Tony Tango

Just because 'most' failed to spot the crash (or just didn't want to look for it) doesn't mean that most people will be wrong when they think that proces have further to fall. Personally I think that the lack of supply will steady the fall with the market currently approaching a new equilibrium between lower supply ("I'm not selling my home at 80% less that it was worth last year") and demand ("damn - prices have fallen but now I can't get a mortgage"). Cash in bank v cash in house is an interesting conundrum at the moment. For the reasons you've mentioned I'm currently tempted to pump a lot of cash into a house versus keeping it in the bank. What impact will inflation have on mortgage payments?

House went on market mid 08 at £650,000. According to EA had a couple of offers at that price, but buyers didn't follow through. Price dropped recently to about £550,000 - i.e. a 16.5% drop which was about the national average for 2008 (according to Nationwide figures). Vendor seems reluctant to budge below £540,000, which is a drop of 'only' 17%. On the basis that the house will probably be worth £487 by the end of this year (total 25% drop), I (generously) offered to split the difference - e.g. a 20% discount, but vendor will not budget despite me being a no-chain cash buyer! Plonker (greedy) vendor - claims to BTL mortgage and tenant lined up (yeah - right). Maybe I'll offer him £500 in the spring/summer unless he's found some other sucker to buy before then!

Not necessarily. Doesn't the fact that more are selling suggest that they may have reached or be approaching their new equilibrium price where supply is in balance with demand? If sales pick up, prices may pick up (unlikely) or at least stop falling. Prices for 'normal' goods don't normally fall as volume (demand) rises. Prices will not drop indefinetly as many people simply will not sell at a 'loss'. The supply side reduction (fewer houses on the market) is one reason why prices have not already dropped further. Vendorws will prefer to stay put or rent out rather than sell at a loss. If prices do fall by more than 40%, the economy will be in such a mess that few people will be able to buy these 'bargains' (like all the FTB who were rubbing their hands with glee at the house price falls only to realise that the economic mess that was causing the house price falls was also proventing them getting a mortgage). I'm a cash buiyer and I've been hanging on for the past 12 months to buy. Anecdotally, the EAs in my area (Wiltshire 500K market) have all reported an increase in interest this year (marketing or truth??). They reckon that there is pent up demand now from buyers like me resulting from such low activity in 2008. IMHO I think that price drops of 60% are just fantasy - housing supply would have to massively outweigh demand. I'm expecting a 10% drop this year for a total peak to trough drop on average of 25% When to jump? Now and risk making a loss, or only when we're definetly turning the corner....and risk missing a bargain? Predicting a boom and bust is easy - I guarantee that there will be another boom, and then another bust. The only relevant question is when?