash at an amount higher than they originally paid. So no, the majority of homeowners wanting to sell are not going to be sitting tight. For the majority of home owners, for which it was all paper profits anyway, it won't make a blind bit of difference.

Doom_and_Gloom

Not everyone will lose out on this crash. People like my parents bought their house in 1994. There had just been quite a crash. They picked up a house below price. Now 14 years on they would have to have a crash of more than 50% to lose money. If they sold at a 50% crash they would still walk away with over 60k more than they paid if they paid off the mortgage before they did so. Some other people are in the same position that it does not matter.
At the same time if the prices do drop and if people lose money does it really matter? It's been a roof over your head and given you a bit of stability as you didn't have to fear getting evicted by a landlord who wants to sell the place you're in even though you still have the money. It's not about making money. It's a place to call home that you can do with what you wish.
I find it odd that people are so worked up over this and some are rather bitter. You buy anything else and you just take it that it will lose value like a car/motorbike/fridge/freezer etc but with a house some people think that up should be the only way the price can go. How does that help their children?? House prices go up and down and they have to for many reasons, inflation/ecconomy etc. As many people have already stated it's the borrowing of too much money that has been one of the problems for the current house climate.

2cats1kid

I was there in the last crash too.

As a bright-eyed and bushy-tailed youngster I bought a one bedroom flat at the beginning of '91 - asking price was £42K and I got it for £40K. I thought I'd got a bargain although I was still stretched on the mortgage (these were the 15% interest rate days).

Then I got married and moved job to a different area and needed to sell it. The flat sold at the beginning of 1994 for £28.5K.

OK it's not a 50% loss, but I make it just shy of 29% so big losses can and do happen. Hubby incurred similar loss on his house (both moved jobs shortly after we married) so not the best start to married life!

Our current house we bought for £70K and at the peak the one next door sold for £225K, so thankfully we have a fair bit of equity and a paid-off mortgage this time around!