House Price Crash draws closer

Not Blair. Greenspan.

FoFP

1911.

FoFP

Perhaps Reading and thereabouts is still booming, or at least isn't falling - I don't know. And the rent-to-buy article I saw in last weekend's Observer would account for many expensive chains completing without the need for an FTB. It would seem that after 6 months, the cheapest house in the chain was still unsold so its uptrading owners were persuaded by the agents to rent it out instead and to use the income to help service their new massive mortgage. It could be a disaster, though if they can survive the next 5 years or so they'll probably manage. Personally, I think they'd have done better to sell and rent.

Sellers still drunk on a binge of selling/buying/toshing-up property TV are not in a mood to accept your low offer...YET!!!

I don't think infill or conversion is a factor here - I'd imagine the profit margins from that kind of development to be wide enough to withstand a 30% fall - any more than that and they can fit an avocado bathroom suite and similar cut-backs.

Exactly! It's the asking price!! ( I'm told we can now look up actual selling prices)

But nearly 4 years ago when I moved (just pre 9-11) those estate agents I had any experience of (SW London and Devon) were already bracing themselves for a price correction - add in 3 years of your claimed doubling and you must surely have a sense that something has to give?

Those still showing 'for sale' are still failing to sell at the price fixed last year. A few properties each week are slashed in price, anything from 1% to 25%. Not sure what you mean by price vs value.

That's pretty much how I see things but I don't believe there's been a definitive figure on the increase - not one that would convey a meaningful average anyway. Sure, there have been doublings and I'm sure I've read of verifiable treblings - probably small flats - but some increases also in the low 20%s (a friend buying/selling in Bath

2001/2004).

Cheap borrowing, hence BTL, hence mortgage equity release - yes I think it has to end in tears. 50% seems high to me, but.....

So sell your house now and make a small fortune!

Depends on the timing. 25% in a year or less would be a crash, but in 2+ years, a correction.

about shares maybe, but probably not houses!

so did shares and it didnt seem to stop him trading in those, the reason it was called the Wall St crash was nothing to do with the price of property on Wall St!

What, you mean not the labour party? If its labour, its just more of the same. If another party got in, shares would probably fall, markets dont like uncertainty.

Agreed, but the keyy question is how it gives. So many people are predicting a crash that it seems to me to be less likely rather than more, because people are always caught out about what happens to the economy. If the vast mass think it will do one thing, chances are it wont.

The other question is, what is a crash? Suppose prices rose 100% over the past 4 years, then drop 25% in year 5, 10% year 6, and then level out? Is that a 35% crash? Or a 65% rise* over 6 years? Certainly from an impact POV, unless you are a FTBer, your actual hit is going to be less than 35%, and if you bought 6 years ago you are up 65%. And FTB-type properties are probably not hit as badly as at the upper end, eg it might be 45% at the top end and

25% the bottom.

He might mean that someone bought their house for say 200k, saw their neighbours sell a bit later for 250k ('value'), and advertised theirs at

300k ('price). But if prices stopped rising at 250k, and they then eventually reduced their selling price back to 250k and sold, there was no real fall at all.

"Tumbleweed" wrote

Why do you say that? AIUI, last time (early nineties) it was the small - eg studio flats etc - properties which fell a much greater % than bigger houses. [Because they had risen a bigger % beforehand!!]

Very true - it took one person I know nearly 10 years to escape the negative equity on a studio flat.

Nope. It's a 35% rise over 6 years. You forgot to reindex.

FoFP

It looks to me as though the above illustration needs a bit of stripping out if only for clarity. What is the relevance of the first figure - £200k? Would it have made any difference to what you are trying to say if that had been, say, £150k?

Do you mean:- price = asking price value = the sum finally agreed on.

Then expect a crash - my reading is that the vast mass, i.e. owner occupiers, expect a rosy future. HPC.com and its devotees are a noisy, but certainly better informed and probably wiser, minority.

I think the normal test is what the chattering classes waffle on about at their dinner party tables - if it's an embarrassed silence then there's been a crash. And don't expect to be invited back for the return nosh-up until the next boom.

Well your first numerical scenario is one of an infinite range of up/down possibilities with magnitudes varying to suit. There's not much point in evaluating any of them unless you're going to evaluate them all - do we have the time?

Re your last sentence - do you mean that rises and falls in FTB properties are relatively small, as a percentage of their 'base' price, when compared to same-period rises and falls in expensive property?

I note you've fallen for all the hype yourself: expecting another boom to follow the crash.

History says there'll be another boom, but history also says that the asset propelled skywards by Funny Money next time will not be the same as this time.

FoFP

absolutely not - that was purely for Tumbleweed's benefit. I wouldn't want to leave him without at least the illusion of something to look forward to.

Possibly, the relevance of the first figure is that its the difference between that and the second (the neighbours sale) that encourages the greedy/reckless/astute/cunning/foolhardy vendors to up their asking price above the one the neighbours went for.

I do but dont forget I was only guessing what the OP meant :-)

LOL Too late for that I'm afraid.

The number of uninformed buyers willing and able to pay grossly inflated house prices is drying up rapidly. There has been NO SPRING BOUNCE. Mortgage approvals are down a third from this time last year. House prices have fallen every month since last July and the rate they are falling at is increasing. Chains are breaking down. Houses listed as Under Offer or SSTC are frequently coming back to the market. Buyers are cutting asking prices by 10, 15, 20% and more but are still failing to attract buyers. In short the UK housing market is in MELTDOWN.

No point putting my house up for sale now. I have MISSED THE BOAT as have almost all of todays sellers. Its going to be a buyers market for the next few years and theres only one way for prices and thats down.

Hope that helps.

Take a look here for some informed debate and useful information :

A little overblown methinks.

What is evident is that the capability of the credit bubble to keep the housing bubble enlarging at its previous speed has been dented. There are also signs of divergence, a clear sign of a market top, in the steep falls in volume of exchange in housing markets.

Looking more widely, since even the Economist has now noticed that all the anglo-saxon countries now display evidence of housing bubbles (also China through being unable to sterilise import of the US credit flood which results from its currency peg), in the US, the National Assocoation of Realtors has said that fully one third of properties bought in the past year were investment properties. Federal statistics peg this at a quarter, indicating that this isn't wild surmise by estate agent professionals.

Meanwhile at Ground Zero of the credit bubble, Fannie Mae and Freddie Mac, have (as predicted here by Yours Truly) both now been engulfed in financial scandals and have both seen their top executives replaced. Both seem to feature daily in the uncovering of new scandals by oversight bodies now awake and actually pursuing investigation. Fannie Mae as yet looks to be sitting on 11 billion of "restatements" while Freddie Mac managaged a mere 4 billion. For two companies owning an estimated 90% of US mortgage markets, and having an asset to debt ration somewhere around 3% and covering 1.4 *trillion* Dollars in mortgages, one is reminded of the canard "A few billion here, a few billion there, and pretty soon we're talking real money".

Rumours of the collapse are somewhat exaggerated, but the dominoes are racked up and ready to cascade. Forget the UK housing stats. As always, watch the money, or in this case the funny money we call credit. In particular watch Freddie and Fannie, and what happens in China. Any collapse in the UK housing markets will start with some sort of excitement there.

Please take your seats. The show is about to begin.

FoFP