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Experts Predict How Much Further House Prices Will Fall

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[url="http://timesbusiness.typepad.com/money_weblog/2008/11/the-house-price.html"]Five experts predict how much further house prices will fall[/url]

Includes HPC.co.uk

I do hope you'll vote and add a comment at the foot. Edited by Financial Planner

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[quote name='Financial Planner' post='1439009' date='Nov 5 2008, 02:51 PM'][url="http://timesbusiness.typepad.com/money_weblog/2008/11/the-house-price.html"]Five experts predict how much further house prices will fall[/url]

Includes HPC.co.uk

I do hope you'll vote and add a comment at the foot.[/quote]

The only logical box to tick is for a drop so large it`s scary!

Duly ticked!

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Do we really know something they don't?

I mean, a 50% drop from peak would be absolutely amazing for me to buy a place at last, and I hope it goes all the way down! But outside of this forum I've really not heard much talk of anything greater than a 25-30% from peak.

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[quote name='Number86' post='1439219' date='Nov 5 2008, 04:46 PM']Do we really know something they don't?

I mean, a 50% drop from peak would be absolutely amazing for me to buy a place at last, and I hope it goes all the way down! But outside of this forum I've really not heard much talk of anything greater than a 25-30% from peak.[/quote]


Outside of this forum they all laughed about any form of crash only a few months ago.

I might just wait with my STR fund and trust this site to be correct again.

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“The market will not bottom out until spring 2011, by which point there will be a 40 to 50 per cent drop from when house prices were at their peak in August last year.

“If you remember the last house price crash in 1988, it took until 1994 for the market to recover, so a good four or five years. There is no reason whatsoever to suppose the market will recover any quicker this time.

“It is far too early to bag a bargain – people should not be buying for at least another two years. We are only one year into the crash, and it has a long way to go yet.”


FP, it is interesting that the emphasis of your comment seems as much on timing as on the size of the fall. What is your relative confidence level of the two statements?

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[quote name='Chicken' post='1439262' date='Nov 5 2008, 05:13 PM']FP, it is interesting that the emphasis of your comment seems as much on timing as on the size of the fall. What is your relative confidence level of the two statements?[/quote]
I have equal confidence in the forecasts.

4 years is not too much for a house price crash after 14 or 15 years of rises.

40-50% is not too much when prices were such a multiple of earnings and based on levels of lending which will not be revisted for years or decades.

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While being a FTB near London(or should I say potential FTB) I don't have a STR fund burning a hole in my bank, but I sure hope that's true. It would be nice to bypass the overpriced shoebox flats and move straight onto a detatched house! <_<

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I'm not disagreeing with either comments but I have greater confidence in the magnitude of the fall than the time it will take for that to manifest.

Barring abnormally high inflation, house prices have to come down to become affordable again. If anything, tighter lending practices and depressed salaries as the result of the depression/recession may make house prices overshoot on the downside (as arguably happened in the previous recession).

Timing though is less exact. It depends on a whole bunch of factors including; foreclosure rates (itself dependent on how long the occupiers can keep making those payments), the willingness of the banks to sell at any price, the availability of credit available to prospective buyers, or the availability of cash in the buyer's pocket. There are good reasons why Detroit has probably already hit rock bottom while New York is only just starting to crumble.

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[quote name='Financial Planner' post='1439278' date='Nov 5 2008, 06:24 PM']I have equal confidence in the forecasts.

4 years is not too much for a house price crash after 14 or 15 years of rises.

40-50% is not too much when prices were such a multiple of earnings and based on levels of lending which will not be revisted for years or decades.[/quote]

Spectacular. Decades hey. We should take your advice and buy all that gold and commodities you were championing in september. Brilliant, fantastic what an expert you are.

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[quote name='Number86' post='1439298' date='Nov 5 2008, 05:30 PM']While being a FTB near London(or should I say potential FTB) I don't have a STR fund burning a hole in my bank, but I sure hope that's true. It would be nice to bypass the overpriced shoebox flats and move straight onto a detatched house! <_<[/quote]

this interests me... it seems a lot on here either ftb or str are aiming to bypass the 'first rung on the ladder'.

now as far as flats go, i never even considered these the first rung, you rent a flat in your early years, and later you, or you and your partner buy a house.

but we now have th dilemma where a lot of ftb's with despoits that were being saved for the average 2007 priced house are now seeing the market collapse - therefore, with 40-50% falls that deposit could buy 40% of the average house at the market bottom.

so what is the average house - i'd certainly say detached, and maybe 3 bed wouldn't be a bad call.

but there won't be that many too buy, and getting one in a decent area may be even harder (plus decent areas are going to be harder to come by as 50% from peak means a lot of unemployment - hpi didn't happened on debt and employment, hpc happens on the reverse, plus too many other numerous factors to mention).

what i am getting at is that i don't see how every ftb is going to skip the terraced/semi stage (though i'd be perfectly happy if i could buy the semi detached i live in now at a reasonable price - i'd say it's peak 'value' was around 120k, i would have no qualms at 60k even though i know it was 44k in 2000/01).

i suppose it could happen if those who are 'leveraged' to the eyeballs lose it all and end up in the slums they speculated on in the first place, and those that they thought would live in these shoeboxes end up living where they used to live as they wasn't daft enough to gamble their last bean in a crazy market but keep it safe for later. that would be sweet justice come to think of it. :P

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Another 35% feels about right to me, next 12 months fall about 15 to 18% and slower falls towards the end of next year & in 2010. Whilst there may be a small bounce somewhere I think fairly stagnant prices for at least 2 or 3 years afterwards (by then interest rates should be higher again).

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[quote name='clloyd' post='1439610' date='Nov 5 2008, 09:42 PM']AWhilst there may be a small bounce somewhere I think fairly stagnant prices for at least 2 or 3 years afterwards [b](by then interest rates should be higher again)[/b].[/quote]
Mortgage rates maybe but central bank rates will be negative real for years.

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[quote name='bendybogle' post='1439473' date='Nov 5 2008, 08:11 PM']this interests me... it seems a lot on here either ftb or str are aiming to bypass the 'first rung on the ladder'.

now as far as flats go, i never even considered these the first rung, you rent a flat in your early years, and later you, or you and your partner buy a house.

but we now have th dilemma where a lot of ftb's with despoits that were being saved for the average 2007 priced house are now seeing the market collapse - therefore, with 40-50% falls that deposit could buy 40% of the average house at the market bottom.

so what is the average house - i'd certainly say detached, and maybe 3 bed wouldn't be a bad call.

but there won't be that many too buy, and getting one in a decent area may be even harder (plus decent areas are going to be harder to come by as 50% from peak means a lot of unemployment - hpi didn't happened on debt and employment, hpc happens on the reverse, plus too many other numerous factors to mention).

what i am getting at is that i don't see how every ftb is going to skip the terraced/semi stage (though i'd be perfectly happy if i could buy the semi detached i live in now at a reasonable price - i'd say it's peak 'value' was around 120k, i would have no qualms at 60k even though i know it was 44k in 2000/01).


i suppose it could happen if those who are 'leveraged' to the eyeballs lose it all and end up in the slums they speculated on in the first place, and those that they thought would live in these shoeboxes end up living where they used to live as they wasn't daft enough to gamble their last bean in a crazy market but keep it safe for later. that would be sweet justice come to think of it. :P[/quote]

Well I tend to think that by the time this all evens out, we will have a great many fewer average families given demographics. There will be more downsized retirees (end of boomers) and for a while at least fewer migrant workers. These people will tend to want flats not houses. As the very young FTB will need a large deposit they will not be in the market for a bit. So, slightly older families with deposit (and reasonable income for LTV) will have plenty of choice.

Edit due to screwed up quotes. Edited by adp

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[quote name='Financial Planner' post='1439613' date='Nov 5 2008, 09:46 PM']Mortgage rates maybe but central bank rates will be negative real for years.[/quote]

After 2 or 3 years of really low rates do you not think it is likely that, coupled with a government intent on flooding the economy with cash, inflation could start to rise again (I'm assuming lower inflation in the short term as a given) & as a result an increase in interest rates?

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[quote name='clloyd' post='1439633' date='Nov 5 2008, 10:03 PM']After 2 or 3 years of really low rates do you not think it is likely that, coupled with a government intent on flooding the economy with cash, inflation could start to rise again (I'm assuming lower inflation in the short term as a given) & as a result an increase in interest rates?[/quote]
Curious way to put it. OF COURSE there will be huge inflation (after the deflation we are currenyly experiencing).

Long term rates will go to the moon.

They want to inflate their debts away.

Buy precious metals.

Before anyone asks, there will not be the same lending as 2005-7. Thus HPs will not move strongly just because IRs will be low. In any case, mortgages may not be.

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[quote name='Number86' post='1439219' date='Nov 5 2008, 04:46 PM'][b]Do we really know something they don't?[/b]
I mean, a 50% drop from peak would be absolutely amazing for me to buy a place at last, and I hope it goes all the way down! But outside of this forum I've really not heard much talk of anything greater than a 25-30% from peak.[/quote]



No you don't.

Halifax Chief Economist and Merrill Lynch Economist say upto another 10%. Telegraph panel of economists last week say 25% max from peak.

HPC Spokesman says [b]another[/b] 35% - Come on boys get real! It is only on this site you'll find bo11ocks like this.. :rolleyes:

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Inflation adjusted HPC will be 67% to 90% DOWN, Just like Japan.

Gold will gain on all other assets regardless of inflation or deflation.

Stock market toast.

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[quote name='BTL_and_milking_it' post='1439812' date='Nov 6 2008, 01:07 AM']No you don't.

Halifax Chief Economist and Merrill Lynch Economist say upto another 10%. Telegraph panel of economists last week say 25% max from peak.

HPC Spokesman says [b]another[/b] 35% - Come on boys get real! It is only on this site you'll find bo11ocks like this.. :rolleyes:[/quote]
Yes dude, and it was only HPC that was predicting the crash was gonna happen 18 months ago. All the other people who are on this survey said flat or some growth for 2008.

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[quote]No you don't.

Halifax Chief Economist and Merrill Lynch Economist say upto another 10%. Telegraph panel of economists last week say 25% max from peak.

HPC Spokesman says another 35% - Come on boys get real! It is only on this site you'll find bo11ocks like this..[/quote]

Actually these comments from Halifax Chief Economist and Merrill Lynch are rather bullish compared to mainstream thinking. If you feel it will only drop 25% put your money where your mouth is and pickup some nice repossions at auction, some houses/flats are going for 50%+ below 2007 peak. Or better still buy some development land, wait a few years then sell it on when the market is booming again in two years. :blink: Edited by blobby o mr blobby

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Voted

FP - they have time shifted the last crash it was 89-95 not 88-94

Bit of a biased voting box. starting at 0-5% and ending at 'scary percentage'

I'm still sticking with my bottom in Q4 2009 with another 20% off. That is 35% peak to trough.

I have many clients renting, that are itching to buy but will not enter the market until affordability reduces further. Another 20% off and they will be able to buy their flats with a standard mortgage for 10% less than their rent.

We will see.

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[quote name='BTL_and_milking_it' post='1439812' date='Nov 6 2008, 01:07 AM']No you don't.

Halifax Chief Economist and Merrill Lynch Economist say upto another 10%. Telegraph panel of economists last week say 25% max from peak.

HPC Spokesman says [b]another[/b] 35% - Come on boys get real! It is only on this site you'll find bo11ocks like this.. :rolleyes:[/quote]

Hello Prof. Stephen Hawkins.

Do me a favour when you've got a moment and extrapolate the current rate of falls (-2.0% Month on Month for the last 6 months) and tell me when we'll hit "a further 8 to 10% fall" at that rate.

Now take that answer and ask yourself the question "will the situation improve that quickly?".

You may want to be less heavy-handed on the rum punch over there in the Bahamas in future. Edited by Paddles

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I hope you are right FP.

Can I ask when you changed your original prediction. You did say 35% from peak, but now another 35% so that's at least (given we have already had about 15%) something around 60% in total. What has changed for you to re-assess your prediction? The banking crisis?

I would have to say that the other four predictions of another 10% are woefully optimistic if not crazy. That would only be another 5/6 months at the current falls, and od they really think we will be out of recession by March? No way, I would imagine March time next year to be deep into the recession, we have years of falls ahead.

It will be good to go back to those 'experts' in a years time and show them their predictions.

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[quote name='Jim B.' post='1440690' date='Nov 6 2008, 12:53 PM']I hope you are right FP.

Can I ask when you changed your original prediction. You did say 35% from peak, but now another 35% so that's at least (given we have already had about 15%) something around 60% in total. What has changed for you to re-assess your prediction? The banking crisis?

I would have to say that the other four predictions of another 10% are woefully optimistic if not crazy. That would only be another 5/6 months at the current falls, and od they really think we will be out of recession by March? No way, I would imagine March time next year to be deep into the recession, we have years of falls ahead.

[b]It will be good to go back to those 'experts' in a years time and show them their predictions.[/b][/quote]

"Nobody could have predicted the credit crunch/interbank lending rate/sun rising in the morning/life, death and taxes/etc. (delete where appropriate)"

They've already been wrong, just look at last year's predictions. They explain their failure as being excusable because of "black swans". Allow them their indulgence.

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