Saturday, Nov 29, 2008
Futures markets confirm the worst is yet to come
FT: The house loses
If UK mortgage lenders believe they have secured enough capital to tide themselves through a recession, they had better think again. A look at the residential property derivatives market suggests house prices have very far indeed to tumble before they reach their expected trough. Since peaking in August 2007, when the average house sold for £201,081, prices have fallen 16.4 per cent, reaching £168,158 at the end of October. Two-year derivatives contracts are now pointing to a further fall of a third to about £113,000. This implied 44 per cent peak-to-trough decline would wipe out all gains since the summer of 2002
Posted by rama @ 03:08 PM (416 views) Add Comment
4 Comments
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1. What Price Drops? said...
bring it on!
2. Dave said...
Hi
This will only happen in your dreams
Dave
3. mark wadsworth said...
It's the wisdom of crowds!
I ran a poll here a couple of months back, and, doom mongers that we, we predicted peak-to-trough of 42% (on average).
Japanese Uncle reckoned a 90% fall, P4AC said house prices would go negative, but those are outliers.
But because there were so few FTB's over the past few years, the implied loss to banks (assuming they take half the negative equity on the chin) is, surprisingly, only about £40 - £50 billion (or about 3% of outstanding mortgages). (this based on BoE LTV figures from the start of the year).
4. drewster said...
MW, according to a recent Radio 4 documentary (can't remember the name, sorry) the average fall in auction-room prices has already reached 42%. Admittedly a lot of auction sales are probably repossessed new-build BTL flats which were horribly overpriced in the first place, but still. The auction room is where the real price can be seen, there's no wafting of freshly baked bread or neutral colours to sway buyers, no holding back for a better offer.
42%. Life, the universe, and everything....