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Debate House Prices
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Even the US, with their HPC at epidemic proportions, think we are screwed.
skap7309
Posts: 874 Forumite
http://www.iht.com/articles/2008/11/27/business/col28.php
Some snippets -
...Britons simply do not save enough to supply their banks with enough to lend to fund the debt requirement implied by their housing prices...
...On the other side of the equation, you have to wonder which buy-to-rent investor or potential home buyer is out there who a) is a good risk, b) possesses a 20 percent down payment and c) is willing to buy an asset that is losing 2 percent of its value a month...
...Bank liabilities in the United States are about 20 percent of the size of the economy. In Britain, the figure is 285 percent...
...So, it's looking as if the fall in British house prices will be further than expected...
...Ask yourself then what might happen to Britain...
Some snippets -
...Britons simply do not save enough to supply their banks with enough to lend to fund the debt requirement implied by their housing prices...
...On the other side of the equation, you have to wonder which buy-to-rent investor or potential home buyer is out there who a) is a good risk, b) possesses a 20 percent down payment and c) is willing to buy an asset that is losing 2 percent of its value a month...
...Bank liabilities in the United States are about 20 percent of the size of the economy. In Britain, the figure is 285 percent...
...So, it's looking as if the fall in British house prices will be further than expected...
...Ask yourself then what might happen to Britain...
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Comments
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House prices have further to fall.
In other news, the Titanic sinks.US housing: it's not a bubble
Moneyweek, December 20050 -
http://www.iht.com/articles/2008/11/27/business/col28.php
a) is a good risk, b) possesses a 20 percent down payment and
Two good points
a) Dont judge us on your own poor standards.:D
b) They did not need to (to buy a house) untill the credit crunch now they are saving
America need to make somwhere to look worse to get their own people feel better.
The truth is america gave out 30%+ of mortgages at 120%+ of the property value to people who could not afford it.
So when those propertys went down 30% the banks lost 50%. And those people had nothing to loose so just handed back the keys.
Even though we did do some silly lending I still think it was less than 5% of all mortgages were lent at 100% or more.
Our banks are still working (just) (dont forget we have been in the credit cruch as long as America and seen noting like the trouble they have seen)
But America a brought down its own banks bankrupted iceland etc.
Next they will be telling their people our obesity problem is worse and our gun crime is higher.;)0 -
I think both nations are screwed for some time. America will always come out better as they actually have industry and export it. We're stuck with Gordon Brown and his miracle economy built on sand...debt.
American home "owners" can also walk away from their debts with little consequence (spelling) compared to us so we are probably more determined to try and sort it out where as americans will leave the debt with the banks to sort.0 -
I have relatives in the US and from what they are telling me they are suffering a lot more than the UK. A lot of people in the US rely on their employer for health and welfare payments (rather than the state). Whole middle-class families are losing health cover when Dad gets made redundant. 1.8 million bankruptcies last year in the US due to inability to pay medical bills!!. In some states there is little in the way of welfare benefits and so guy made redundant from middle-management job suddenly finds himself and family with zero income. At least we have some sort of safety net, flimsy as it is, and health coverage.0
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At least in the UK people are for the most part liable for their negative equity ... In the USA, as I understand, you can hand back the keys and walk away without penalty. That's not going to help the grand scheme of things ... even I would be happy to borrow 125% of a property value if there was no risk of being hounded for the shortfall for the rest of my life. As it is in the UK, I haven't dared borrow even 80% of a property value ... hence I still have no house, but save save save for a respectable (French style) deposit, while renting a stunning flat for about 70% of the cost a mortgage on the same place would be ... (thank god for professional LL with outright ownership!).0
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At least in the UK people are for the most part liable for their negative equity ... In the USA, as I understand, you can hand back the keys and walk away without penalty.
This is often said, but my relatives tell me that this is the case only in certain states. In some states its the same as the UK - don't know any more details though.0 -
This is often said, but my relatives tell me that this is the case only in certain states. In some states its the same as the UK - don't know any more details though.
Thanks for the correction. Clearly I've been listening to the rumour mill for too long!! Be interesting to know what % of states it applies to, as I still think it might have contributed to the great crash they're seeing now.0 -
Non recourse states (that is states where you can walk away from the mortgage):
Alaska
Arizona
Arkansas
California
Colorado
District of Columbia
Georgia
Hawaii
Idaho
Mississippi
Missouri
Montana*
Nevada*
New Hampshire
Oregon
Tennessee
Texas*
Virginia
Washington
West Virginia
The advantage from the lender's point of view is that they can send a foreclosure notice to you if you in breach of the T&Cs of the mortgage and they don't have to take you to court to repossess you. The disadvantage is that they only get back what the property is worth.
* In these states the bank can get a court foreclosure and so have recourse for the rest of the debt if the sale doesn't cover the mortgage.0 -
while renting a stunning flat for about 70% of the cost a mortgage on the same place would be ... (thank god for professional LL with outright ownership!).
Home ownership is a sham! When I tell people that I'm going to do exactly what you have described above (rent until I have a deposit large enough that it's more economical to buy), they say things like "but why would you want to pay somebody else's mortgage" and blah blah blah - so assured are they that buying a house with barely 10% down is the finest investment they have ever made.
I subscribe to the rich dad poor dad notion that your home is a liability first and an asset second, and a property with a 120% mortgage on it is no asset at all.
So good for you!Student Loan Company Ltd: 17,805 (2.8%) Overdraft: 500 (Interest free)
Savings: £5,100 - Target by end of 2008 £5,000+
Net Worth 1/7/06: -£32,698 -- Net Worth 25/8/08: -£13,350.0
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