Friday, Jul 04, 2008
A change of tack?
m.a.p.: A short, sharp housing shock may be best
Is it better that prices should slide gently but continuously for three years? Or would a quicker and deeper plunge in year one, followed by two years of stability or even gently rising prices from a new lower base, be better?
Posted by cornishman @ 08:42 AM (1081 views) Add Comment
18 Comments
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1. cornishman said...
They are talking about this now on R4.
It seems that there is now a desire to talk the market down quickly - to get the collapse over with before the next election? Whereas not that long ago we were being told that this is just a small correction and nothing to get worried about.
Putting out headlines saying that there will be further tightening of mortgage availability in coming months would seem to be encouraging sellers to panic/accept reduced prices now - rather than sit it out.
2. tyrellcorporation said...
Um, I have to admire their false optimism. I really don't think a housing crash is something you can orchestrate. Deluded fools IMO.
3. yorkshireman said...
We are in the present situation as a result of the greed of a number of people and that greed has fed on other people. Fear is now driving the market and fear feeds on itself. Far more people are now involved and fear is more powerful than greed, as it involves not just the perceived price of a house, but next years holiday, new car, Plasma TV or maybe your next meal. It attacks people's whole lives and they will try to protect themselves. The desperate and indebted will sell or have to sell and I believe we will see an exponential fall in prices down to traditional 2.5 to 3 times salary, however long that takes The few who stoked the market up, will be powerless to do anything other than talk. Far more people will be driving the market down. As for predicting a pattern and timescale your guess may be better than mine.
4. tyrellcorporation said...
Biggest falls over the next 2 years and the trough in 2013 (approx £100,000 for an average house IMO).
5. george monsoon said...
Ok,
2009, 2010, 2012.... now into 2013... just great, at this rate, I will be 50 before I can get a house and then I will be too old to bet a mortgage.
Sorry guys, I may have to jump into the market before it hits bottom and my deadline is 2010.. If I go into negitive equity then Bu@@er it !
6. mark wadsworth said...
TC's forecast is probably correct (going by 1990s crash) but the 1974 bubble was over in a mere two years.
Anecdotal - my wife's best mate put her house up for £350k last summer, the purchaser had a mortgage offer from NR so that fell through last December. She then put it back on for £320k on EA's advice in March, and now she says she'd gladly accept £305k. That's a 13% fall in expectations in less than one year.
7. shipbuilder said...
Prices in Northern Ireland have dropped 18%, mostly since the start of the year. The market is completely dead. To me, the bottom will be hit next year at about a 50% drop, unless things get much worse in terms of employment and so on. I can't see a prolonged drop, simply because there are those that have been priced out for as much as 5-6 years, waiting on the sidelines. To be honest, I think the 4-5 year crash many are predicting on here is unlikely. But again, it's all down to economic conditions.
If i'm honest with myself, as much i'd like to see a change, I think that society's view of debt has changed permanently, which includes the mortgage market. For this reason, I think we are set for an even more volatile ride in terms of boom and bust. Banks and the public will not learn their lesson.
8. tyrellcorporation said...
George, I've extrapolated the graph on the front of HPC and because the profiles look virtually identical (between 1990 crash and this one) so far, I'd say the actual trough point will be about 5 years away. If it's any consolation, I intend to find some desperate seller and buy in about 2 years time. I too have waiting too long.
9. whiteknight said...
What is going on? They don't still think it's all a matter of talking it up/talking it down do they?
.. just a matter of wrongdoing commodity speculators as opposed to people trying to protect their relative wealth from the moronic actions of these idiots.....
10. george monsoon said...
Tyrellcorp.
I am now in my 40's and I really don't want to work into my 70's to pay off a mortgage. This is great news for the 20 somethings because finally they will be able to jump onto the ladder, but it doesn't help my generation, lost in a void...
To be honest, when I do get my home, I won't be moving from it any time soon, so I will carefully select the house I want, then sit it out until the price curve turns up hill.
I still believe that the biggest falls will come in the next 2 years, by which time sellers will have been dragged kicking and screaming into the mindset of taking "whatever they can get" for their house, so there will be some rich pickings for FTB's
Just hope I still have a job!
Don't you just love the financial fatcats for driving us off this economic cliff.....
11. tyrellcorporation said...
"Just hope I still have a job!"
My thoughts exactly. I graduated in 1990 and it was messy, the job market evapourated almost overnight. 20 somethings only know boom conditions and think cheap credit is the norm - it ain't and the hangover for the last decade is going to be pretty vicious IMO.
12. justwatching said...
But where are those pesky Halifax figures??
13. tyrellcorporation said...
"But where are those pesky Halifax figures??"
Simmering slowly on the hob, they should be cooked nicely!
14. letthemfall said...
george m:
Probably quite a few of us in your position. But of course you don't have to take out a 25 year mortgage when you come to buy. All depends on how much you want to borrow compared to income. This highlights the damage these bubbles cause: they can make life very difficult for many people, while giving a windfall to the undeserving few.
15. mark wadsworth said...
George M, if prices fall as low as in the 1990s, you won't need a 25 year mortgage!!
I bought in 1998 with a 20% deposit and a ten year fixed rate mortgage, and it was still cheaper than renting month-by-month. I paid it off just in time to sell the place again (tee hee).
16. martin said...
mark w:
Seems we were pretty lucky, I bought in 96 with a 10% deposit, all paid off now and sold early this year. Now renting and still listening and watching as people borrow more and spend more. This will all happen faster than before IMO.
17. mark wadsworth said...
We can continue in this cheerful vein in the light of the article I just posted above.
18. Duncan said...
6. mark wadsworth said...
TC's forecast is probably correct (going by 1990s crash) but the 1974 bubble was over in a mere two years.
The thing to remember is that inflation was completely different in the 1970s. Didn't Ford Motors go against Government advice and give everyone
a 15% pay rise to try and keep them happy. Not surprisingly Negative Equity was unheard of. For the couple of years you mention house prices crept up
while wages lept up restoring the P/E balance.
:- Duncan