Friday, Jun 13, 2008
“People were attracted by the apparent upward one-way bet on property”
Times: Buyers find homes turning from cash cows into millstones
"For many homeowners, houses have become more than just a place to live – they are seen as an investment vehicle, a pension or even a savings bank" I can't help laughing hard...
Posted by confused76 @ 08:17 PM (675 views) Add Comment
8 Comments
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1. debtfree said...
but but but....
excellent and simple explanation of a collapsing market.
2. denzil said...
My Father is a builder, albeit semi-retired and his comments are that the market has stopped dead. Typically he does extensions and the occasional up-market new build etc and his comment was that people are holding back on any major expense. On the new build Barratt type estate, things are very painful indeed. As for the article it very much sums up the exact sheep mentality which herded after dot.com. How short peoples memories are.
3. greytornado said...
For me, a house is a home. It's where myself & my wife live, I bought it years ago, we have spent a lot of money improving and maintaining it over the years and I have not had a mortgage for many years. I suppose in theory it's worth about £300k, even in the current climate (At this moment in time). If the value falls by 50% - so what? If I still had a mortgage, I'd just keep paying it.
Houses are essentially a commodity, like many other things. Events can conspire to bring about drastic corrections, that can last for many years. If people have been daft enough to buy into any commodity, thinking that prices can never fall, not only have they lost sight of the true purpose of a house (a home), but they have lost their sense as well.
4. i-cld-murder-a-blt said...
A lot lot more to come is all that needs to be said right now I think.
I am amazed at the naivety of people that make these investments.
All spurned on by the property porn stars(god it makes me angry).
5. Mytimeisnigh said...
I just want prices to fall and fall fast, so I can get on with my life. I hope there is never a repeat performance of this boom n bust in housing, it's financially and socially immoral. The growth caused extreme amounts of misery to those who were priced out of the market, or out of the standard of housing they should of been able to afford. And now it's gonna cause a lot of misery to those who had to buy or who believed the spin and thought they should buy. For some who bought and who used their houses as cash machines things will be far worse. Then there's the buy to greeders who deserve everything that's coming to them. My only hope is that the buy to greeders will suffer and quick and painful end rather than a slow and painful one. Please, if anyone reads this with political powers, ensure that when property is sensibly priced again, that taxation is in place to deter this dreadful social evil from occuring again.
6. Mytimeisnigh said...
I just want prices to fall and fall fast, so I can get on with my life. I hope there is never a repeat performance of this boom n bust in housing, it's financially and socially immoral. The growth caused extreme amounts of misery to those who were priced out of the market, or out of the standard of housing they should of been able to afford. And now it's gonna cause a lot of misery to those who had to buy or who believed the spin and thought they should buy. For some who bought and who used their houses as cash machines things will be far worse. Then there's the buy to greeders who deserve everything that's coming to them. My only hope is that the buy to greeders will suffer and quick and painful end rather than a slow and painful one. Please, if anyone reads this with political powers, ensure that when property is sensibly priced again, that taxation is in place to deter this dreadful social evil from occuring again.
7. Stevie Dee said...
@greytornado.. totally agree.
But unfortunately many of your peers and the young dodgy salesman turned property tycoon / slave merchants de la rigsby's have been given free reign with the change in legislation (conservative policy 1997) and carried on by the Labour government to bring about one hell of a mess.
This is not entreprenuerialism, because as you rightly pointed out, a home is a home. It was merely opportunism played out on the public as had been done under the Thatcher administration, with the full backing of banks, politicians, financial advisors, surveyor, builders & solicitors with very perverse & corrupt mentalities.
Time for radical idea's, I personally think that after the market crashes, that the state brings about measures that will protect the population with one fundamental right, the home. And distribute housing accordingly, although I now also believe today that "pigs can fly".
8. last_days_of_disco said...
@greytornado
Housing and land are not commodities.
From wikipedia:
"A commodity is anything for which there is demand, but which is supplied without qualitative differentiation across a market. In other words, copper is copper. Rice is rice. Stereos, on the other hand, come in many varieties of quality. And, the better a stereo is, the more it will cost."
So houses and land break the fundamental rules of a commodity. It varies in price wildly based on many many factors other than supply and demand. Basically it breaks the "without qualitative differentiation" property of a commodity.
Land and housing are real estate or real property in the UK, we just say property:
"In British usage, “real property”, often shortened to just “property”, generally refers to land and fixtures as such while the term “real estate” is used mostly in the context of probate law, and means all interests in land held by a deceased person at death excluding interests in money arising under a trust for sale of or charged on land."
The key difference which is now destroying the economy is that you can't use property to make anything useful. Unless we bulldoze down all the houses and turn them into farmland. Commodities always have some value and can be sold. Basically commodities are liquid. You can sell them very quickly. As people who bought into this housing boom are now discover they are trapped with an immovable asset that is worthless until someone comes along who wants to live in that location.
The implications for the economy are going to be prolonged and severe. You are going to have a whole generation of young people who are going to spend their whole working lives basically paying interest to banks. That murders your productivity and consumer spending for 25 years! The political implications are also going to be severe.
This brings me to another major difference between commodities and property. Commodities can be moved around and hence sold where a good price can be obtained. An acre of land with a beautiful house in Zimbabwe or some areas of Kenya is now practically worthless and you can't move it somewhere else to recover your losses.
Perhaps I am being too pedantic. You meant, probably that you don't see your house as more than somewhere to stay and you don't owe the bank anything, so to you its a commodity -- you are quite willing to sell it at a massive discount on current asking prices if you needed to -- I wonder. You are expressing your lack of attachment to it perhaps. I find that hard to believe, but in that respect only would your house be a "commodity" to you.