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House Prices Are Already Crashing

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http://www.moneyweek.com/blog/house-prices-are-already-crashing-00291.aspx

The latest Halifax numbers showed prices falling by 0.1% in November and 2.1% in the last three months. The annual rate of price falls is now 0.7%. It is, says Martin Ellis, housing economist at the Halifax, "consistent with a relatively flat overall trend in house prices".

But let's not forget – as all too many people want us to – that "flat" actually means "falling" at the moment. With RPI inflation well over 4%, your house is losing value in real terms every day. Indeed, if you take inflation into account – which you obviously should – UK house prices are already down 20% plus on their 2007 levels.

The bulls might think house prices aren't going to crash, but on many measures they already have. And it isn't over yet.

Ellis allows that a larger supply of houses on the market coupled with a falling number of buyers has led to the recent price falls, but he notes that as "homeowners are becoming more reluctant to put their houses on the market" further falls are unlikely.

There is a problem with this argument.

Sure, there might be fewer willing sellers around than there were; and a lot of the people who do have their houses on the market aren't really motivated sellers, and so won't ever cut their prices to the levels today's buyers will pay. But the market isn't just about willing sellers, it is about unwilling sellers too. And with unemployment quite likely to rise into next year, and with the inflation numbers suggesting that interest rates won't be able to stay ultra low for as long as the heavily-indebted might hope, their numbers may soon start to rise.

The market is also about buyers. And with mortgage approvals at historical lows and bank funding worries hitting mortgage availability, they remain very thin on the ground. Add it all up, and it sounds less like "flat" and more like "crash" to us.

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People using 'real prices' is misdirection designed to get buyers back into the market as soon as possible whilst the bargains are still available.

Year 1 - House is overpriced

Year 2 - No change in nominal value of house, no change in net income. All other living costs have gone up.

Does the increasing cost of food, fuel etc in the intervening year now mean that properties are better value than before, or are household budgets more strained than before putting downward pressure on a sustainable level for houseprices?

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People using 'real prices' is misdirection designed to get buyers back into the market as soon as possible whilst the bargains are still available.

Year 1 - House is overpriced

Year 2 - No change in nominal value of house, no change in net income. All other living costs have gone up.

Does the increasing cost of food, fuel etc in the intervening year now mean that properties are better value than before, or are household budgets more strained than before putting downward pressure on a sustainable level for houseprices?

Exactly. Without wage inflation 'real' price reductions mean zip. If anything, affordability declines with cost-push inflation, which is bearish for nominal values.

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All very well spouting off all these statements -

where's the data they are working from?

what areas are main sales ?

what price ranges ?

independent or BANK OWNED biased, misleading, ea chains reporting?

la de da de da - fingers in ears :P

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  • 285 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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