Jump to content
House Price Crash Forum
Sign in to follow this  
waitingscot

Comparing This Crash To The 1990s

Recommended Posts

Are we missing something?

If you are right then I am not. I have been banging on (and been largely ignored) about this for quite a while. :)

To see how this crash could pan out, forget other regions, because they did not fall in unison and some did not fall at all.

Here is this time vs last time using London figures only and also London last time vs UK this time.

Posted before.

LDN.jpg

LDN_UK.JPG

post-9535-1243948694_thumb.jpg

post-9535-1243948709_thumb.jpg

Share this post


Link to post
Share on other sites

Bulls and bears alike make comparisons with the 1990s crash to draw inferences about how this crash will proceed, although some bears claim it is not a valid comparison because this crash is a result of more serious conditions than the last crash.

However are we missing something a bit more basic? It is often pointed out, and it appears to be correct that the last crash was largely a phenomenon of London and the South East. There was no crash in Scotland for example. So if we are going to compare the 1990s crash with this one is it not a bit misleading to compare the national figures this time round with the national figures last time? Using the national figures for the last crash means that the force of the crash in the South East is underestimated by being blunted by those parts of the country that were not affected or affected to a much lesser degree. This time however there is pretty much consensus that prices inflated all over the country, from London to Cornish villages to Northern Ireland to Aberdeen to Yorkshire to the Isle of Arran.

Therefore would it not be more instructive if comparisons of this crash with the last one were made on the basis of current national figures compared with the figures specifically for the South East last time round?

In other words how much did prices fall by in London and the South East during the last crash? That might give us a better clue as to how far prices will fall nationally this time round.

Share this post


Link to post
Share on other sites

These things always have different causes and different hues when they burst... you are right that London generally fared far far worse than scotland last time around... but then there were so very many differences between last time and this ( not least interest rates).... you could turn round quite legitimently now and say last time BTL and overbuilt city centres and over built 2 bed roomed flats were not an issue.... these have undoubtedly dragged the national figures down this time, dropping as some have by upwards of 60% or even 70% in some extreme cases...... factoring londons drop out and applying it won't help you get to the comparison you seek of apples with apples I fear.

Share this post


Link to post
Share on other sites

All I know is my cousins place cost £12,500 in 1980, £30,000 in 1990, £40,000 in 1996 and finally £50,000 in 2000 after which it went up up and away upto £140,000 in 2007. Currently valued at £110,000 in 2009.

This crash is entirely different compared to the 1990's as the underlying causes differ (for worse).

Share this post


Link to post
Share on other sites
... but then there were so very many differences between last time and this ( not least interest rates).... .

Give it 12 months, and this may no longer be true. One has to question the BoE's public concern about inflation with their private reweighting of their pension fund into index linked bonds...

Share this post


Link to post
Share on other sites
Bulls and bears alike make comparisons with the 1990s crash to draw inferences about how this crash will proceed, although some bears claim it is not a valid comparison because this crash is a result of more serious conditions than the last crash.

However are we missing something a bit more basic? It is often pointed out, and it appears to be correct that the last crash was largely a phenomenon of London and the South East. There was no crash in Scotland for example. So if we are going to compare the 1990s crash with this one is it not a bit misleading to compare the national figures this time round with the national figures last time? Using the national figures for the last crash means that the force of the crash in the South East is underestimated by being blunted by those parts of the country that were not affected or affected to a much lesser degree. This time however there is pretty much consensus that prices inflated all over the country, from London to Cornish villages to Northern Ireland to Aberdeen to Yorkshire to the Isle of Arran.

Therefore would it not be more instructive if comparisons of this crash with the last one were made on the basis of current national figures compared with the figures specifically for the South East last time round?

In other words how much did prices fall by in London and the South East during the last crash? That might give us a better clue as to how far prices will fall nationally this time round.

Using Nationwide Quarterly data:

According to the Nationwide data, London (32%), Outer Met(31%) and the South east (36%) dropped by an arithmetic average between the 3 of 33%. Of course inflation was much higher then.

In this crash the 3 of these have dropped by about 20%.

2 years into the last crash prices had dropped by 21%.

Theres a lot more to go.

Edited by ItsColdUpHere

Share this post


Link to post
Share on other sites
All I know is my cousins place cost £12,500 in 1980, £30,000 in 1990, £40,000 in 1996 and finally £50,000 in 2000 after which it went up up and away upto £140,000 in 2007. Currently valued at £110,000 in 2009.

This crash is entirely different compared to the 1990's as the underlying causes differ (for worse).

At last some anecdote based on real examples.

All of this 'will it be like 1990/1930' etc stuff is just guff. You need to think about what is happening now in your area. Looking on the regional boards it is clear that in many of the nicer bits of the South East there is a mini-revival in sales or at least a bottom being found. Maybe this is just temporary and there will be further falls everywhere, but this 'bigger picture' guff is just meaningless imho. Not enough people on these boards get off their backsides to do viewings , speak to people in the market etc in their specific area.

Share this post


Link to post
Share on other sites

Based on identical houses (4 bed detached, double garage, reasonable garden, quiet area) in the road where my parents lived (Bournemouth) from the point when they moved in the mid 80s, prices went from the just under £60k they paid to advertised prices of £125+ during the boom, to a sale at £75k in the early nineties. A couple we knew at the time lost £20k on a starter terrace they purchased at the peak for £60k and lost a few years later (long term unemployment...). In short, it was pretty bloody.

Share this post


Link to post
Share on other sites

Bought a flat in 1991 that had been on the market for £42k two weeks earlier - I paid 27k as it was just about to be repossesed.

Sold it again in 2000 for £48k ..so took nearly 10 years to recover; I should add that I completely renovated the property as well adding to its value (last decorated circa 1970!) .. probably made a small profit (maybe?) ..

I see the same thing happening to prices in the area again - except this time an identical property at the peak sold for £170k .. last registered sale for a similar spec property ... £110k (December 2008).

Its the 1990's all over again but worse ... especially for anyone who as you bought after 2002 ...

And for those who think that sellers won`t sell at a loss ..its already happening - three houses i have seen are selling 15% below what the vendor's paid, some less than 18 months ago.

Share this post


Link to post
Share on other sites

WASHINGTON (Dow Jones)--Home sales will likely keep rising, a report suggested Tuesday, as buyers seize on foreclosure-cheapened property, low interest rates and a tax credit.

The National Association of Realtors' index for pending sales of previously owned homes increased a third month in a row, rising 6.7% in April to 90.3 from 84.6 in March, the industry group said Tuesday.

Year over year, the index was 3.2% above the level of 87.5 in April 2008.

The index is based on signed contracts for previously owned homes and serves as a forecasting tool for the used housing market.

The 6.7% monthly increase was much larger than the 0.5% advance private analysts projected for April.

Last week, the NAR reported existing-home sales rose in April, the second increase in three months. Home resales increased 2.9% to a 4.68 million annual rate; about 45% were foreclosures and short sales.

"Housing affordability conditions have been at historic highs, but now the $8,000 first-time buyer tax credit is beginning to impact the market," said Lawrence Yun, chief economist for NAR. "Since first-time buyers must finalize their purchase by Nov. 30 to get the credit, we expect greater activity in the months ahead, and that should spark more sales by repeat buyers."

The NAR projects existing-home sales at 4.98 million this year and 5.28 million in 2010. That compares with 4.91 million in 2008. The median price for an existing home is seen at $183,100 in 2009 and $190,300 in 2010. It was $198,100 in 2008.

A month ago, the NAR forecast 2009 sales at 4.97 million and 2010 sales at 5.28 million. The 2009 median price was projected at $188,500 and the 2010 price at $196,800.

The NAR's pending home sales index was designed to try measuring which way the housing market is going in the future. It is based on pending sales of existing homes, including single-family homes and condominiums. A home sale is pending when the contract has been signed but the transaction hasn't closed. Pending sales typically close within one or two months of signing.

By region, the pending sales index for the Northeast increased 32.6% in April from March; it had gone up 0.8% since April 2008. The Midwest increased 9.8% in April from March; it had gone up 11.1% since April 2008. The South decreased 0.2% in April from March; it had gone up 3.5% since April 2008. The West increased 1.8% in April from March; it had gone down 2.9% since April 2008.

Share this post


Link to post
Share on other sites
Bulls and bears alike make comparisons with the 1990s crash to draw inferences about how this crash will proceed, although some bears claim it is not a valid comparison because this crash is a result of more serious conditions than the last crash.

However are we missing something a bit more basic? It is often pointed out, and it appears to be correct that the last crash was largely a phenomenon of London and the South East. There was no crash in Scotland for example. So if we are going to compare the 1990s crash with this one is it not a bit misleading to compare the national figures this time round with the national figures last time? Using the national figures for the last crash means that the force of the crash in the South East is underestimated by being blunted by those parts of the country that were not affected or affected to a much lesser degree. This time however there is pretty much consensus that prices inflated all over the country, from London to Cornish villages to Northern Ireland to Aberdeen to Yorkshire to the Isle of Arran.

Therefore would it not be more instructive if comparisons of this crash with the last one were made on the basis of current national figures compared with the figures specifically for the South East last time round?

In other words how much did prices fall by in London and the South East during the last crash? That might give us a better clue as to how far prices will fall nationally this time round.

One of the key drivers of the 1990 crash was interest rates going up from around 8-10% to around 14%. THis time round we have managed to drop over 20% on the national figures despite IRs being at record lows. THe ZIRP is the life support machine keeping the patient alive at the moment. A rise in interest rates will see the patient crash again, and that willl be the big one.

Share this post


Link to post
Share on other sites
Using Nationwide Quarterly data:

According to the Nationwide data, London (32%), Outer Met(31%) and the South east (36%) dropped by an arithmetic average between the 3 of 33%. Of course inflation was much higher then.

In this crash the 3 of these have dropped by about 20%.

2 years into the last crash prices had dropped by 21%.

Theres a lot more to go.

And these are only average figures. I personally know of falls over 60% during the last correction having been working in a county court at the time.

Bought a flat in 1991 that had been on the market for £42k two weeks earlier - I paid 27k as it was just about to be repossesed.

Sold it again in 2000 for £48k ..so took nearly 10 years to recover; I should add that I completely renovated the property as well adding to its value (last decorated circa 1970!) .. probably made a small profit (maybe?) ..

I see the same thing happening to prices in the area again - except this time an identical property at the peak sold for £170k .. last registered sale for a similar spec property ... £110k (December 2008).

Its the 1990's all over again but worse ... especially for anyone who as you bought after 2002 ...

And for those who think that sellers won`t sell at a loss ..its already happening - three houses i have seen are selling 15% below what the vendor's paid, some less than 18 months ago.

I couldn't agree more.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   291 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.