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House Price Crash Forum


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About leptokurtotic

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  1. I didn't seem to see this in previous threads, even though the story is a bit old: Ajay fined and scolded FTA: It's hard not to get the feeling that Ajay will be twisting in the wind for one reason or another before the HPC is done.
  2. When the recovereh comes all houses will cost upwards of one million pounds. And the trains will run on time. And it will stop raining all the bloody time. And the streets will be paved in gold.
  3. This seems to be more of the "house prices depend on sentiment" business. It's correct that they do depend on sentiment, but more importantly recent UK house prices have depended on punters shouldering spine-bendingly heavy debts that the financial system could then sell on via securitisation. This avenue is closed. As a result, even the most optimistic person who can't understand why house prices aren't shooting up (what, with interest rates and supply and demand and the iron will of Gordon Brown behind them...) will eventually be confronted by the reality that there is not enough money available to sustain Britain's still-insanely high house prices. It's a bit like when an optimist falls off of a tall office building - people on every floor of the building can hear him saying "so far so good" all the way down to the pavement. The pavement comes eventually, optimism or not.
  4. I've similarly shocked many people by explaining that you don't have to offer the posted rent. When we moved in 2005 the flat was advertised at 350 pw and we moved in for 200 pw. The agent had even been reluctant to pass on the offer, but it turns out that voids are a lot more expensive than low rents and this gives renters huge negotiating power. This will only become more pronounced as banks and multinationals give up the practice of paying housing costs for people who they move to London for a couple of years. Gerrards Cross' rental market above 4000 pcm is likely to suffer...
  5. I have observed impressive rent declines (around 35% over the last 18 months or so) for houses in the bits of Bucks and Herts that I haunt. I rather suspect that investors purchasing "bargain" properties are over-estimating yields for this reason. As it becomes increasingly clear that yields on rental properties are highly uncertain, I wonder if investors will become more reluctant to keep supporting property prices. If they don't stop buying properties, I suspect that they will be badly burned in fairly short order.
  6. All of the recent premature and irresponsible talk of a recovery in the housing market seems extremely short sighted. There are two possible outcomes of the recent central bank and government interventions in the US and UK: (1) They don't work, and the feared deflation is realised. House prices fall (along with a great many other and more worthwhile things, like the overall standard of living for many people). (2) As hinted at by the OP, the IR, QE and stimulus policies do start to work and lenders raise interest rates in anticipation of inflation. All of the people who were saved in the nick of time by IR cuts will, presumably, be wiped out by their oversized mortgage debts. There is a third possibility, which is that the BOE and government got the stimulus level exactly right and that there will be a recovery without a sharp increase in inflation expectations. This last outcome might prevent further house price declines, but I am not aware of any observers that consider this the most likely outcome (or even a likely outcome at all). I certainly wouldn't want to be one of the millions effectively betting my house on this happening.
  7. The reason is that housing markets are not likely to be "efficient markets" (in the financial markets sense of "efficient markets"). The link goes to a paper that explains: - What the potential inefficiencies of the housing market are - Why these inefficiencies can help create housing bubbles - What statistical evidence there was (in 2004) of these inefficiencies http://www.econ.ox.ac.uk/members/andrew.fa...t2UKHousing.pdf It is almost sad to look back at these papers now that the whole thing has gone so very badly pear shaped... Good on Farlow, though.
  8. A couple of months back I was meeting with some US-based economists whose work includes expert testimony in lawsuits against brokers and banks that wrote subprime mortgage business during the boom there. They said that the only difference between the US and UK housing markets they could see was that most of the loans written in the UK had the same characteristics that contributed to subprime blowing up in the US. For better or worse, IR cuts have blunted the most prominent of these subprime-like features (short fixed rate periods), but (1) low interest rates aren't going to last forever, and (2) the risk of default for many, many UK mortgages ("subprime" or not) remains high simply because banks were much more concerned with writing the business than evaluating the borrowers.
  9. I second the motion. The vast majority of house purchases are made with mortgages, and until mortgages are widely available at affordable rates house prices will fall. A couple of cash buyers coming through the doors may keep the remaining agents from closing, but these people simply aren't going to prop up prices (at least not for long). I think that some posters here forget how expensive houses are. In the area where I rent the average household income is around 70k, but if you ask an agent to show you a 3-4 bed detached house they've got nothing to show under 400k and nothing in a nice bit of town under 500k. It's silly, and it won't last.
  10. If transactions return- particularly at auctions- it might well be a sign that some vendors are setting more reasonable asking prices and reserves. My guess is that prices will continue to fall (though perhaps more slowly than during the last year). The inital pace was awfully fast, and if this crash is like the last one there will be a very long period of slow declines after the first big bump down. The US has seen a couple of these periods of apparent renewed interest over the last 18 months or so, but all of them have been drowned pretty quickly by the extent of forced sales and lack of affordable mortgage finance.
  11. There are many places around where I live where asking prices have remained above 2007 sales prices for more than a year. I keep checking the LR prices over and over to make sure that I'm not just missing something, but it turns out that some people still think that there's a greater fool out there.
  12. In the article: 'Nobody can know how long this is all going to take to turn around and we should be highly speculative of anyone who claims to be able to do so.' This is a man who doesn't know, or can't bring himself to use, the word 'skeptical'.
  13. After the Halifax and Rightmove data, armies of the misguided are emerging from the woodwork to proclaim the end of house price declines. Tellingly, these proclaimations all seem to be based on annecdotes rather than data. What are the data like? There is currently 3 Billion per month mortgage "shortfall" for home purchases relative to this time in 2007. CML data say that, no matter what an estate agent tells the Guardian, mortgages aren't being written at anything like the level required to sustain high prices. The FTSE has fallen 40%. Hedge funds are suspending redemptions. People who had a lot of liquid wealth last year now have quite a lot less. The notion that these people are deciding to pour cash into property is questionable at best- making 0% on savings is much better than losing 5-10% in a house over the next year. The slow tide of unemployment. When people are made redundant, they don't just throw in the towel, auction the house, and sell the kids to dog food manufacturers. Most people who are made redundant will struggle for as long as possible to keep their houses. The impact of unemployment on house prices is likely to lag redundancy announcements by several months or a year for this reason. The housing market is not efficient. Because of the lack of information available to participants, heterogeneous stocks, capital constraints, high transactions costs, etc. it seems very unlikely that the housing market is "efficient" in the sense that, say stock exchanges are. The idea that sellers will accept offers made at (or slightly above) next year's prices this year because they are rational is questionable at best. The market decline is likely to be protracted rather than instantaneous because of this inefficiency. As far as I can tell, the UK is very likely to have a house price crash similar to the one in Phoenix, California, Las Vegas, and other cities in the US where there was a pronounced house price appreciation. Before some clever person comes along to say that in the US there was too much house building during the boom and this will make the US crash worse than the UK, have a look at the toy model of the housinig market here. Based on these very simplisic "toy models" (i.e.: A-levels economics graphs), inflexible housinig supply would seem to tend to make booms and busts bigger. It is not at all clear that a lack of new housing would prevent house price falls when mortgage availability and employment decline (though it does seem likely that it would lead to a higher average housing price over the length of the housing market cycle). As far as I can tell this adds up to no spring bounce or a bounce that simply doesn't make any long term difference. 2007 prices can only return when 2007 levels of lending return. Given the present panic of banks and financial authorities, that kind of recovery seems far away indeed.
  14. I am sceptical of the idea that cash buyers exist in sufficient numbers to make a difference in the market for very long. There are at least three reasons for my suspicion: Too much cash - These buyers would each need to have £200k to buy a house for cash. Where were they keeping that for the last year? Deposit accounts? Investment funds? Shares? Either they were taking very low returns or losing a lot of money. Too much to buy - Given the presumably depleted surplusses of cash and liquid assets and the relatively high number of places for sale, it is hard to imagine that there are thousands of these "cash buyers" around actually bidding against one another. If they aren't bidding against one another, they're probably not supporting prices by very much. Too stupid - If you're so stupid that you're buying a house just now, how come you're rich? Edit: spellun
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