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Realisticftb

A Long Way To Go Yet

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Hi Guys/Gals

Just having a relaxing evening in and thought i'd share some thoughts. I was at the opinion during the boom times that prices would have to reverse around due to simple economics. There comes a time when people cant afford to buy, therefore demand falls and price falls.

So i sat back and have waited, thinking happy days will return when the drop comes. I have what i would describe as a good job as a trainee in the 'professional sector'. Which really translates to people think i get paid way more than i actually do. But recently all the news about people getting made redundant has really hit home and made me think about where are these good times and where are they going to come from?

Right now I don't see a light at the end of the tunnel for this problem. I have always been of the opinion that no matter what 'you can't beat the market' and that Government intervention will only delay the inevitable. Also timescale for this current situation. Most people that I talk to, even at work see this problem lasting maybe another 1 or 2 years. For some strange reason now, I think this current downturn in the economy is going to last a decade. I am not usually so negative in my life. Mervyn King talked about how we had a decade of rapid growth. Is it unreasonable to believe that with people and businesses in-debting themselves up to the eyeballs, that this slowdown could take a decade to rectify.

The scariest thing is, if I'm anywhere near right, how many more people will have to suffer losing their job? It is painful enough for me to watch and read the news about other people i don't even know.

And I don't think there's a thing that any person can do about this, apart from secure assets in cash as a 'fund for the rainy day'. In many ways i wish the 'real' storm would hurry up and get here, sooner it does, the sooner we get through it. Lets just hope enough people have umbrellas!

Let me know your thoughts.

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Most studies/theories tend to indicate that on average, housing crashes take close to a decade before houses start rising again in real terms, with about 4 or so years to near the bottom. So you're probably right in that respect.

There are a lot of bulls in disguise out there now - sounding bearish but in denial - wrong about the crash, but now seeing that there is another one or two years to go. In fact think I that this is the majority opinion at the moment.

The important thing to realise is that these people will go through a number of phases -

- houses won't stop going up

- houses won't go down, just flatten

- houses won't crash, just a dip

- it isn't really a crash

- ok, it's a crash but it will be over soon

- ok, it won't be over soon, but when it is, houses will rocket

- ok, we're at the bottom, buy now or regret it

- ok, they're not going up, housing is a dead loss, things are different this time.

We're at 6 at the moment - people have yet to accept the new reality - they see the cycle as a V rather than a U, but it's just wishful thinking.

When we are at acceptance, the majority of houses on the market will be at the lower level, which will be seen as 'normal', there will be very few EAs and sellers still in denial - half a decade or more is too long to be unrealistic. The period just before the bottom to just after, which will last years, will be the time to buy - although apparently there may be a greater choice in the just after or just before periods.

Note that this is prices in real terms. Nominal prices may well bottom out earlier due to inflation, and there's the rub.

I think that many of us on here, even the most bearish, have been caught out by the severity of the crash here. I think that many, including me, were in denial to some extent about just how bad the accompanying economic crash would be as well. Certainly in my head, I was hoping for a crash without the economic consequences.

It is always the economy, and the government interference that tries to fix it, that drags out the recovery. This is why, at the start of a crash, when things still look relatively healthy, people see the recovery just around the corner and invent the 'fundamentals' to justify it.

From my personal point of view - I am at the stage where up until now, even the economic situation was somewhat abstract. Unfortunately now, hearing of people I know being laid off is a weekly occurrence and the shadow of the axe looms large. I know now that short term economic prospects are not just bad, but catastrophic - I fear that unemployment estimates that now seem awful are well short of the mark.

I suppose the point that I am trying to make here, though, is that there will be no housing recovery without an economic one. By that time, many of us may be in dire straits, but when we can eventually buy, the current delusions will be a distant memory - the majority of houses will be affordable. There is light at the end of the tunnel.

Edited by shipbuilder

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I agree than in the short term the economic prospects are catastrophic but it had to happen. A decade of reckless spending and lending was never going to end well. The young were priced out home-ownership and there was an unprecedented transfer of wealth from the many to the land-owning/house-selling few. How often did we not wonder: "how could they afford to buy that?" - now we know! Cars, holidays, houses all bought with ludicrous loans - secure futures sacrificed for immediate gratification in the present. Perhaps worst of all there was a devaluation of 'honest' work - why bother getting qualifications and working hard when all you have to do is buy a few grotty flats with the banks money then sit back and become a millionaire. Ponzi scheme or what? I have the greatest sympathy for those who will suffer unemployment through no fault of their own. No sympathy at all for developers, estate agents, mortgage brokers and the other assorted tat sellers who play a full part in this spectacle of greed.

The short-term pain may be great - but perhaps a price worth paying for a kinder, less selfish and less greedy society.

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I do believe that at the end of this we will be left with 'a great fear of debt', similar to that which our grandparents had. Somewhere along the line we lost this, lost respect for money. That will change. A fear of debt will as you say produce a better society, of people living within their means and concentrating on the more important aspects to life. Between now and then is going to be tough.

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In my opinion, I tend to agree that we have a long way to go yet.

I remember when I got on the housing market 10years ago banks were very loathed to lend more than 3 times salary and you had to have a small deposit on the house. To get back to that stage (and note 1st time buyers back then were usually single people, not couples) 1st time buyer houses would have to back down to £60-£70k assuming that the average salary is around £20k.

Until this happens the markets will keep on falling. Granted we are starting to see a number of houses below the £100k level but there is a bit to go yet (in my opinion.) What's other peoples view on this? :ph34r:

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In my opinion, I tend to agree that we have a long way to go yet.

I remember when I got on the housing market 10years ago banks were very loathed to lend more than 3 times salary and you had to have a small deposit on the house. To get back to that stage (and note 1st time buyers back then were usually single people, not couples) 1st time buyer houses would have to back down to £60-£70k assuming that the average salary is around £20k.

Until this happens the markets will keep on falling. Granted we are starting to see a number of houses below the £100k level but there is a bit to go yet (in my opinion.) What's other peoples view on this? :ph34r:

My view is that you are spot on ;)

There is still a big gap between affordable wage multiple mortgages and current house prices. Fear is now the driving factor in the housing market. Fear of unemployment and fear of negitive equity will keep people away from the large deposit, large income multiple mortgages currently on offer.

If a mortgage is more than 3.5 times income, more than 90% LTV or more than 25 years then it is a sub-prime mortgage.

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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