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  • FIRST POST
    • glennw
    • By glennw 22nd Aug 04, 5:53 PM
    • 34Posts
    • 7Thanks
    glennw
    **Don't Buy A House** House Prices Set To Crash!!!
    • #1
    • 22nd Aug 04, 5:53 PM
    **Don't Buy A House** House Prices Set To Crash!!! 22nd Aug 04 at 5:53 PM
    Sorry for the attention grabbing subject, but hopefully this is true.

    Think about it. Who really benefits from over-inflated property prices?
    • First time buyers?

    Definately not. I've been waiting to buy a house for Four years, but the increase in prices has
    outpaced what I can save for a deposit, and my investment returns put together.
    How many more people are in this position I wonder?
    • Homeowners not looking to sell?

    Slightly, because they can borrow against the increased equity in their home.
    • Homeowners looking to trade-up?

    No, because they will have to pay a premium for their new home.
    • Homeowners looking to trade-down?

    Again slightly, because they will make a bigger profit on the difference.
    But I believe this is a relatively small group.
    • Estate Agents, Mortgage lenders and the Government?

    You bet! A percentage of the value of a more expensive house is more money for all three of these
    major types of institutions.

    What can we do about this?

    Everyone who is thinking of buying a house - **Don't buy one yet!!**

    The whole thing is controlled by Market Forces.
    Greedy Estate agents price a house by the rule of thumb - What they sold a similiar one for + 3 to 5%
    I know some, and I know this to be true!

    Margaret Thatcher's greatest plan was that everyone should be able to afford their own home.
    (I don't often agree with Margaret Thatcher, but on this point I believe she was right.)

    Gordon Brown would like to bring in 40 year mortgages - of course he would.
    This would enable the property boom to continue. I for one don't want to be penalised just to
    enhance Gordon Brown's career.

    Martin, Any chance of a campaign on this one? It really is a classic example of punishing the little
    guy at the moment. Please, please, help the little guy!!!
Page 1
    • yonk
    • By yonk 22nd Aug 04, 8:20 PM
    • 760 Posts
    • 483 Thanks
    yonk
    • #2
    • 22nd Aug 04, 8:20 PM
    Re: **Don't Buy A House** House Prices Set To Cras
    • #2
    • 22nd Aug 04, 8:20 PM
    You could have cashed in your investments to enhance your deposit - were you just waiting for a crash (and investing elsewhere in the meantime)?

  • kinster
    • #3
    • 22nd Aug 04, 8:36 PM
    Re: **Don't Buy A House** House Prices Set To Cras
    • #3
    • 22nd Aug 04, 8:36 PM
    Everyone who is thinking of buying a house - **Don't buy one yet!!**
    Ermmm... don't you think everyone already knows that, because prices have stopped increasing and not many are taking out new mortgages?
    • dunstonh
    • By dunstonh 22nd Aug 04, 10:59 PM
    • 95,773 Posts
    • 63,467 Thanks
    dunstonh
    • #4
    • 22nd Aug 04, 10:59 PM
    Re: **Don't Buy A House** House Prices Set To Cras
    • #4
    • 22nd Aug 04, 10:59 PM
    You buy a house to live in over the long term. So what if prices go down in the interim for 2-5 years.

    In May 1989 the average house cost 70,246. After the decline it bottomed out in 1995 with the avergage cost just under 62,000. It took until 1998 for the average price to climb back to the 1989 level. Now its over 150,000 so even if you had bought at the previous high, before the last crash, you are well up.

    Lets say a price drop of 30% happens over the next 5 years, the only people its going to affect adversely are property developers and those with an inheritance or selling up. However, those selling up or getting an inheritance would almost certainly have gained 100% gain at least prior to the adjustment so a 30% drop is nothing.

    If it does come, then its not going to be a sudden drop. It will be a slow decline. I say bring it on. It would benefit many who have the same or lower mortgage they arranged over 5 years ago but are looking to move up. Those that have constantly borrowed against equity would not benefit but if they can afford their monthly payments, it wont hurt them financially. Although they wont be in a position to move on for a 5-10 years. Perhaps that would teach them not to borrow so much next time.

    If you want to buy a house, buy it. Remember there will always be good times and bad times to buy when you look back with hindsight but over the longer term property has gone up. Ask your parents how much they paid for there house in the sixties/seventies.
    • glennw
    • By glennw 23rd Aug 04, 1:56 AM
    • 34 Posts
    • 7 Thanks
    glennw
    • #5
    • 23rd Aug 04, 1:56 AM
    Re: **Don't Buy A House** House Prices Set To Cras
    • #5
    • 23rd Aug 04, 1:56 AM
    You could have cashed in your investments to enhance your deposit - were you just waiting for a crash (and investing elsewhere in the meantime)?
    Unfortunately, most of my investment is Credit Card Super Tart money. What is mine doesn't add up to 5% of the current value of a cheaper terraced house. This is what I believe I would need to get a good discounted rate mortgage.


    Ermmm... don't you think everyone already knows that, because prices have stopped increasing and not many are taking out new mortgages?
    I hope you're right...

    You buy a house to live in over the long term. So what if prices go down in the interim for 2-5 years.
    You seem to have missed the point. Myself, and I believe many others cannot currently afford to buy a house to live in over the long term.

    If you want to buy a house, buy it. Remember there will always be good times and bad times to buy when you look back with hindsight but over the longer term property has gone up. Ask your parents how much they paid for there house in the sixties/seventies.
    For the sake of discussion I would also ask them how much interest they have paid over the life of their mortgage, and what that equates to in todays money. The difference between buying at the top and buying at the bottom is huge. But catching falling knives is difficult, even if they fall slowly!
    (If it is a slow decline, and the property market remains fairly illiquid then is it any easier to predict the bottom?)

    You are, of course, right about hindsight. With that I would have bought four years ago with a 100% Mortgage. And been well up now. But what of the future? Increasing interest rates and the possibility of a crash or a slow decline make these difficult times.

    Ask the people who suffered the negative equity trap of the early nineties whether they would say: "If you want to buy a house, buy it."

    I for one hope they crash rather faster than last time.
    • dunstonh
    • By dunstonh 23rd Aug 04, 2:15 PM
    • 95,773 Posts
    • 63,467 Thanks
    dunstonh
    • #6
    • 23rd Aug 04, 2:15 PM
    Re: **Don't Buy A House** House Prices Set To Cras
    • #6
    • 23rd Aug 04, 2:15 PM
    You are, of course, right about hindsight. With that I would have bought four years ago with a 100% Mortgage. And been well up now. But what of the future? Increasing interest rates and the possibility of a crash or a slow decline make these difficult times
    Interest rates are anticipated to up no more than 0.5% from the current position. !That doenst make a lot of difference to the average mortgage.

    There is a lot of scaremongering going on to try and cool house prices but the economic situation itself gives no indicators that house prices will drop big time. ! !

    Ask the people who suffered the negative equity trap of the early nineties whether they would say: "If you want to buy a house, buy it."
    Ignoring those that borrowed too much and couldnt afford repayments and got repossessed, the average person wouldnt have noticed any difference. !It may have reduced the likelihood if them moving whilst in negative equity but there were negative equity mortgages available. !If you are in the house and can afford the payments, the "paper" value of the house is irrelevent until you come to sell it.

    • Spendless
    • By Spendless 23rd Aug 04, 2:39 PM
    • 20,435 Posts
    • 34,003 Thanks
    Spendless
    • #7
    • 23rd Aug 04, 2:39 PM
    Re: **Don't Buy A House** House Prices Set To Cras
    • #7
    • 23rd Aug 04, 2:39 PM
    I bought a small 2 bed MTH in 1994 as a single working girl. Within a year the house was in negative equity. It didn`t bother me as I didn`t want/need to move. Fast forward to 2001 now I`ve got a problem cos I`ve now got a husband and baby. The house is too small. An estate agent estimated 3,000 negative equity. A builder 10,000.
    Where I live 2 bed MTH are the first rung of the ladder.
    People were bypassing these in favour of new houses or 3 bed semis.
    We were lucky Mr spendless got a mortgage in his name and we moved to a bigger house in a better area.

    We got the house cheap cos it needed some modernising. The idea was to do the work ourselves raise the value of this house re-mortgage and with the money pay off the defecet on the other.
    It didn`t happen that way some people came forward to rent my house and the boom happened here in 2002.
    When the tenants moved out last year we sold my
    place.

    I wouldn`t tell people not to buy a property I would say
    in the event of a property crash would a lifestyle change cause you a problem.
    y di
    • Nicholas
    • By Nicholas 25th Aug 04, 11:16 PM
    • 486 Posts
    • 90 Thanks
    Nicholas
    • #8
    • 25th Aug 04, 11:16 PM
    Re: **Don't Buy A House** House Prices Set To Cras
    • #8
    • 25th Aug 04, 11:16 PM


    You are, of course, right about hindsight. With that I would have bought four years ago with a 100% Mortgage. And been well up now. But what of the future? Increasing interest rates and the possibility of a crash or a slow decline make these difficult times.

    Ask the people who suffered the negative equity trap of the early nineties whether they would say: "If you want to buy a house, buy it."

    I for one hope they crash rather faster than last time.
    Not being funny, you got it wrong last time around, you may be wrong now. Everyone has a different opinion on the way things are going to go, and of course some will end up being right. Just remember though, that if you end up waiting 5 years for the market to hit rock bottom you will end up having paid another 5 years worth of rent (or endured another 5 years living at home).

    Seems like you are thinking extreme long term. However, don't forget we all only have one life and the next few years that you are waiting you will never be able to reclaim again
  • spl0dge
    • #9
    • 26th Aug 04, 11:41 PM
    Re: **Don't Buy A House** House Prices Set To Cras
    • #9
    • 26th Aug 04, 11:41 PM
    soon, the big question is going to be 'how low will they go'.


    That is what happened last time.

    people don't want to wait forever, so they pitch in at what they think is the bottom. (in the stockmarket, they call it bottom pickers). I think the bottom is 2-3 years away from now.


    prices drop a lot. then they rise back a little as bottom-pickers come in.

    This process repeats itself 20 or 30 times (maybe 5-10 times, maybe 70-80 times, who knows).

    don't buy in too early (as a bottom-picker).
  • Galstonian
    Re: **Don't Buy A House** House Prices Set To Cras
    "don't buy in too early (as a bottom-picker). "

    And how can one tell when "too early" is without waiting until it might be "too late"?

    I think I'll just leave picking bottoms to you...
  • spl0dge
    Re: **Don't Buy A House** House Prices Set To Cras
    nobody knows.
    that's the whole point.

    "I think I'll just leave picking bottoms to you... "

    cheap joke made by a loser.

    • isasmurf
    • By isasmurf 27th Aug 04, 2:26 AM
    • 1,760 Posts
    • 785 Thanks
    isasmurf
    Re: **Don't Buy A House** House Prices Set To Cras
    If it does come, then its not going to be a sudden drop. !It will be a slow decline. !I say bring it on.
    So I keep hearing... usually from people with a vested interest (building societies, estate agents, etc) I don't believe it is true for simple supply and demand reasons. As soon as there is the slightest hint of the prices coming down, the majority of buyers are going to desert the market, waiting for the prices to come down just that little bit more. Meanwhile your going to get a lot of homeowners and amatuer property investors panicing and selling their houses (or attempting to!). This will cause a surplus of houses on the market meaning the few buyers there are can force the prices down.
    This is what your saw in the stock market crash in 2000, and I believe you'll see in the house market crash of 2004/05.

    However, I don't think prices will drop more than 30% (I reckon about 20%) which still means I won't be able to afford my own place.
  • spl0dge
    Re: **Don't Buy A House** House Prices Set To Cras
    >>It will be a slow decline, usually from people with a vested interest ( building societies, estate agents, etc )

    exactly right.

    even if prices dropped 30%, these people will be continually telling us that prices are rising. Because they may well be for short periods.

    'soft landing' is an NL phrase. there is no such thing.
  • alared
    Re: **Don't Buy A House** House Prices Set To Cras
    When the "buy to let" brigade realise that prices are starting to fall (in some areas,they already have) there will glut of houses put up for sale and as prices fall and panic grows it will snowball into a stampede.
  • DiggingOut
    Re: **Don't Buy A House** House Prices Set To Cras
    Well, I have no vested interest, other than that I own my home (well, Nationwide has a slight interest in it, I suppose :), but I don't expect a rapid drop. If there is a decline, it will be gradual. But what I expect is simply a flattening.

    I suppose a crash would actually be beneficial to me because my mortgage rates would likely drop significantly. I have no plans to sell my home in the next 10 years or more, so what the market does is largely irrelevant to me.
  • Galstonian
    Re: **Don't Buy A House** House Prices Set To Cras
    exactly right.
    With such an accurate understanding of the economy and your very precise insight into the future of the housing market I'll just have to go with your prediction then. !Shame on me for thinking that you are simply guessing, how foolish of me, I apologise.
  • tr3mor
    Re: **Don't Buy A House** House Prices Set To Cras
    DiggingOut, how would your mortgage payments drop if prices fell? Your mortgage is based on the amount you borrowed to begin with, not the current value of your property.
    • lisyloo
    • By lisyloo 27th Aug 04, 2:34 PM
    • 22,714 Posts
    • 11,290 Thanks
    lisyloo
    Re: **Don't Buy A House** House Prices Set To Cras
    Your payments are based on the amount borrowed AND interest rates.

    I think the D_O is thinking that if house prices drop dramatically then interest rates will drop.

    If there is a drop off in sales, then estate agents and mortgage brokers etc will loose their jobs, this will means less money in the economy so people who work in the service industry will loose their jobs as well (cinemas, dominos pizza, mcdonalds etc).
    The bank of England will then drop interest rates.

    That's massively simplified, but house prices are tied into the whole economy.
    The fact that people's homes have been going up in price means that people have been spending (sometimes from increased mortgages) on cars, holidays, clothes etc.

    This will all go into reverse if house prices drop.
    • dunstonh
    • By dunstonh 27th Aug 04, 2:54 PM
    • 95,773 Posts
    • 63,467 Thanks
    dunstonh
    Re: **Don't Buy A House** House Prices Set To Cras
    I dont have a vested interest and stick by my views that it will be a steady decline if and when it comes rather than a sudden drop. This would mirror the list decline. That one had more of a reason to drop fast but it didnt.

  • DiggingOut
    Re: **Don't Buy A House** House Prices Set To Cras
    Correct, lisyloo. Other impacts will be that people will no longer be as able to borrow against equity in their homes, because there won't be any. This will affect sales of big-ticket items like cars, etc.

    So a housing crash could cause redundancies in manufacturing and the service industries, and lots of misery all around. It could even spiral into a deflationary situation like Japan has had for years.

    At the first sign of significant falls in housing prices, I would expect the MPC to slash rates to try to prevent a major crash, and all the negative consequences that could come with it.
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