Friday, Jan 30, 2009
Ouch
Daily Mail: Housing crash traps 1.2m in negative equity
A collapse of nearly 20 per cent in house prices means around 1.2million families are trapped in negative equity, it emerged yesterday.
Figures from the Nationwide confirm that Britain is in the grip of the worst housing market crash since its records began in the 1950s.
A year ago, less than 100,000 homeowners were in negative equity.
The average price of a home has dropped from £186,050 at its peak in October 2007 to £150,500 today - a fall of £35,550. At their current level, anybody who has bought a home since 2003 paid more for their property than it is currently worth. Government figures also revealed nearly one million homeowners in England are struggling with their mortgage. An average of 2,500 people are being made redundant and around 85 small firms are collapsing every day.
20 Comments
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1. Total_injustice said...
The government could do worse than state their aspiration for mortgage lending in 12 months time. After all they:
- Decoupled house prices from the measure of inflation.
- Lacked leadership and let house prices grow uncontrolled.
- Encouraged borrowing.
- Promoted the perception of false asset price based wealth.
- Bought the banks in an attempt to force more lending.
They are dependent upon house prices stabilising if not increasing, as a means of recovering the mess the have created.
This is worth a look: http://petitions.number10.gov.uk/LendingReform/
Personally I see most of the falls in appartments, with family homes not shifting much in price. Same we can't seperate the cost of appartments from the adverage 3 bed, semi.
2. charlie brooker said...
Let it be.
We tried to warn them, but when you try to warn those who simply do not want to hear what you've got to say, its time to draw a line and get on with living the rest of your life.
Breakout of Shawshank, cross the border and live like the Mexican Fisherman - and leave the inmates to it.
http://www.zihua.net/
3. stillthinking said...
More house price stuff !
4. alan said...
I think that for most people who use this site the "Headline News" isn't such a surprise.
Charlie B says that we should "leave the inmates to it". Actually their experience is a painful one sometimes. I do voluntary debt advice for a charity and the people who believed the housing hype and "property porn" seem to be hurt the most.
Financially speaking, I'm out of it and "live across the border". Its nice to return to a peaceful home. Thanks for the forewarnings HPC.
5. Shockedandy said...
Absolutly Alan, thanks HPC! A great site that booked some many trends. And still is!
6. str 2007 said...
''anybody who has bought a home since 2003 paid more for their property than it is currently worth.''
This is what the sheeple need to know.
However that means an asking price drop of at least 20-30% for just about every house on rightmove.
Maybe now sites like net house prices exist it is easier for realistic values to be applied to houses (by the buyers at least).
But every statement/article that comes close to mentioning green shoots puts back recovery even further as sellers pick up on this and try and hold out. (Much like we pick up on the opposite type of articles).
Well known psychological fact is that people look for the news they want to hear.
7. Charlie Brooker said...
@alan
If you work for a debt advice charity why did you need forewarnings from HPC?
8. Eyes_wide-open said...
Like others here I tried to warn a few people including family and friends and was sneered at for sounding like a "doom monger".
I'm not happy that we have financial turmoil, job losses and a failing currency, there's little pleasure to be had from someone elses misery - there is also little pleasure in being derided and sneered at for warning that a housing bubble had developed and it was clear (to most of us) that there was a bust looming large.
9. This comment has been removed as it was found to be in breach of our Blog Policies.
10. This comment has been removed as it was found to be in breach of our Blog Policies.
11. mark wadsworth said...
What Total Injustice says, that's Nulabour's economic miracle in a nutshell. Problem being, the Tories wouldn't have been much better. Fred Harrison for Chancellor!!
Michael Saunders always hams this up - he talks of 200,000 people per month, what he means is 100,000 mortgages.
1.2 million seems on the high side - this would be correct assuming prices had fallen 25%-plus, which is quite possibly the case. So how come the Nationwide don't come out and say it?
I like the way the Daily Mail says prices are back to 2003 levels, which is certainly true on an inflation-adjusted basis but not in nominal terms.
12. charlie brooker said...
@alan
If you work for a debt advice charity why did you need advice from HPC? When you wrote "live across the border" why did you put your own words in quotes? For evil to flourish all it takes is for good men to do nothing; for evil to triumph all it takes is for good men to comply - and comply they did. Spare us your saintly empathy - your lack of condemnation only condemns those you council to repeat their catastrophic mistakes. Some councillor you must be.
13. mark said...
anyone reckon this will be a much worse than last crash? maybe 50% drops?
14. You_talkin_to_me? said...
@mark
Using fibonacci retacements, one could estimate potential drops of 38.2%, 50%, and 61.8%. (the major ones) if you believe in technical analysis
15. letthemfall said...
I don't think house prices, or any other asset prices, were ever included in inflation indices. The cost of servicing a mortgage is in RPI, but otherwise nothing related to house value. Bear in mind it was not the actions of the Govt that caused so much easy lending; it was the vast amount of money coming from the East, combined with all sorts of financial sleights of hand, that washed money into housing and other assets. The question is how do govts in future regulate the economy to prevent these kinds of bubbles; or more to the point, how are electorates to be persuaded that credit free-for-alls and light regulation and low taxation are not actually in their collective interests.
16. shining wit said...
2 mark at 9..
It's become obvious that this will be much larger than the 80s/90s crash. 50% drops at least. The only way to stop this is to print money. DOH!
Why did I open my big mouth.
17. str 2007 said...
shining wit
They are going to and if you look at the cost of money at present it is very very cheap.
Assuming you have a 40% deposit then £295.00 per month per £100,000 borrowed interest only.
That means you could buy a £500k family home for under £1k per month. To rent the same would cost approaching £2k per month.
£200k in the bank will earn about £400 month in interest.
So unless you're a committed HPCer and can raise money it's a close run calculation particularly for those buying a home for the next 20 years or so.
They may have to sell the one they're in though first and that may be a bit tricky.
So another 20% off at least required IMO.
Anecdotally just seen a new build reduced from £750k last year to £525k this year. Over priced in the first place but perhaps the first sign of a vendor having to face reality.
18. timmy t said...
str - "That means you could buy a £500k family home for under £1k per month. To rent the same would cost approaching £2k per month."
True, but a £500K house is depreciating by about £7,5K a month at the moment. I suspect that anyone who is renting right now, is living in a house which is depreciating by more than they are paying each month in rent. This is still going to get a whole lot worse before it gets better IMO
19. str 2007 said...
Very true timmy t
And to be fair when I said buy for less than a £1k per month I should have said rent from the bank for less than £1k per month with full exposure to property depreciation from ones own capital.
20. Tenyearstogetmymoneyback said...
str 2007
The big question is, 40% deposit or not, would anyone lend you £300000 these days.
Unless you are a highly paid Civil Servant I can't see it happening.
Would be interested in hearing from anyone with inside knowledge what the situation with mortgage applications is these days.
You certainly wouldn't be able to divide by three and then claim you were earning £100000 a year like
people were advised to (by Birmingham Midshires) back in 2005.