Friday, Dec 28, 2007
Mortgage Industry must face up to a 50% reduction in transaction volume
Firstrung: Mortgage approvals fall to record lows for second successive month
How long before these disastrous mortgage figures 'bleed' into the house transaction sales figures? Feb at the latest? This close on 50% reduction in mortgage approvals for house purchases indicates that the credit crunch has finally bitten..hard. Will we see a 50% reduction in: estate agents, mortgage brokers, lenders, money advice websites and worse still general commerce? Possibly so given our UK one track economy is tied so inextricably to the housing market.
Posted by converted lurker @ 12:22 PM (1176 views) Add Comment
15 Comments
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1. the reaper said...
you're right CL transaction figures are the key .Once they've bombed and it's plain for all to see,then it's game on.Given how bad these figures are,it's hard to see a gentle decline ie 0.5% per month.Surely it will go faster than that.
2. Thebusinessstudent said...
The reality according to the house price index set up in 1950 is that the real price of houses ,thats the price linked to inflation since 1950 till today suggests that propertie prices are 40% above the real price.
they have risen out of the real price over the last 7 years which if past is anything to go by they have now started to decline back to the real price which allowing for 2% inflation will see houses by 2015 decline 26% as every time they have risen above the real price they have taken the same time period to come back to the real price.
no speculation here just real facts
the business student
3. growler said...
It's bound to. FTBs priced out of market, 50% less mortgages approved, 1.4m people having to refinance in 2008 (and not getting the same deal), huge increases in personal bankruptcies, cost of living increasing... It is a matter of time.
4. jack c said...
@ growler - good points - we can throw in this one as well "The outlook for the UK job market is at its worst for a decade, an employment organisation says" - from BBC website.
5. inbreda said...
"Surely it will go faster than that."
If you look at the chart on the home page, the pattern seems to be shallow-bottoms, spiky-tops. The bottoming out is gentle, but the peak is damn near vertical. No way is this thing going to be gentle.
6. wdbeast said...
I agree inbreda,
Thebusinesstudent is correct about the timespan, but I think the current combinations as outlined above will lead to a sharp correction in the first half of 2008 of about 9% and an overall fall of about13% for the year.
2009 onwards depends on how deep the recession is when it arrives.
7. Marvin said...
The HPC graph actually looks worse than that (to me) Inbreda, the area we are currently in( slight plateau) looks similar to electrical devices going into saturation ie amplifiers - If there is a parallel, it is a very alarming one, because levels of over saturation held for too long usually lead to catastrophic failure (in layman's terms your hi-fi blows). Okay its a bit abstract I know but the other peaks and troughs look reasonably regular - compare them to the one we are sat on which looks abnormal to say the least (if this system is breaking its going to take some fixing).
8. handle_it said...
Thebusinessstudent Are you SURE that every TIME they have risen over the "Real Price" that they have taken the same to TIME to adjust back down the the "Real Price" ? This would seem to be some coincidence ? Real facts ?
9. Take Cover said...
House prices overshoot the 'real price' and are highly likely to undershoot the 'real price'. So if prices are 40% over valued - we're likely to see a 50% reduction.
10. uncle tom said...
I am firmly convinced that the boom-bust cycle that we saw in the late eighties/early nineties is a minnow compared to the one we're in now.
The economy has been growing strongly, quarter on quarter, for the longest period on record - but what have we achieved to deserve this?
Manufacturing industry has contracted sharply, and north sea oil and gas are all but exhausted. While technological advancements have taken place, the pace has been steadily slowing - since 2000, existing technologies have been refined, but very little has emerged that is genuinely new.
At the peak of the last boom, the government had a healthy budget surplus, and our balance of payments gave no cause for concern. Consumer debt was a worry, but was on nothing like the scale it is today.
Now we have large persistant government deficits, a dire balance of payments position and millions of consumers who are reliant on increasing their debt to make ends meet.
The only good news is that inflation has been kept under control, but now that cat looks likely to escape the bag.
The brown stuff looks set to hit the fan in style..
11. Orwell said...
They'll be lowering them thar interest rates again now... Now don't go messin with that thar economy now will yer...?
12. Renting2 said...
I hate to say it, but if these dire predictions do come about I think we'll soon see that the modern UK consumer is not the restrained beast of 30 years ago. Can you see a politician today standing before the masses and asking them to 'tighten their belts'? They will not stand quietly in queues for handouts. They are more likely to ram raid Tescos en mass. The gap between the haves and the have nots will suddenly become all too painfully apparent. There have been poll tax riots, can you imagine if suddenly a tipping point was reached and 'debt riots' and 'fuel riots' became the norm. And in the new 'ME, ME, ME' society ................ .
13. it_is_going_with_a_bang said...
A 50% reduction month on month of turnover in the whole industry is going to have a huge impact on this 'house' economy.
Pundits are predicting a static house price just to try and be positive, without caring to realize that even a static market is a disaster for the current economy makeup.
A 1% reduction per month is easily going to be achieved by desperate estate agents trying to keep their jobs.
14. renting2 said...
Be in no doubt, the lifeblood of solvency for estate agents is stock turnover (sales). They will be begging potential buyers to offer anything in the hope that the seller will take it or at least start negotiating. Negotiating is easy in a sellers' market. In mbuyers' market it is much harder to get a seller to wake up and smell the coffee. In these cases they just blame the agent for not trying hard enough!
You will see sellers changing estate agencies with ever great rapidity in the hope of finding that elusive 'full price' purchaser.
The timing of the bust will depend on how long the sellers can hold out.
15. Guiriduro said...
renting2 - absolutely. Its always a first instinct to hold onto an asset that is losing value if you are deluded into thinking the market is undergoing a short-lived dip. Its also a complete losing strategy if - as is very likely - the market falls much further and recovers much more slowly. The market will be supplied in the early stages with BTL's and reposessions going on the market at 10-15% off, which will seem in retrospect a good move when they are 20% down and falling in 2009, when it will become apparent to the majority that if they want to get out at 80% 2007 value they will end up putting their properties on the market en masse, accelerating the fall to 40%+