Homeowners In Britain ‘Can’T Afford To Trade Up’

[The Masked Tulip]

http://www.timesofmalta.com/articles/view/20110130/business/homeowners-in-britain-can-t-afford-to-trade-up

The bit at the bottom is the worrying bit.

Growing numbers of homeowners in the UK are struggling to trade up the property ladder due to a combination of falling house prices, the mortgage drought and the shortage of first-time buyers, according to a report.

So-called second steppers, people buying their second home, have been hit hard by the problems of the past few years, which have left many trapped in small first-time buyer homes unable to afford to move up the ladder, according to Lloyds TSB.

The typical first-time buyer stays in their first home for four years, meaning many of those looking to buy their second property now will have bought their first one when house prices peaked.

As a result, it is estimated that nine per cent of second steppers are in negative equity and a further 18 per cent have insufficient equity in their property to make a move.

Since this group bought their first home, the average price of a starter property has fallen from £148,001 (€171,864) to £119.960 (€138,368).

The situation is made worse by the fact that 95 per cent of mortgages were still widely available when this group bought, meaning many did not put down large deposits that would have cushioned them from the house price falls.

At the same time, 43 per cent admitted they had not been able to save any money since they first got on to the property ladder.

Lloyds estimates that the difference between the price of a first-time buyer property and one for a second stepper is around £48,200, or 32 per cent, while this group also needs to find an additional £5,423 to cover the cost of moving, such as stamp duty, estate agents’ fees and solicitors’ fees.

Even if second steppers could raise this sum, they are still faced with the problem of who will buy their home, with 84 per cent saying they would expect to sell it to a first-time buyer, who are also struggling to get a mortgage.

Only 13 per cent of people said they would be prepared to reduce their asking price if they were not able to sell their home at the level they were marketing it for.

[guitarman001]

Good find, thanks! I'm VERY tempted to mail this to a friend who bought at the peak and recently told me you can only ever make money on property medium-long term.

Only 13% willing to sell for lower? Sounds like my mate.

Can't they see how ridiculous it all is? How much of a trsuggle it is to move up the ladder - all these costs benefit mainly the banks!

[Pent Up]

Only 13 per cent of people said they would be prepared to reduce their asking price if they were not able to sell their home at the level they were marketing it for.

Check rightmove with property bee. At least a quarter of listings in my daily searches are reductions. In fact I can't remember the last time I saw a sold sign on a house that wasn't reduced!

[Bloo Loo]

now, Ive got a jewjaw for sale.

Ive advertised it for x.

the last thing I am going to tell anyone is that I will accept x-y.

[Georgia O'Keeffe]

now, Ive got a jewjaw for sale.

Ive advertised it for x.

the last thing I am going to tell anyone is that I will accept x-y.

not even if Y is negative?

[Bloo Loo]

not even if Y is negative?

is that an offer...only slightly used jewjaw...never been swallowed.

[MrFlibble]

Only 13 per cent of people said they would be prepared to reduce their asking price if they were not able to sell their home at the level they were marketing it for.

Sadly they still have this option but the tide is turning, albeit very slowly.

[kittingerjump]

thanks, this a a telling article

"Lloyds has launched a new equity support scheme to help people move home even if they are in negative equity or do not have a large equity stake in their property. Under the scheme, existing customers can move their mortgage to a new property, even if they are in negative equity or breach the normal loan to value requirements"

I read this as it's ok to get yourself into an even bigger debt! crazy!

[Bloo Loo]

thanks, this a a telling article

"Lloyds has launched a new equity support scheme to help people move home even if they are in negative equity or do not have a large equity stake in their property. Under the scheme, existing customers can move their mortgage to a new property, even if they are in negative equity or breach the normal loan to value requirements"

I read this as it's ok to get yourself into an even bigger debt! crazy!

I read that as "THERE ARE SUB PRIME LOANS IN THE UK"

[kittingerjump]

I read that as "THERE ARE SUB PRIME LOANS IN THE UK"

That too, but you don't often hear that term outside of hpc these days

[xux42]

Sadly they still have this option but the tide is turning, albeit very slowly.

It is going to be so sweet watching from the sidelines as more & more of the 87% are forced to sell at MV.

Mind you, I wonder, how many would secretly be prepared to sell at MV?

Are they scared of being locked out from the 'security blanket' (ha ha) of 'owning' a house if they STR?

Do they assume that no one would cooperate with forming a chain at MV?

Actually its interesting that we still have to speculate on here after all these years. We only seem to get Bear or Troll posts with a few honourable exceptions. Why don't joe soap property fans who lap up a place in the country and all that other claptrap find HPC and fight their corner?

[Bruce Banner]

Only 13 per cent of people said they would be prepared to reduce their asking price if they were not able to sell their home at the level they were marketing it for.

I would expect most of them to say that, they have put every penny they have into their house along with every penny they could borrow. They will drop their prices when the awful realisation, that property values go down as well as up, sinks in.

[BlinkTooFast]

http://www.timesofmalta.com/articles/view/20110130/business/homeowners-in-britain-can-t-afford-to-trade-up

The bit at the bottom is the worrying bit.

To some degree, this means that a sub-set of FTBs will leap-frog jump the second-steppers that are stuck in -ve equity, and buy a second-stepper property for the same price that the starter properties were being bought in 2007.

That'd be quite demotivating for those stuck in the starter houses.

[blackgoose]

Actually its interesting that we still have to speculate on here after all these years. We only seem to get Bear or Troll posts with a few honourable exceptions. Why don't joe soap property fans who lap up a place in the country and all that other claptrap find HPC and fight their corner?

There are still the vast hoardes living in denial, safe in the 'knowledge' that house prices only go up. As far as I can see, there are three reasons why they dont post on here:

1. They feel intimidated.

2. They are unaware of the site.

3. If they submit to an in depth discussion and investigation of the reality of the situation, they will change their minds, leaving them not likely to argue for their former beliefs.

[numpty]

There are still the vast hoardes living in denial, safe in the 'knowledge' that house prices only go up. As far as I can see, there are three reasons why they dont post on here:

1. They feel intimidated.

2. They are unaware of the site.

3. If they submit to an in depth discussion and investigation of the reality of the situation, they will change their minds, leaving them not likely to argue for their former beliefs.

For many all or most of their wealth is in their home with many seeing it as their pension and helps define them and provides status

If they have a 70% mortgage and they come to terms with a 10% fall in prices, then 1/3rd of their wealth has gone

If they have a 80% mortgage and they come to terms with a 10% fall in prices, then 1/2th of their wealth has gone

If they have a 90% mortgage and they come to terms with a 10% fall in prices, then all of their wealth has gone

The root of the problem with the housing market IMO is that the risks of gearing are not appreciated or costed correctly. Rising house prices make gearing seem very attractive indeed and causes a stampede sucking in financially unsophisticated people who are then ripped to pieces when the market falls

Edited January 30, 2011 by numpty

[guitarman001]

To some degree, this means that a sub-set of FTBs will leap-frog jump the second-steppers that are stuck in -ve equity, and buy a second-stepper property for the same price that the starter properties were being bought in 2007.

That'd be quite demotivating for those stuck in the starter houses.

That's my plan.

[gf3]

Only 13 per cent of people said they would be prepared to reduce their asking price if they were not able to sell their home at the level they were marketing it for.

This figure shouldn't surprise any body. If the only houses selling are those that have been discounted that leave a small pool of sell-able houses and a large stagnant pool of non sell-able houses.

[juvenal]

http://www.timesofmalta.com/articles/view/20110130/business/homeowners-in-britain-can-t-afford-to-trade-up

The bit at the bottom is the worrying bit.

Only 13% of people said they would be prepared to reduce their asking price..

Doesn't everyone come out with that sort of bluster when the agent's FOR SALE board first goes up out front?

Until a better house just two doors down sells at 40K less than they want; they've been on the market for nine months; they've changed agents; yet still had a total of only four viewings and a single brusque offer of 30% off asking (valid 7 days only) from someone on hpc?

Edited January 30, 2011 by juvenal

[Cinzano Bianco]

http://www.timesofmalta.com/articles/view/20110130/business/homeowners-in-britain-can-t-afford-to-trade-up

The bit at the bottom is the worrying bit.

So I read this as:

• A maximum of 13% of first time mortgage owners have the cognitive capacity to realise that house prices decreasing is a good thing, since the price gap closes.

• Most first time mortgage owners expect to be able to afford this second step purely on the back of HPI, and do not save.

• First time mortgage owners don't understand this just means they need more debt for the "second step".

[Number79]

To some degree, this means that a sub-set of FTBs will leap-frog jump the second-steppers that are stuck in -ve equity, and buy a second-stepper property for the same price that the starter properties were being bought in 2007.

That'd be quite demotivating for those stuck in the starter houses.

I like that, too much of my time is spent reading between the lines and failing to find a positive. I hope this comes to fruition.

[Number79]

So I read this as:

• A maximum of 13% of first time mortgage owners have the cognitive capacity to realise that house prices decreasing is a good thing, since the price gap closes.

• Most first time mortgage owners expect to be able to afford this second step purely on the back of HPI, and do not save.

• First time mortgage owners don't understand this just means they need more debt for the "second step".

I read it as 13% of those with mortgages get it and would drop their price to sell.

Of the remaining 87% many can not sell, would not get another mortgage or are simply leaving their price high because other houses around them are not reducing either - the houses not reducing are all probably mortgage free and the owners have nothing but time.

In our village some houses have been sat at the same price for 2 years without a reduction. Sat empty too. The mortgage free are propping up the prices imo and keeping the market stale as others remain stubbornly unrealistic.

[BlinkTooFast]

I like that, too much of my time is spent reading between the lines and failing to find a positive. I hope this comes to fruition.

You're welcome. Providing a ray of sunshine is all part of the service.

[MC Fur Q]

Many of the houses I'm stalking on Rightmove have been on for many months with no drop in price. Sometimes even an increase. When I was making offers last summer I found that the majority weren't interested at even just a 10% or 5% reduction even though they were on the market at prices similar to early 2008.

When I check how long they've owned their house and what they paid I figure that either these people are in denial or they've been sucking the equity out of their house so that now they're in negative equity.

[xux42]

For many all or most of their wealth is in their home with many seeing it as their pension and helps define them and provides status

If they have a 70% mortgage and they come to terms with a 10% fall in prices, then 1/3rd of their wealth has gone

If they have a 80% mortgage and they come to terms with a 10% fall in prices, then 1/2th of their wealth has gone

If they have a 90% mortgage and they come to terms with a 10% fall in prices, then all of their wealth has gone

The root of the problem with the housing market IMO is that the risks of gearing are not appreciated or costed correctly. Rising house prices make gearing seem very attractive indeed and causes a stampede sucking in financially unsophisticated people who are then ripped to pieces when the market falls

Aye - so, logically, it is critical that this mechanism is understood and acted upon however late in the day through gaining knowledge and taking steps to, at minimum, stop the rot in their financial circumstances, and at best rectify their situation and adopt more prudent strategies going forward.

Fail to see how denial and refusal to engage with the reality helps them in any way whatsoever.

[Number79]

Aye - so, logically, it is critical that this mechanism is understood and acted upon however late in the day through gaining knowledge and taking steps to, at minimum, stop the rot in their financial circumstances, and at best rectify their situation and adopt more prudent strategies going forward.

Fail to see how denial and refusal to engage with the reality helps them in any way whatsoever.

....because realising that sort of loss is massively difficult if not impossible for most. Doing an impression of the 3 wise monkeys seems to be the most that many can stomach. Once they realise that hoping for the best and prices to rise again isnt going to happen then things may change.

What else can they do though? If they sell at a loss what else are they going to be able to buy? where will they live? All that most people can do is sit tight and hope for the best imo.