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richcrashman

I Think A Falling Housing Market Needs These Upswings

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I think that these upswings in the market are good thing for the continued downward trend in house prices. As new money (with deposits) comes in it frees up sellers (maybe taking some hit with negative equity, but manageable) and the bank is no longer looking at a repo. Over time as prices fall those that need to sell in a year or 2 are in the same posistion as the original sellers, most likely having there deposit wiped out and maybe taking a small hit. They sell and the process starts again.

If one lot of home owners took all the hit on the way down it would kill the banks, if they can get new buyers in then there losses of deposit lubricate the market down.

Are STR's and savers been suckered by VI's with the threat of inflation and rising prices so that there cash can be taken and used as grease!! lol

Is the ramping really about turning the market or is it to draw this money so that the banking system dosen't suffer to many losses?

With all the help on mortgages for the newly jobless (2 years is it?). What will we see when this kicks back in after the time period. Some of these people could have been on the brink and over strenched before. So how is it going to be with 2 years interest piled on, even if they get as good a paid job as before. The timing of this scheme puts any pain the other side of the election, very convenient!!

Thoughts anyone?

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I think that these upswings in the market are good thing for the continued downward trend in house prices. As new money (with deposits) comes in it frees up sellers (maybe taking some hit with negative equity, but manageable) and the bank is no longer looking at a repo. Over time as prices fall those that need to sell in a year or 2 are in the same posistion as the original sellers, most likely having there deposit wiped out and maybe taking a small hit. They sell and the process starts again.

If one lot of home owners took all the hit on the way down it would kill the banks, if they can get new buyers in then there losses of deposit lubricate the market down.

Are STR's and savers been suckered by VI's with the threat of inflation and rising prices so that there cash can be taken and used as grease!! lol

Is the ramping really about turning the market or is it to draw this money so that the banking system dosen't suffer to many losses?

With all the help on mortgages for the newly jobless (2 years is it?). What will we see when this kicks back in after the time period. Some of these people could have been on the brink and over strenched before. So how is it going to be with 2 years interest piled on, even if they get as good a paid job as before. The timing of this scheme puts any pain the other side of the election, very convenient!!

Thoughts anyone?

Yes, and for this reason i think we'll have a prolonged japanese style decline in house prices - as we have discussed to death on this board, prices are unsustainably high.

Yet there are some who are inclined to and can afford to buy at each step on the way down.

Few desparate sellers due to low interest rates.

But the slight upswings might persaude new sellers to come onto the market.

I now think L shaped recession with very long slow decline in house prices.

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Yes, and for this reason i think we'll have a prolonged japanese style decline in house prices - as we have discussed to death on this board, prices are unsustainably high.

Yet there are some who are inclined to and can afford to buy at each step on the way down.

Few desparate sellers due to low interest rates.

But the slight upswings might persaude new sellers to come onto the market.

I now think L shaped recession with very long slow decline in house prices.

They're not that high; and only unsustainable if unemployment continues to rise. I do agree, or perhaps wish for there to be, a long decline in house prices.

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I think you may be right about some of this. There is certainly a concerted efford by the authorities to get people who do have cash, to part with their cash.

Can you imagine that comment getting any airtime on Pravda?

Nick Dastardly: Hello BBC Breakfast, i would like to talk on your programme about house prices.

BBC: Ok.... What do you want to talk about?

Nick Dastardly: Well I am concerned that you have failed to warn poeple over the last 18 months that house prices have been consistently falling yet you only mention recovereh. I feel that a lot of your viewers will have been influenced by the rhetoric on your programme and as a consequence many thousands of people are in massive financial trouble. Many thousands are waiting for prices to bounce back before selling; yet with each passing month they are getting further and further mired in trouble.

BBC: Its not our fault........ It started in America..... or something

Nick Dastardly: Well, lets not apportion blame now. But lets try to avoid a similar headache a massive number of your viewers might have in a few years time if they make a bad decision now.

BBC: Go on

Nick Dastardly: the banks and Govt recognise there will be further falls in house prices and want to make sure that the banks dont get hit with a massive cost of defaults. Someone somewhere is going to spunk a lot of money up the wall as the HPC continues, and there is currently a concerted effort to cover these losses with money from any cash rich individuals sat at home hypnotized by the goggle-box. Hello! Hello! Hello?

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They're not that high; and only unsustainable if unemployment continues to rise. I do agree, or perhaps wish for there to be, a long decline in house prices.

the reality is no one really knows what house prices are going to do, all you can do is form an opinion, take a position and go from there.

I'm convinced that house prices will be in decline for a few years to come, and they will never reach the levels of 2007 in real terms as the massive credit bubble we have lived through won't be coming back any time soon. Unemployment, repossessions and a general shift in investment opinion will take a long time to fully filter through the market.

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Yes, and for this reason i think we'll have a prolonged japanese style decline in house prices - as we have discussed to death on this board, prices are unsustainably high.

Yet there are some who are inclined to and can afford to buy at each step on the way down.

Few desparate sellers due to low interest rates.

But the slight upswings might persaude new sellers to come onto the market.

I now think L shaped recession with very long slow decline in house prices.

I would agree also. Every step the government is taking is trying to prevent the inevitable. At each stage it give everyone hope, and delays events. The best way out of the mess is to have a quick sharp shock.

Edited by BalancedBear

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2 bed boxes in London are about 300k in zone 4 areas. Interest is £1250 on a 5% mortgage. These places rent for about £1000 - £1250 with the owner seeing 10-12.5% taken by voids and estate agents. So lets say at best, the landlord is getting £1000 for his £1250 interest payments. If rates go to 6% the landlord will have to pay another £250 a month in interest to the bank. Putting him at a £500 loss each month. Theres other fees they have to pay of course, but lets keep it simple.

As people are paying huge sums of their income on their mortgages already, a £500 jump isnt tolerable for long. If they loose their job, they are seriously in trouble. If the tenants loose their jobs, the landlord is in serious trouble.

The margins are so tight. If interest rates rise, we will see the next phase. In the meantime, I hope people who have cash - use it to buy property from those who are heavily indebted. This money will pay offmortgages. Doing so will cause that £300k to be totally taken out of circulation and deflating the housing bubble slowly, the banks will have £3 million less to loan due to the deleveraging of that £300k savings at 10 to 1.

This is the longer term plan. The government isnt trying to reignite HPI, just perhaps pump it up a little to get all the rats off the ship before it sinks to the bottom of the ocean.

So yep, we need upswings.

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I think you just get to a point where people who are in a position to not sell simply won't. That point seems to be about 20% off what they thought they could get for it at peak.

The only thing that will change this is DDD and changing sentiment towards the "value" of the property.

For DDDs, I think people who have family who have passed on are choosing to hang onto the house instead of sell it hoping for a quick recovery. I think there are probably not that many forced sells yet as job losses have not properly started feeding through, and as other posters have mentioned, many will be spending their redundancy pay/savings.

The other way prices can drop further is when sellers lose hope of selling at peak price and re-adjust their expectations downwards. I witnessed this in the last crash.. around 1995 after not selling her house after 4 years on the market she just accepted a very silly offer to be shot of it so they could move to New Zealand.

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They're not that high; and only unsustainable if unemployment continues to rise. I do agree, or perhaps wish for there to be, a long decline in house prices.

I think that they are.

Back a few years my girlfriend of the time had a small 3 bed terrace in Norwich price =30K or so when she bought.

Now folks are looking to sell them for 75k +

Since then wages have not moved at all and her job 15k when she bought woulb be max 18k now if that.

My brother also thinks houses are not that expensive he is on 112,000 or so a year, he lives in a 2 bed small newbuild flat.

He is the mistaken one as in Norwich he is in the top 5% of earners and should be in a large house or penthouse apartment on 3/times his wage.

He cannot afford this

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Agree with OP and here's why:

I've been keeping a record of housing for sale inventory in my area since early 2007. Currently there are 350 for sale on Rightmove. At peak in summer 2008 it was 900.

There is a property ladder of sorts. As families form and grow they want to upsize. If you were a potential upsizer with a decent amount of equity, then you'd be with us bears and hoping for prices to fall so that the price difference between what you sell your place for and your target purchase narrows. Good news for those who want something bigger.

Every little upswing will bring out the ladder-climbers who think that now is the time to make their move.

I'll be looking at inventory in my area with particular interest in the coming weeks to see if the apparent green shoots persuade a few more folk to put their toe in the water.

It's the sort of shift in supply we need to help push forward the next step down.

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My brother also thinks houses are not that expensive he is on 112,000 or so a year, he lives in a 2 bed small newbuild flat.

How does someone so clueless make so much money? Politician? Juicy public sector job?

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I agree with the point about 20% being a psycholgical barrier to people. This is why the market needs some volume of tranactions and new money. Then the sellers can sell at -19.9%. The new buyer gets the same as the previous one. Then after a year or two the new buyer need to sell and manages -19.9% overall on the sale. So both sellers are not to gutted as both sold at less than 20% off and the banks probably loose nothing.

If we have large price falls and no volume in sales, the result will be huge negative equity and trouble for the banks. If suckers can be drawn in to the market on the way down, the losses are divided up into smaller chunks and are generally at the buyers expense and not the banks as repos will be lower etc.

I feel the ramping is more for volume than for prices. They have to go at this hard. What would happen if all the uk population realised that houses were certainly heading downwards. You'd have virtually no sales at all (price deflation), with big pain for the original buyers and more importantly the BANKS.

This is a crash landing. We are gliding, now and then we get a helpful push and the odd thermal to help smooth out and extend the range, touch down some miles away !

I think job losses are still to be really felt in housing yet. Like it was said, spending redundantcy etc. Then there is the goverment interest payment scheme for the unemployed for two years (just spreading the pain). Just this morning ive spoken to someone seriously worried about his job in a commercial vehicle franchise. Its still happening.

edit 4 spelling

Edited by richcrashman

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