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Clouds Over The Housing Market Create A Perfect Storm For First-Time Buyers

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http://www.guardian.co.uk/business/2010/oct/22/housing-market-firsttime-buyers-double-dip

Not for the first time, storm clouds appear to be gathering over the stubbornly robust UK housing market. The usual autumn bounce in new home sales has not materialised, say the Home Builders Federation. The latest surveys from the Halifax and Nationwide point to price falls gathering pace – with the Halifax figures described in the City as "a shocker". Gross mortgage lending continues to slow, according to figures from the Council of Mortgage Lenders.

Also this week, a quarterly update from the Ernst & Young Item Club pronounced: "The housing market clearly looks as if it is heading for a double dip." One City analyst, who preferred not to be named, put it even more succinctly: "The housing market is about to puke."

Top economists from the International Monetary Fund have muttered darkly on the sustainability of UK house prices, describing the situation as "worrisome". The Bank of England this week pointed to an "unexpected" fall in mortgage demand in recent months, suggesting: "weaker potential purchaser confidence – both in the macroeconomic outlook and the likely path of house prices – had started to weigh on demand."

Not everyone shares the gloom: few believe house prices are likely to climb meaningfully in the near future, but there are plenty of respected analysts and seasoned industry insiders who insist talk of a dramatic slump is overblown. They point to the encouragingly low repossession rates, which have undershot all forecasts. Banks taking keys from homeowners is front page news almost daily in the US, but has yet to emerge in the UK.

"I think the repossession figures are going to continue to be low," said Ray Boulger at mortgage broker John Charcol. "I think all the indications are that the number is going to be below 40,000 this year. When you look at where we are in terms of the recession that's a good number to be at – though clearly any number is too high. If you compare it with what happened in the early 90s, repossessions are comfortingly low."

Repossessions have been kept down – with numbers falling in each of the last three quarters – in part by very low interest rates relieving the pressure of mortgage bills. The expansion of government subsidies for out of work and low income homeowners through the Support for Mortgage Interest (SMI) scheme has also helped, though this assistance was pared back this month.

Speculation that house prices could be reaching a tipping point was triggered by a shock Halifax survey showing a 3.6% decline in house prices for September, the steepest monthly drop recorded by the lender since 1983. A flurry of reports told homeowners that prices were falling at £200 a day, with Howard Archer, chief economist at IHS Global Insight, describing it as "an absolute shocker ... [that will] undoubtedly rase fears of a housing market crash".

Behind these claims, however, many experts, including Archer, took the Halifax figure with a pinch of salt. David Hollingworth, of mortgage brokers London & Country, is far from upbeat about the prospects for a further housing bounce, but he does not believe it is time to panic. "The market's not going to drop off a cliff. Just because Halifax says it's down 3.6% doesn't mean it is going to stay that low. If you look at different indices they tell you different things. If you look at Nationwide and Halifax they tend to have reasonable variation from one month to the next."

The housing market is about to puke???

Time will tell, but everywhere else there has been a bubble there has also been a correction. So far in the UK there has been no major correction.

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Pesossesions are low as they have been artificially kept down, now that support is ending the flood could hit like a tidal wave.

They are quite dismissive of the worst value ever. Even halveing it it would be a pretty dire number. We may not be in 40% a year down, but we could be at 20 to 25% down easily, thats a crash in anyone's book!

I never heard them saying that the markets not rising at record rates when the monthly figure was high!

This baby is going down and will squash anyone who gets in its way!

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Pesossesions are low as they have been artificially kept down, now that support is ending the flood could hit like a tidal wave.

They are quite dismissive of the worst value ever. Even halveing it it would be a pretty dire number. We may not be in 40% a year down, but we could be at 20 to 25% down easily, thats a crash in anyone's book!

I never heard them saying that the markets not rising at record rates when the monthly figure was high!

This baby is going down and will squash anyone who gets in its way!

But the "support" for property prices has been almost entirely down to low interest rates and that certainly isn't going to change, particularly given the dampening effect of public spending cuts. So, other than unemployment rising (and the unemployed also need a roof and paying mortgage is probably cheaper than renting presently) what will change to really make the market puke?

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But the "support" for property prices has been almost entirely down to low interest rates

categorically incorrect

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But the "support" for property prices has been almost entirely down to low interest rates and that certainly isn't going to change, particularly given the dampening effect of public spending cuts. So, other than unemployment rising (and the unemployed also need a roof and paying mortgage is probably cheaper than renting presently) what will change to really make the market puke?

Edited by Tamara De Lempicka

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Sooner or later many of you will realise that the huge crashes seen in other markets were in part due to overbuilding and a huge overhang of supply. With miniscule new build for many years it takes relatively few buyers to maintain the market. My guess is those few buyers will eventually disappear but ignoring the supply side of the equation can give you false hopes.

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Sooner or later many of you will realise that the huge crashes seen in other markets were in part due to overbuilding and a huge overhang of supply. With miniscule new build for many years it takes relatively few buyers to maintain the market. My guess is those few buyers will eventually disappear but ignoring the supply side of the equation can give you false hopes.

Still, the fear factor might cause a ripple or 2 and from there anything can happen.

It will take some hefty job losses and repossessions to really tip it over the edge mind.

Edited by Guinness

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I wasn't talking about support for house prices but support for preventing repossessions.

How many times do we have to direct people to the japanese market for an example of how house prices can crash even with a percieved shortage!

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I wasn't talking about support for house prices but support for preventing repossessions.

How many times do we have to direct people to the japanese market for an example of how house prices can crash even with a percieved shortage!

Good luck with that analogy but its 20 years out of date already. The US markets that were at British price to income levels have fallen by 50% or more with the exception of San Francisco and a few others like it where land is literally (geographically) constrained.

You can hope all you want but you must have that nagging feeling that maybe demand still outstrips supply here and prices will remain high.

(And I am all in favour of a serious house price crash if no other reason than entertainment value.)

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But the "support" for property prices has been almost entirely down to low interest rates and that certainly isn't going to change, particularly given the dampening effect of public spending cuts. So, other than unemployment rising (and the unemployed also need a roof and paying mortgage is probably cheaper than renting presently) what will change to really make the market puke?

nothing needs to change

it's a bubble

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I wasn't talking about support for house prices but support for preventing repossessions.

How many times do we have to direct people to the japanese market for an example of how house prices can crash even with a percieved shortage!

This is entirely anecdotal but a friend of mine spends one day a week in the county court advising mortgagors in repossession cases. A year ago she said it was quiet, in her words "too quiet", now she cannot get around the cases that are in the waiting room, mainly sub-prime mortgagors where the lender has gone for possession. My belief is that lenders, having been told to hold off, have now been given the go-ahead to repossess. This will, of course, take time to feed into the official figures.

edited for typos

Edited by Ellie

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This is entirely anecdotal but a friend of mine spends one day a week in the county court advising mortgagors in repossession cases. A year ago she said it was quiet, in her words "too quiet", now she cannot get around the cases that are in the waiting room, mainly sub-prime mortgagors where the lender has gone for possession. My belief is that lenders, having been told to hold off, have now been given the go-ahead to repossess. This will, of course, take time to feed into the official figures.

edited for typos

Interesting.

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This is entirely anecdotal but a friend of mine spends one day a week in the county court advising mortgagors in repossession cases. A year ago she said it was quiet, in her words "too quiet", now she cannot get around the cases that are in the waiting room, mainly sub-prime mortgagors where the lender has gone for possession. My belief is that lenders, having been told to hold off, have now been given the go-ahead to repossess. This will, of course, take time to feed into the official figures.

edited for typos

Yup - very interesting.

I have heard recently of various cases of couples pushed to the very limit by massive mortgages taken out during boom times.... Several are in imminent state of collapse....

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But the "support" for property prices has been almost entirely down to low interest rates and that certainly isn't going to change, particularly given the dampening effect of public spending cuts. So, other than unemployment rising (and the unemployed also need a roof and paying mortgage is probably cheaper than renting presently) what will change to really make the market puke?

The cost of bus (and train) fares.

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I do not believe in the lack of supply theory.

1. If supply was such an issue, rents would have rocketed at a similar rate to house prices. They have not.

2. I studied the housing and population stats a few years back and came to the conclusion that there may be a small under supply issue in some parts of the country, ie south west due to elderly living longer and lots of holiday homes, and the south east, not london strangely, but not any where else and certainly not in the north. If supply was such a big pricing factor then prices would have plummeted up there, not boomed!

3. Any under supply issue is as a result of too many people hanging on to empty second homes.

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This is entirely anecdotal but a friend of mine spends one day a week in the county court advising mortgagors in repossession cases. A year ago she said it was quiet, in her words "too quiet", now she cannot get around the cases that are in the waiting room, mainly sub-prime mortgagors where the lender has gone for possession. My belief is that lenders, having been told to hold off, have now been given the go-ahead to repossess. This will, of course, take time to feed into the official figures.

Do repos figure in official figures? The Land Registry excludes them.

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Annoying article - the media yet again perpetuating the myth that falling prices are a bad thing and that the issues are with lack of finance and shortage of 'affordable homes'.

Boulger spouting his usual cr@p, too.

The subtitle says it all:

Low levels of lending amid fears of a double dip leave young people unable to buy

Aaaaargh! 'Young people' will be perfectly able to buy with 25% deposits (and service loans at higher IRs) once PRICES HAVE FALLEN!!! Jeez, I come over all Eric when I read tripe like this...

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This is entirely anecdotal but a friend of mine spends one day a week in the county court advising mortgagors in repossession cases. A year ago she said it was quiet, in her words "too quiet", now she cannot get around the cases that are in the waiting room, mainly sub-prime mortgagors where the lender has gone for possession. My belief is that lenders, having been told to hold off, have now been given the go-ahead to repossess. This will, of course, take time to feed into the official figures.

edited for typos

this would chime with the appearance of family home reposessions and broken relationships I am seeing in Yorkshire - ground zero for financial sector meltdown as well as public sector meltdown (head offices (one of) of HBOS and NHS)

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Just a couple of observations;

1. There have been relatively few repossessions in Ireland, this has not prevented the backside falling out of house prices.

2. In 2006 & 2007 the majority of "respected commentators" (VIs in HPCspeak) predicted a "soft landing". See point 1 above.

Part of every bubble is the "paradigm shift" which explains why this one is "different" and won't crash. :rolleyes:

If you believe that there's a bubble, then it must burst and there will be casualties.

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I can't see how you can compare Ireland - 4 million population, massive new build housing boom with the UK - 60 million population and, generally accepted, a housing shortage.

This baby won't crash while people are prepared to pay £550 to rent a house that cost 40k at auction and 5k to do up (yesterday's Homes Under the Hammer - filmed in 2010) - and more generally, while young people will pay £750 to rent a 2 bed flat or house and a grand for a 3 bed semi and others will pay £1500 for a 4 bed detached estate box.

At these rent levels and with current interest rates - property investment based on yield still makes a lot of sense - at least to about 99% of the population.

Young people have effectively withdrawn from being buyers in the housing market - not of their own volition but because they can't borrow enough to buy. The market couldn't care less.

Young people need to withdraw from the market as renters - then you'll get your house price crash. Move home and bug your parents, move in with your brother or sister, do anything - but stop paying the rents that sustain the market.

Edited by Let's get it right

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Rents are nowhere near that here. 3 bed semi, asking price about £190k rental £750. I'll leave you to work out the yield on that!

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  • 245 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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