Thursday, Aug 28, 2008
Record fall, record rate of fall
Nationwide: House Prices Continue to Fall in August
Fionnuala Earley still squiggling away to the best of her ability on Radio 4, but Evan Davis, gently probing with simple questions, knew she had nowhere to go. He pointed out that the 3-month rate of falls is now around 18%.
Posted by dohousescrashinthewoods @ 07:23 AM (3414 views) Add Comment
50 Comments
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1. mark wadsworth said...
Excellent, excellent, the fall over the last six months was 8.2%
If HPC continues at that speed, here's how long it will take to hit our benchmarks (not adjusted for inflation):
1 year - down 16%
2 Years - down 29%
3 years - down 40%
4 years - down 50%
5 and a half years - down 60%
2. str 2007 said...
Thanks Mark
Just like to point out that £169,316 ave in July and £164,654 in July is a 2.75% monthly fall (correct me if I'm wrong) but the biggest monthly fall ever on record.
And does seasonal adjustment ever ever ever make a fall bigger than it actually was. 1.9% my arsh.
3. str 2007 said...
And I make it about 11.4% fall from peak so far.
And yes that's 2 quarters now with an annualised average of almost 18% (and I haven't looked into how they've massaged those figures).
4. little professor said...
Ha ha, down over £1,000/week in July.
Poor Fionnula, even she's having difficulty spinning this:
"I'm not sure we'd describe it as a crash yet; things are moving rather rapidly, that's true."
http://news.bbc.co.uk/today/hi/today/newsid_7585000/7585465.stm.
5. matt_the_hat said...
but Fionnula reckons the brakes with be applied due to fundementals such as supply and demand
6. Edwardnh said...
Fionnula is acting a bit like a shill. Her commentary every time seems off. This report was not pretty.
7. str 2007 said...
Thanks LP
I missed that this morning.
Squirming on a grand scale.
It's such a pity questions like - how did you get your prediction so wrong only a few months ago ?
and - How much are you paid for your opinion.
and - is your real opinion different to that which appears in the Nationwide statements and what your saying now.
and - if not, you actually believe what you say and consider your worth your wage do you?
I suppose Evans gently gently approach is more professional but I want blood.
8. str 2007 said...
Somethings gone wrong with our thread - I didn't put a link in above, either Matt has done something wrong or we've been sabotaged by the Nationwide.
9. jack c said...
Little Prof - time to post up that graph with house prices falling off a cliff, you know we love it (LOL)
10. voiceofreason said...
1. This is the shortest Nationwide house prices report I have seen. The first page tries to avoid the subject by going into in depth analysis of what type of mortgage people take out.
2. Interesting point ".... UK borrowers who ..... attach enormous weight to the level of initial monthly repayments......". Proving the point that UK home buyers are amongst some of the dumbest in the world (bar the US of A of course).
3. Extrapolating June/Jul/Aug shows another 11 months to go to the 40% off peak mark at £111K average price. ETA Sep 2009. Though my hunch is that the fall will be more rapid because everything happens faster now than it has done in the past.
4. The nice (very) young lady from Capital Economics was on BBC1 Breakfast this morning telling Deklan that 35% fall from peak is what they expect. And I am sure I detected a look of dread amongst the rest of the studio cast. Probably all mortgaged to their eyeballs with BTLs, bloody VIs everywhere.
11. Rm96696 said...
The article talks about an increased supply of houses relative to sales. But isn't there a housing shortage?
12. str 2007 said...
VOR
Interested in you point 3.
How did you do that ?
My calculator seems to take just over 2 years from hear to reach 111k basing quarterly falls on 4.5%.Given the election must be held in less than 2 years expect any amount of rescue packages to be launched in the Autumn of 2009 to try and at least level any falls until after the election.
However on the flip side we haven't really started to see many redundancies yet and the sudden rise in living expences whilst hurting hasn't really bitten yet. And there are an awful lot of mortgages to be renewed over the next 18 months. And BTLers haven't been approached for equity top ups yet. And peoples Spanish holiday homes haven't been put into forced sales on a grand scale yet.
You might be right about 40% off peak in a year, but not by extrapolating the last 1/4 falls.
13. Cooking The Books said...
HAHAHAHAHAHAHAH
they can cook the figures but it still tastes like sh**
2.75% down this month - i agree with all the other comments here - my daughter worked it out and she is 9!
of course the best thing about seasonal adjustments is that they always come back and bite yer...
But that leaves them starting the september numbers on minus 0.85%
HAHAHAHAHAHAHAHAHA
14. mountain goat said...
little professor @4 think you might not have closed your html tag?
15. Cantonf said...
guys I am Italian, we haven't grown so much in the last 10 ys, but house prices in the main cities are as high as here in UK. People buy with very high deposits usually. If mkt here fall by 60% I buy the whole building where I live in London.
Problem here is not the house mkt, but the economic system that collapsed.
16. hpwatcher said...
I agree
17. hpwatcher said...
just closed
18. Yerhavingalaugh said...
Looks like we are in for a massive winter of discontent after a thoroughly miserable summer. Everyone seems to be battening down the hatches and the storm will surely blow Broon and Co. away before Christmas which will be pretty bleak for many families. What will come first Broon's departure or Krustie's hat munching?
19. peter_2008 said...
I remember that last month's Halifax report said it was back to 2006 price, so next Hallifax report will be back to 2005 price?
I think average homeowners are starting to accept the reality in mass. They will accept a lose on their houses, in the same way they would accept a lose when they sell their cars, furnitures, DVDs and any other used assets. And they can and will live with it, because they have to get on with their lives, and because every other houses is getting cheaper as well. They will also soon realize the faster they can drive down the price, the faster they can move on. I don’t think they would be bitter about the lose, because the gain was only ever on paper in the first place.
But, it is a total different story for greedy “investors”. If average Jonny English’s main house is in negative equity, there maybe some help from Government and Local Authority if you are lucky. But if your SECOND house is in negative equity and you start asking for public help, you will only get the finger. The investors think they have some kind of “gentlemen’s agreement” or allegiance with all ordinary sellers, but they don’t. They will be isolated soon, and shot down one by one!
20. Cantonf said...
Guys I really don't understand most of the comments. Everyone seems happy because the prices are falling - clearly most of them are not property holder.
BUT here the consequences are: no more holidays in Spain for you, no more cars, flat screen, universities for your children (or they have to live with you), no more versace and gucci, and maybe no more job for you. Maybe if you don't hold a property you can feel little bit richer than your neighbour, but who is he? probably an IT or a developer from essex who struggles to pay bills and mortgage, not a wealthy foreigner with whom you can exchange opinions and culture.
So there is no hahahaha here.
21. voiceofreason said...
Peter @ 19.
I like it !
I wonder if New Labour have finally got the message now that houses have been too expensive for too long, must revert to the norm (3.5x earnings) and have been expensive because of oversupply of credit. Nothing whatsoever to do with supply/demand (apart from excess creadit to BTL speculators causing artificially high demand).
22. jack c said...
The drop in house prices will adversely affect the Governments receipts from both Stamp Duty (SDLT) and Inheritance Tax (IHT) this combined with a rapidly slowing economy - anyone care to give me a few pointers on how Mr Darling & Mr Brown will "balance the UK Plc books"?
23. richc said...
VOR -- As an American, I really take issue with your second point, or at least your assertion that American homebuyers are dumber than those in the UK. If you look at the ratio of house price to income, the UK ratio is far higher, and this is before you take into account the mortgage interest tax deductions that provide a enormous benefit to American homeowners. Granted, there were a large number of "flippers" in the US taking out crazy loans to buy into the bubble, hoping to quickly resell for a profit, but most people doing that were well aware that they were taking a gamble that the market would keep on going up. And if the market crashed, you could always walk away from a home loan in the US. You lost the house, but you probably didn't put down a significant initial deposit, and your credit score takes a hit, but you probably had a lousy credit rating to start with. In the UK, on the other hand, you see mainstream people selling themselves into a lifetime of debt slavery and not giving it a second thought. The crash in the US is going to be peanuts compared to the one in the UK, and the consequences for individuals here are going to be far more dire.
Otherwise, on non-house-buying issues, I think I agree with you that Americans are generally dumber than the British.
24. bystander said...
anyone care to give me a few pointers on how Mr Darling & Mr Brown will "balance the UK Plc books"? @jack c @21. BORROW MORE MONEY FROM THE REST OF THE WORLD, IS THE ONLY OPTION LEFT TO THEM. Good luck to the poor sods who have to clean up this mess. UKPLC will be in debt for a very, very long time.
25. little professor said...
You love it:
26. Zr_seanie said...
I wonder how long it will take for Mr Darling to lower the stamp duty threashold back down to where it was years ago so they can still tax us all to death.
27. mountain goat said...
what a fine sight!
28. jack c said...
Good work little prof - I reckon even Alastair John Campbell couldnt spin his way out of this one !
29. str 2007 said...
bystander
It was almost poetic justice that John Major got in back in '92 to precide over the mess his government caused.
I doubt Brown & Darling will get in, the worry is that Conservatives will serve 1 term, be unable to clear up the mess and labour will be back in again just as the economy starts to recover (or at least stabilize) in 7 years time.
Unless a politician stands up, confesses to the situation and clearly states how they plan to resolve it and what measures they'll put in place to stop a repeat performance I don't think I'll bother voting.
Maybe Monster Raving Looney as a protest.
30. str 2007 said...
jack c
Oh I don't know, if you look at the graph you can clearly see the Nationwide curve levelling off and moving away from the vertical !
Might not be so if they hadn't seasonally adjusted the monthly falls from 2.75% down to 1.9%. But hey.
31. mountain goat said...
str 2007
poetic justice that this is is happening while Brown is still in charge...
32. handle_it said...
The fact that transaction have all but ground to a halt is more significant than monthly falls.
33. jonb said...
Jack C,
Actually, I think he could spin his way out of it.
One of the things Gordon Brown promised, when he became prime minister, was to make housing more affordable. It is about the only one of his promises he has kept.
34. amjidk said...
even with seasonal adjustments, that graph looks pretty good!! YEEHAAAAA
35. amjidk said...
anyone heard from kursty lately??
36. inbreda said...
22. richc said...
VOR -- As an American, I really take issue with your second point, or at least your assertion that American homebuyers are dumber than those in the UK
OK richc - in your defence - I understand that american mortgages cannot be chased if the borrower defaults, is repo'd, and the hosue sells for less than the mortgage amount. In that respect it is a no lose equation for home buyers, and they are all sensible for buying at any price no matter how high.
On the other hand, americans are retards.
37. mark wadsworth said...
Richc @ 22 makes very good points. People in the UK are the dumb ones here.
Peter_2008 @ 19, going by Nationwide's House Prices since 1952 (not adjusted for inflation), the July 2008 average = 2006 Quarter 3 average, but the August average = 2006 Quarter 2 average. So the bubble is bursting three times as fast as it built up.
Further, prices were pretty flat in 2004/2005 actually, so another 7.5% reduction (i.e. by end of 2008) catapults us back to mid-2004 prices. The most ridiculous price rises were prior to 2004, so sooner or later the time machine slows down again.
38. george monsoon said...
Im not sure that housing will be more affordable, because you need to be loaded with about 20 or 30k in the bank to even get a mortgage on some 2 bit terrace.
Housing will need to fall an awful long way before my 4k in the bank will cover my deposit, and that sum is shrinking in value because inflation is rising. AND>...... adding insult to injury, my wage is static.
39. amjidk said...
good points George!!
40. holding out said...
Inbreda - I'm assuming you are talking tongue-in-cheek. I can't understand how a country can vote in someone like dubya and still keep a straight face, but that doesn't mean that all Americans are retards (as you put it). After all the UK was happy to vote in TB based on a grin. I'm sure the whole world is dumbing down - and as usual the US of A blasts a trail which we all follow.
41. george monsoon said...
How long have we been "dumming down"? This must have been happening since the beginning of the industrial revolution.
Makes me wonder how our ancestors would look at the current situation, and what they would do about it?
42. James said...
George M - look, I don't mean to be rude here, but you seem to be symptomatic of the British malaise - the belief you're *entitled* to *own* a house. Note that this is very different from 'entitled to have a decent place to live', which I would definitely agree with. It's the emphasis on home ownership, with its attendant subprime lending, that's got us into this mess in the first place.
I hate to say this, but even with my most bearish hat on, I can't foresee a situation in which £4k ever gets to be a 'decent' deposit - it won't cover the costs of buying a place. The housing, mortgage and services markets aren't going to fit themselves to your particular needs. What can change is that we could get a wholesale reform of tenancy laws, removing the stigma attached to renting and giving good tenants the security they deserve.
43. beartil2010 said...
To answer this 'UK house buyers are dumber than American house buyers' - no they're not.
Our salespeople are much smarter in order to pull the wool over our smart house buyer eyes.
Even a retard can buy in a non-recourse state and look good, it's a win-win situation. Does it count as taking a risk if you can't even read the form? Well, just sue the firm selling to you!
However on a more serious note I won't call it ballsy borrowing 8x salary here. Smart enough to read the form, but too dumb to realise that prices always rise - anyone who cannot afford the mortgage they took on deserves everything they get.
44. Cantonf said...
to richc,
on "Otherwise, on non-house-buying issues, I think I agree with you that Americans are generally dumber than the British"
Americans are not stupid at all. remember: 1. you won the last war, 2. you are the emperor of the world, 3. you still can say Russia to f@ck off and all the Europeans follow you, 4. your economy will recover soon, 5. your new president is black (quite impressive considering it is a minority in your country - I think we have to wait a lot before we have a Pakistan prime minister here). Only problem that Romans during roman empire were living better the barbarics or non-romans and at the moment you need to give a better life to your middle-class. As usual the looser of all this will be Europe (uk included). Europe that does not have balls to be independent from NATO, Europe that cannot take oil from middle east or gas from Russia without asking you. so do u think u are the stupid?
45. Indenial said...
may be I am bit thick, but
2 months back house prices were 17% down
(http://www.dailymail.co.uk/news/article-1030940/House-prices-17-cent-year-experts-warn-outlook-dire.html)
now they are only 10.5% down !
so does it mean House prices have increased 6.5% in 2 months ?
could somebody enlighten me !
46. Drj said...
All this nationalistic/racist banter is pretty childish. The Americans I've met are generally sensible pleasant people. A lot of the general population in both countries are not particularly financially well educated and rely on " independent expert" advice which is supposed to be properly regulated. As we are all aware now this advice was neither expert nor independent.
47. Davip said...
What richc @ 23 didn't mention was that in the US you can also offset property tax (i.e., councul tax) against your income tax liability as well as mortgage interest. Imagine that in the UK -- no interest on your mortgage and no £1.5K yr council tax! Americans got sucked into the boom as much as in the UK, but the British did it WITHOUT all the no-recourse and tax benefits the Americans enjoy, and to a far greater degree. It's clear who was the dumbest there. Here in the US I live an affordable, council estate- and chav-free life in a society with a sense of communal- and self-respect long vanished from the UK. The irony is that having waited a decade for house prices to come down in the UK, I'm now unsure if I'll ever return.
A good example of what I mean: the in-bred @ 36 "...On the other hand, americans are retards" -- stupid comments from an appropriately named poster.
48. growler said...
Mark Wadsworth: I think we will see the rate of HP falls accelerate as we come to the end of the year. I see an equities market looking for safe havens and not finding them. Gold? not so sure, handle with care. If the hurricane comes in anything like Catriona, more losses to manage. Oil might yet again see investment. I can see the IRs coming down in 4-6 months as we fly into recession and deflation and Darling has yet to make the excuse of his life as he bridges the growth expectations he's published with the reality of Q3/2008 going negative. The biggest difference in prediction versus actual in a very long time. If Sterling lifts, exports will start to suffer at the same time as the economy is into Q2 of recession. Expect more unemployment Dec-Mar. As Vince Cable says, trying to flog a dead horse is a waste of time. The market is going to implode. His point is we should be looking to prevent homelessness - from a human point a valid point, but meaning yet more unexpected taxpayer support. Imagine you are in such an economy? Who is going to say - unless they have no choice or have taken leave of their senses - "shall we buy a new, bigger house?". Who can blame the agents and the lenders for trying to resurrect their livelihood? Everyone is just doing what humans do: number 1. Self-preservation. And that means de-risk for all.
49. Ijjhall said...
@Indenial
I assume the Mail article refers to a 'prediction' of 17 per cent falls..
That prices have already fallen 10 per cent pre recession shows how optimistic some are...
50. voiceofreason said...
Must admit davip that I had temporarily forgotten the norecourse stuff.
Maybe the aren't so dumb.
I was thinking hard about whther there was a way to create a no recourse mortgage in the UK by byuing through a limited liability company. But I believe the banks can still chase the directors for compensation if such a company goes bust, that or the banks will not lend the mortgage without personal guarantees.
The tax benefits are interesting too, didn't know about them. I guess these factors explain some of the massive heights the US property market reached. Which makes UK house prices look even more vulnerable.