Thursday, May 29, 2008
It's awful but it's all going to be alright
Nationwide.co.uk: House price falls accelerate in May
Link to latest press release from Nationwide indicating house price falls are accelerating (price are now falling ca 10% p.a. if you take latest quarterly view of falls). Fionnuala's department at Nationwide of course can only see the positives:
" * House prices fell by 2.5% in May
* Prices are 4.4% lower than this time last year, but remain 5% higher than 2 years ago
* Falling house prices combined with higher inflation makes MPC decision more difficult still
* Borrowers are better placed to weather the storm than in the 1990s
* Tighter credit conditions should help the longer term sustainability of the market"
Posted by trough2010 @ 08:14 AM (3288 views) Add Comment
50 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. hpwatcher said...
This is great news, for me...probably not the average Joe in the street.
2. pendulum said...
When asked if the mortgage lenders were to blame for exacerbating the boom by pushing cheap credit, she replied "no, let's not forget this all started in the USA" as if that was the explanation. [bbc radio 4].
3. mken said...
I wonder about the banks and all their "good" mortgage books.
Does anyone have a statistic on what falling prices are doing the banks'
asset base - perhaps a projection of when, as declines continue,
they will each become technically bust?
4. hpwatcher said...
When asked if the mortgage lenders were to blame for exacerbating the boom by pushing cheap credit, she replied "no, let's not forget this all started in the USA" as if that was the explanation.
Deluded b*tch.
5. little professor said...
Oh, PWNED!
I like the way she is now comparing prices to 2 and 3 years ago, having lost the YoY battle.
6. sovietuk said...
If this continues - in 1 year 2.5% x 12 = 30% , oh dear. But remember the keyword here is "accelerate" so who knows what will happen. Very nasty.
7. quiet guy said...
"Prices are 4.4% lower than this time last year, but remain 5% higher than 2 years ago"
OK. Seeya in 2009! No doubt, we will soon be hearing about comparison with property prices 5 years ago.
"Borrowers are better placed to weather the storm than in the 1990s"
I'd be fascinated to know why. Record levels of personal debt, millions of public sector non-jobs and a global oil and commodity price boom are not what I call "better".
8. Orcusmaximus said...
“Tighter credit conditions in the market at present are making it more difficult for borrowers to obtain loans at
higher loan-to-value ratios. While this is frustrating for those in that position, more stringent underwriting criteria
should ultimately lead to fewer overstretched borrowers and hence a more stable and sustainable market.”
So - fewer loans being made means reduced demand, and larger deposits required means lower house prices being offered.
Fionnuala seems to be saying that lending criteria forcing lower prices will lead to a more sustainable market. Well duh.
9. hpwatcher said...
''..."Borrowers are better placed to weather the storm than in the 1990s"...''
Classic labour spin.
10. Hardball said...
At 2.5% a month even I can work out it will only take till July for prices will be the same as two years ago.......
11. This comment has been removed as it was found to be in breach of our Blog Policies.
12. it_is_going_with_a_bang said...
Once what is most annoying is the automatic assumption that if house prices reduce rates MUST also reduce.
WHY?
For 10 Years house prices have been allowed to increase - supposedly not 'linked' to interest rates but purely Gordon's "the good times" propaganda phrase 'low inflation'. Now that it doesn't really suit him or the BOE to take that approach suddenly it is house prices that ARE linked to interest rates ....
Nice to see a decent drop tho :-)
13. confused76 said...
I am too happy!
14. confused76 said...
Can t help laughing when I saw the home page of Times online, a big red warning... "Latest:House prices fall at fastest rate for 17 years"... but to soften the blow... "Nationwide records biggest annual fall since 1992 downturn but figures are still five per cent higher than two years ago"
http://www.timesonline.co.uk/tol/news/
AH HA HA AHHHA AH AHHHAH HAH HAHAHAH
15. planning4acrash said...
I am happy too, but lest not forget that the system which caused the bubble remains intact, causing a bubble in commodities, destroying our currencies, the middle class and our way of life, slowly, but surely, ensuring that, should the system remain, that once you buy your house, you will need to remain vigilant for the next bubble top, unable to remain stable, within your own home for more than about 10-15yrs.
16. Ah-so said...
They did not choose to mention that house prices are now down 7% since October 2007 based on their monthly stats.
2.5% in a month, supposedly one of the best months for house prices traditionally, is a huge acceleration in price declines. Volume 2.5% is well into crash territory. If this carries on for a month or to, "house price crash" will move from opinion to clear fact.
17. i remember the 90`s said...
I only have a 5% mortgage left on our house but i also am glad the HPC is well under way ,this last 7 years has not made me fill any richer (this is my family home not investment)and i have two kids of 9 and 6 and in time if prices are sensible they might want a place to buy not that i`m against renting but all that upheaval you could end up moving a lot and paying a lot more in reconnections, fees etc and have a landlord dictate part of your life imo.
18. hpwatcher said...
''...Can t help laughing when I saw the home page of Times online, a big red warning... "Latest:House prices fall at fastest rate for 17 years"... but to soften the blow... "Nationwide records biggest annual fall since 1992 downturn but figures are still five per cent higher than two years ago"...''
Yeah, it's like they have to temper the good news because they are ashamed of it.....though I think it is important to keep the drop in context, as there have been massive price increases which must fall away.
19. tyrellcorporation said...
"Classic labour spin." HPWatcher (8)
We need to get away from this notion of 'spin' which seems vaguely harmless and eccentric. At the end of the day these statements are at best misleading and at worst bare-faced lies. We need a new word...maybe 'lies' is a more appropriate one.
Great news generally though but the only major annoyance is that I'm witnessing a slow down in business. I'll see cheaper house prices but at a cost. No more boom-and-bust eh Gordon - idiot!
20. denzil said...
How long before Earley is saying...
But House prices are higher than they were 3 years ago......
But House prices are higher than they were 4 years ago......
But House prices are higher than they were 5 years ago......
I give in ..........
21. geed said...
25% off in 2 years seems more than acheivable now. These figures will convince those fools that were possibly thinking of buying this year to back well away. Remember this is MAY, Spring bounce happy house hunting season and a 2.5% fall, I like it when a plan comes together!!.
The most facinating figure for me is that house prices are only 5% higher than 2 years ago, May 2006. So in theory, you could draw a straight line form May 2006 to present day and you wou;d get a flat line taking into account inflation.
Remember folks a 100% rise is counteracted by a 50% fall. In other words, this 4.4% fall has just wiped out 4.8% of gains. This effect increases the larger the percentage fall. -10% wipes off 11%, -20% wipes off a 25% gain, -30% wipes off a 43% gain ect ect.... don't you just love percentages!
22. Olivier said...
"remain 5% higher than 2 years ago"
Thanks for this desperate positive spin Ms Earley.
My understanding of this statement is that we have good chances to be back to the prices of 2 years ago within 2 or 3 months. That would mean that it's going to take approximately one year after the peak to wipe out the last year of increase before the peak.
23. Musicben said...
I just heard from Estonia today that many Banks are raising the required Minimum deposit from the current 30% to 50%! That would be wonderful for the UK too
24. Rm96696 said...
Anybody surprised? The only surprising thing is that the bubble lasted this long....
25. I P Freely said...
The House Price Crash is beginning its rapid descent .... fasten your seatbelts, and crack open some champagne :-)
26. This comment has been removed as it was found to be in breach of our Blog Policies.
27. stu_b said...
Is Fiona lala saying that because UK borrowers are in a stronger boat, the storm won't be as bad? How does that work?!
28. nubbers said...
If house prices are 5% up on 2 years ago, is that allowing for inflation or not?
29. confused76 said...
"lest not forget that the system which caused the bubble remains intact"
What system? Not here! Here is different! This time is different! The bubble came from the US! so said Fionaulallalalla
30. confused76 said...
"average house price stood at 173583 pounds in May, against 178555 in April"
http://www.forbes.com/afxnewslimited/feeds/afx/2008/05/29/afx5057623.html
A £5k drop, which is a whoooopppiiiing 2.8% drop and not 2.5 (courtesy of 'seasonal adjustments' I guess)!!!
And, again, who said that renting is dead money??
Let me think... the average landlord paid about £890 in bank interests + lost interests, £150 for maintenance and service charges and lost £5k on the capital this month... what is the UK average rent? £1,000 per month? Oh yeah, I forgot that rents are going up AHAH HAHAHHAHAH HAHHHAH
31. letthemfall said...
"remain 5% higher than 2 years ago"
And don't forget, prices are several hundred percent higher than at the beginning of the 20th century.
(This information was brought to you by the Fiona Lala Earley Institute of Irrelevance).
32. paul said...
Kirsty Allslop: EAT THAT HAT!
33. hpwatcher said...
The thing is that soon people will forget about house prices....as the recession and inflation really begin to take hold.
34. wiltshire said...
Many of the posters on this site have been aware that there's been problems with house prices for years, the issue sort of became national news last September when National Rock hit the skids but for the majority of people in this country it's only been the past 2 or 3 months where the phrase 'credit crunch' has become part of everyday speech. It seemed obvious that the figures from March/April onwards would be sharply down - that was when the wholesale removal of mortgage products started. So technically I think it could be argued that we're just seeing the start of the downturn as the real impact will only just be becoming apparent. Lord knows what the figures for the next 3 or 4 months are going to be like as the real impact of lack of mortgage products/the new reality of house prices bites. Dare I use the word 'exponential'?
Surely the next move now has to be that sellers will have to drop their prices, if they don't they will have to acknowledge that they're simply not going to sell.
I wonder how many people are still taken in by the whole 'prices are higher than they were 2 years ago' argument anyway? Nationwide must be desperate if their only audience left are the financially illiterate (illnumerate?).
35. Marcus B said...
"Figures are still five per cent higher than two years ago"
Not in real terms they're not and that's what's important...
36. growler said...
I'm suffering total happiness at the moment.
But the reality is that from 15 years of agents bleating "property ladder", "it can only get better" - there is the HARD FACT that this is simply not true. no argument now. We're talking "property slide" and like denzil says, the questions now will be: "which year in the past is the one it will fall back to".
Lenders must be desparate not to reveal a bookload of negative equity. Anyone having bought on 90% or over in the last 2 years will be approaching the fact they cannot get a competitive remortgage anymore. Every month the stats are negative means another load of people cannot remortgage competitively. Meaning EVERY MONTH more people spending money on the mortgage, not in the high street or on any luxuries..... for some time. And this is what is terrifying Darling Brown. But with inflation waaaaay over target, they're well and truly in a corner and will have to grin and bear it. They won't last beyond the end of the year either.
Ho ho
37. Shouldn't Gloat (but Will) said...
Prepare for
- more desperate spin from Express / Mail / Standard : 'Since the last Ice Age prices have risen a squillion %'
- even more desperate price pumping from Broon at taxpayers expense
But more importantly : can't we get a petition together for Ms Allsop to eat her hat live on TV or at least in public ?
She said she would if prices went down, and the record 2.5% in a month looks like 'down' to me.
38. Mark said...
Does this explain the spin about fewer buyers having bought at the peak? The chart and data relate to the proportion of home owner occupiers buying relative to the stock of houses owned by them (see the footnote). It therefore excludes BTL purchases which have formed a very significant proportion of purchases overall at peak prices, probably boosting the overall transactions level to similar if not higher than 1988/89. And of course those Johnny-come-lately BTLs are extremely vulnerable, especially since lenders will feel much less compunction about foreclosing on a BTL. Perhaps Yvette Cooper should be thinking about legislation to protect the position of a sitting tenant for the remainder of the tenancy in the event of impending foreclosure.
39. uncle tom said...
The fall in property prices comes as no surprise to many, and there are many more who shouldn't be surprised, but are.
The game of consequences is the next nasty surprise, one that will be very much worse than most people expect.
For the last decade, average wages have been romping ahead of inflation, but what have we done to deserve that prosperity? The answer is pretty much nothing. While a few efficiencies have been achieved through the better deployment of technologies, those benefits are pretty much cancelled out by increased red tape.
The reality is that we have an economy that has been living way beyond its means, and my attention is increasingly focused on trying to see how this dilemma is going to unwind.
I think we are looking at a significant drop in GDP, and a very significant rise in unemployment. Far too many people have far too much debt. Debt that too many will be unable to service, including millions that currently feel in control. Increased inflation will become an economic necessity.
The worst thing that could happen now would be a general election. It would probably result in a modest Tory majority with a Cameron govt ill-prepared, and saddled with pledges to maintain Labour spending levels that it would have to break within months. It would flounder horribly.
Better that Labour take the flak as the sh*t hits the fan, and give the Tories time to write a manifesto for economic renaissance, and not just more of the same with odd bells and whistles added.
Trouble is, Cameron ain't the right guy for the job - too wet behind the ears - Hague would be much better..
40. crash bandicoot said...
uncle tom, Hague made such a play about keeping the pound when he was leader, that you'd have to believe that he'd look after its wellbeing better than its current guardians.
41. Minnie69 said...
Though this is the best news for me personally, and I've been waiting a few years for this, I hate to gloat because so many people are going to suffer. Families, single people, all struggling to keep heads above water. It happened to me in the early 90s and it took 12 years to recover from such a crash. lal this champagne celebration seems inappropriate. "There but for the grace of God" is the phrase I think...
42. Flippity_gibbet said...
What a bunch of mealy mouthed, self-interested hypocrites. It's like a bunch of non-smokers whooping and cheering at their smoking peers getting cancer. I nearly bought last year and am obviously slightly relieved I didn't - until I realised I'd inadvertently joined this group of people.
The boom/bubble is obviously regrettable and there are a lot of factors influencing its creation: lax lending certainly; insubstantial vetting of the lending by the government - and as a corollary, lack of legislation to counteract this; greed/avarice/fear on the part of the population that fuelled it. In that sense it's not remarkable compared to any other bubble in history be it tulips, South Sea or Dot Com.
I dare say some speculators will get burnt and burnt very badly; I also have little doubt that many, many thousands will get burnt who've done nothing wrong other than watched a conveyor belt of homes accelerate away from them at seemingly unabashed speed, jumping on only to watch with horror as it suddenly starts to reverse having sunk everything they had into it for no other reason than that they had no other choice yet may now face the real threat of repossession and negative equity. Why everyone should be jumping up and down with glee - even if it's "good" news for themselves - is an utterly shameful sentiment and certainly no better than the stored up resentment of received smugness or hubris of the speculators when they were on the way up.
43. Ijjhall said...
CB
Hague banged on about the keeping the pound because he was told euro sceptism was 'popular' with the electorate at a time when the Tories were openly disliked. He was desperately playing a 'populist' card alongside all the anti immigrant stuff but it didn't work. Defence of the pound had nothing to do with principle as such and in any event he has ruled himself out of ever running for leader again and not in a way that leaves the door open as most denials do - think the trauma of that massive 2001 defeat, the ridicule was too much for him particularly when compared to the years that followed - author, TV appeareances etc - his moment has gone. Let's face it after Cameron it will be Osborne or dare I say with London as a prime base Boris !!!
44. Guykit said...
I am surprised by the tone of everyone on here. While I do not think it is a good thing that house prices keep rising by much more than inflation, particularly for first time buyers and those moving to larger houses as their families grow, I am not sure why peope are happy or drinking champagne about the prospect of economic recession, people without jobs, people losing their homes etc. It will be all of us who suffer if a major economic downturn occurs (or at least all ordinary people, the super-rich will be unaffected). As for the political points, no other party would have done anything differently, so I fail to see the relevance.
45. bystander said...
"having sunk everything they had into it for no other reason than that they had no other choice"@Flippity_gibbet said
.....everyone has a choice, although it is not their fault, 'totally', as we have been on a media merry-go-round of property porn and fear of pensions defecits in our old age, not to mention the availability of incredibly cheap money. However, it doesn't mean they are completely devoid of responsibility and by saying they had no choice is removing their right to this responsibility, but that is where this world has gone. We all need to take responsibility for our actions and not look for someone or something else to take the blame.
46. quiet guy said...
@Flippity_gibbet
"What a bunch of mealy mouthed, self-interested hypocrites. It's like a bunch of non-smokers whooping and cheering at their smoking peers getting cancer."
No! That's a dreadful analogy. If you take up smoking then you are making a choice that only affects you (I'm ignoring passive smoking). Basically, if you smoke then that is your choice - best of luck but it's not my problem if you get sick.
When an entire society chooses to artificially inflate house prices, effectively redistributing enourmous amount of money from one part of society to another - mainly from young to old - then that is a different matter. The practical effect of the boom has been to punish those who chose to live within their means instead of gambling on house prices. If this had been done quietly and discretely, that would have been bad enough but instead we have had to endure property porn on the TV and the vulgar boasting of the new 'rich'.
Finally, I am seeing hard proof that I might be able to buy a space to live in one day without getting into ridiculous levels of debt. I celebrate that.
@Guykit
"I am not sure why peope are happy or drinking champagne about the prospect of economic recession, people without jobs, people losing their homes etc. It will be all of us who suffer if a major economic downturn occurs (or at least all ordinary people, the super-rich will be unaffected)."
Sure, I will be impacted by the economic effects but not as much a somebody with a 5x salary mortgage or 'liar loan'. Recessions aren't fun but they *ARE* necessary. If we had permitted a recession in 2001 or 2005 instead of pumping cheaps cash into our economy, then it would have hurt a bit but we would have survived and emerged stronger. Recessions force bad business and resource misallocations to fail. It seems that some people only want to be capitalists during the good times. The sooner we have a recession and start paying our way in this world instead of gambling with house price Ponzi schemes the better!
47. growler said...
@flippity/Guykit:
Sure, maybe some Schadenfreude. But when you've been exposed to a constant barrage of "it can only go up", it is human nature to be happy that this is now proven wrong.
But the real issues are that the regulatory system in this country can create a market where with a given Mr and Mrs X and their constant income, lenders can do anything from bury you with money well over what you can afford to suddenly refuse to look at you at all.
Hopefully this will be the last HPC, but I lived through the 1980s and thought that then as well.
We should legislate so that anything over say 80% LTV is not permissable. All incomes are proven with 3 years records or PAYE records and that a multiplier is FIXED.
Lets not be under any illusions, the LENDERS have created the self-fulfilling prophecy. Lan more -- buy more -- loan more --buy more. Of course commisions to brokers grow as well. Jolly good.
If loans are not granted now, they shouldn't have been a years ago. And as far as I'm concerned, I see NEGLIGENCE since by definition, what you thought was low-risk before, is now too much risk. Why?? Lenders think they will have to repossess negative equity houses and know to recover costs from someone missold a "managble mortgage" will not happen.
I hope to see a class action brought against lenders for poor financial advice on what it meant to be a LONG TERM investment sold in the interests of the borrower, rather than the lender.
48. confused76 said...
Flippity,
The smokers example is misplaced. I am happy that house prices are crashing so I can buy a place for myself without mortgaging my life away. I am certainly not happy that other people will lose out, but tough luck!
Guykit
sure I welcome a good deep recessions, so we stop this funny money to grow endlessy transfering money from the poor to the rich
49. wiltshire said...
Sadly recessions are just part of the natural order, much like forest fires. Build your home in the woods and you need to be aware of the risks. Same with buying property and other investments. If you get in over your neck and the economy shifts you might be in deep water.
50. Historygal said...
No, it's not nice to drink champ to celebrate others' demise, that's true.
Equally, it's not been nice (for the past 5 years!!) hearing others go on about how much their tiny flat is now worth ("my £50k flat is now worth £500k and I'm making £175 per day on it" - sadly familiar...)
This house price rise has been an enormous worry to many of us. In my 20s, I wasn't in a position to buy, in my 30s (now) I want to. But I am priced out. This then impacts our whole life choices - - e.g. don't have children since no where to put them.
This was still going on just last summer when claims were still being made that come 2012, houses would be worth 40% more (than in 2007). It has been depressing. That's why the fizz is being opened. But certainly not against the poor types who are soon to be in trouble, and crashes will ultimately hit us all. But perhaps people will now remember that houses are living machines, not cash cows.