Is This The Beginning Of The "fear" Phase?

[Gigantic Purple Slug]

I would say it was a pretty good call :-)

http://www.housepricecrash.co.uk/forum/index.php?showtopic=147716

I was judging the start of the fear phase to occur when the bull trap rolled over, looks pretty convincing so far, however we need some pretty good falls over the next 6 months to hold to the standard investment cycle.

Some would say yes and others no.

I think in 6-12 months time you'll be in a much better position to boast about your predicitve powers. Or not, as the case may be.

FWIW I hope you are right.

[exiges]

I'm curious to hear when fellow HPCers think "the bottom" will be?

When there's a slow down in bad news and there are signs of some good news.

At the moment, it's all bad.

[Confounded]

Some would say yes and others no.

I think in 6-12 months time you'll be in a much better position to boast about your predicitve powers. Or not, as the case may be.

FWIW I hope you are right.

Totally agree, nothing is in the bag yet, especially given the most recent data. We need a good 10 percent fall over the next 12 months to confirm the standard investment bubble.

Houses where I live are looking more crashy than during 08 with failed sales and falling prices, I am impressed with how robust the indexes have been this year.....

[hpc-craig]

I'm not sure if we are into the Fear stage yet, but some people are cottoning on quicker than others. 2 Quick examples if I may.

1. House came on last October @ £129,000. That has moved down to £103,000 over the months and remains unsold. The Neighbour a few doors doors down is clearly not fearful as he has just put his on the market @ £139,000!! It has recently had a new kitchen and bathroom though so is clearly worth the extra £40k.

2. 4 Bed detached that Parents were looking at buying, early 08. Was on at £229,000 back then. Just come back on this week at £212k.

[fadeaway]

Wasn't the fear stage meant to be ~2 years ago?

Find a panicked / forced seller and combine with nice interest rates, buy a house you like get on with your life for the next 2 years while the HPC prophecy materialises - you won't have lost out too much (assuming you need to borrow money to purchase, if you're a cash buyer stick your cash in gold/inflation beating savings and wait a couple of years). Rates will rise before prices fall too much imo. The affordability bottom is coming sooner than the actual bottom. Don't just look at price, look at cost of borrowing, cost of rent, and cost of not doing what you want to do in life. There are many variables besides price. Watch out for not being able to see the wood for the trees.

Edited April 10, 2011 by fadeaway

[exiges]

Wasn't the fear stage meant to be ~2 years ago?

Yep. Then the govt. chose to rob savers by dropping interest rates and rob tax payers by extending SMI to prevent it delay it, and the BoE printed £200bn to dilute it.

Edited April 10, 2011 by exiges

[Topher Bear]

Agreed. There is a lot of talk of sitting it out and watching from the sidelines. This simply isn't true, by renting you are in the game. For me thats about 10k a year. To be honest I think I have lost out by being am hpc er for so long. 5 years at least, thats 50k I've lost! I'm not waiting for an absolute bottom. My rule of thumb is if the falls are less than 0.5% a month, then i'm better of buying a falling asset. As at the moment i'm paying for someone elses falling asset and I get nothing at the end!

I no longer really know where prices will go. I know my fundementals show a large fall is due, but with governments and banks playing the game, I now think that they can skew things in thier favour. Right now they seem to be engineering a fall without many of us seeing it. Inflation.

As for the original point, I am seeing no fear here in wiltshire. Only stubboness. Almost no new places coming on and we are now on easter holls. Places are selling, not at any great pace, but its still ticking over without any further falls.

[GordonBrownSpentMyFuture]

Yep. Then the govt. chose to rob savers by dropping interest rates and rob tax payers by extending SMI to prevent it delay it, and the BoE printed £200bn to dilute it.

+1

[GordonBrownSpentMyFuture]

Agreed. There is a lot of talk of sitting it out and watching from the sidelines. This simply isn't true, by renting you are in the game. For me thats about 10k a year. To be honest I think I have lost out by being am hpc er for so long. 5 years at least, thats 50k I've lost! I'm not waiting for an absolute bottom. My rule of thumb is if the falls are less than 0.5% a month, then i'm better of buying a falling asset. As at the moment i'm paying for someone elses falling asset and I get nothing at the end!

I no longer really know where prices will go. I know my fundementals show a large fall is due, but with governments and banks playing the game, I now think that they can skew things in thier favour. Right now they seem to be engineering a fall without many of us seeing it. Inflation.

+1

This is how I see things too. Prices are falling my way but it's quite clear the government and the banks will do anything and everything to avoid a crash, to keep prices where they currently are, and everything else will just have to go up in price to match. A house will eventually be 3.5 times the average salary again - it's just that the average salary is going to be significantly higher than it is now.

The moment my deposit is large enough to buy a house I'll be happy to live in for the next 20+ years, I'll be buying.

Everyone on this site has been vindicated 100%. What we anticipated (the banking crisis) has come true. In a free market capitalist system we would have had a HPC following it but we live in a plutocracy and too much of their wealth is tied up in land and property; not to mention pension funds and other indirect investors.

I see a possible 10%, maybe 20% fall, over the next few years (I'm already seeing this on an individual property basis courtesy of property bee) but with the Halifax HP data soon to change (in favour of masking falling prices) there'll soon be little point in relying on them for comparison. If a property is at 2003 prices I'll consider buying as I don't see us ever returning to non-fraudulent 2000 or 2001 nominal prices.

[Alfie Moon]

Except that we have the combination of CPI/RPI inflation (eroding people's incomes) + wage deflation.

In the 1990s and 1970s house price crashes house prices dropped in nominal, but mainly in real terms due to inflation that was accompanied by very large wage inflation. The current situation is very different and is not producing real term house price drops - mortgage debt is not being eroded it is becoming more difficult/expensive to service.

If we are going to have mainly 'real' term house price falls we will need wage inflation to recoup the losses we have experienced through the period of CPI/RPI inflation + wage deflation and then wage inflation top continue apace in order to start producing meaningful real term house price falls. When is this going to start?

[leftiebeard]

As for the original point, I am seeing no fear here in wiltshire. Only stubboness. Almost no new places coming on and we are now on easter holls. Places are selling, not at any great pace, but its still ticking over without any further falls.

Similar dilemma I'm facing in Corsham - Wiltshire. Big pressure from Mrs LB to abandon rental ship and buy. But I'm still on balance happier with the flexibility which renting brings, in a economy that is still very unpredictable, and one where interest rates are about to rise.

[Caveat Mortgagor]

Similar dilemma I'm facing in Corsham - Wiltshire. Big pressure from Mrs LB to abandon rental ship and buy. But I'm still on balance happier with the flexibility which renting brings, in a economy that is still very unpredictable, and one where interest rates are about to rise.

The bottom of the market always falls first. Are you looking at prices only in a higher price range and not seeing whats happening down below?

How signifiacant will the earthquake in Japan be to the house you eventually buy?

The bottom of the market must surely be badly hit by the lay offs at Honda. 2000 people there due for time off. They have a parts supplier in the postcode area I am looking at (CV5). Over the weekend someone who works there told me they are now doing 2 days per week for the next 2 months! Thats about 400 employees going through the pain again.

When you consider this is on the back of a 3 or 4 month lay off in 2009, you have to wonder how many peoples finances havent fullly recovered from those lay offs and were already struggling with pay rises lower than inflation etc.

There must be dozens of parts suppliers in your area that will lose overtime / move to part time working. Keep an eye on whats happening down below. This market will fall from the bottom.

(PS I realise you arent in Swindon - I am suggesting there will be a ripple effect though)

Edited April 11, 2011 by Caveat Mortgagor

[Alfie Moon]

I think we are in the fear stage - just look at Readers Comments on newspaper articles (including the Daily Mail) about the possibility of the Base Rate rising to 2% by the end of the year. And articles about the squeeze on peoples incomes from tax credit cuts, CPI/RPI inflation, petrol costs, wage deflation, etc., etc. Also many people are fearful about job losses, and if not redundancy a reduction in hours, bonuses (not for the Bankers, of course), etc. I do see people linking this to the property market and house prices. Even if people are not making the direct links conciously I think many are unconciously - there is a general fear about the economy and it is beginning to seep into the property market arena. If we get some months of falling house prices and a rise in the Base Rate I'm sure the fear factor about property will go up a notch or two.

Of course, we can help spread the fear by adding Readers Comments on Newspaper websites.

[Pent Up]

A great post.

There is a lot to weigh up other than 'when house prices will crash', and many people on this forum think it's all black and white. It's not.

It's black and White for me, I'm not in the game at all. Every month I wait is saving me thousands in the long run, this is true even if prices don't fall. (which they already are )

[thecrashingisles]

All bets are off until we see the effect of monetary tightening.

[GordonBrownSpentMyFuture]

All bets are off until we see the effect of monetary tightening.

Is there a start date for that yet?

[24gray24]

My 2 cents worth:

The whole system is clearly being fiddled by governments, to try and prevent a crash. They will do everything they can, including throwing cash out of helicopters, to prevent this.

However, if you look at the PIGS, it's clear that governments cannot prevent this crash,.

I look at the "soon back to normal" propaganda, and wait for the next "unexpected" calamity. Presumably, these calamities will take us eventually back to 3.5X average wage (for a house).

No fear yet. The calamities are still viewed as one-off, unexpected, won't be repeated, like a tsunami. Fear only comes when everyone realises a calamity is just one wave of many and many are yet to come.

[happy_renting]

You gotta love the idea of tax credits as a mechanism for increasing tax unopposed while making the victims feel guilty.

Government : " We're putting up tax. But don't worry, we are introducing tax credits too, so you won't lose out overall."

Taxpayer : "Um...OK"

A few years later :

Government : " Why should we be giving wealthy people tax credits? They are are wealthy. We must take the credits away."

Taxpayer : "Sounds fair.....oh, hang on a minute, WTF???"

[allillanchoo]

I no longer really know where prices will go. I know my fundementals show a large fall is due, but with governments and banks playing the game, I now think that they can skew things in thier favour. Right now they seem to be engineering a fall without many of us seeing it. Inflation.

Take your point but the US government can't engineer this type of outcome even though it is probably more desirable to them than they have now. Don't understand why ours can control it but theirs can't.

[Agentimmo]

+1

This is how I see things too. Prices are falling my way but it's quite clear the government and the banks will do anything and everything to avoid a crash, to keep prices where they currently are, and everything else will just have to go up in price to match. A house will eventually be 3.5 times the average salary again - it's just that the average salary is going to be significantly higher than it is now.

The moment my deposit is large enough to buy a house I'll be happy to live in for the next 20+ years, I'll be buying.

If this plays out as you anticipate above - ie. wages rising to meet historically high HP bubble, then we are heading for 20% unemployed or worse.

Workers will be throwing themselves out of employment just to keep their house? I don't see it.

Then again, I've been staggered by some of the actions of govt et al since 2007, so maybe we will see the lemmings jump off the cliff together.

Yes, bosses will succumb to wage requests of 5-10% pa, whilst their biggest trading partners in the EU limit their workers to 2-3%, if they are lucky. The gravy train has been running for 15yrs. Time to let it hit the buffers. Rather than selling each other houses and mewing the profits, the public would have been better advised to save. For a rainy day. It's belting down cats and dogs now.........

[Ungeared]

The bottom of the market always falls first. Are you looking at prices only in a higher price range and not seeing whats happening down below?

How signifiacant will the earthquake in Japan be to the house you eventually buy?

The bottom of the market must surely be badly hit by the lay offs at Honda. 2000 people there due for time off. They have a parts supplier in the postcode area I am looking at (CV5). Over the weekend someone who works there told me they are now doing 2 days per week for the next 2 months! Thats about 400 employees going through the pain again.

When you consider this is on the back of a 3 or 4 month lay off in 2009, you have to wonder how many peoples finances havent fullly recovered from those lay offs and were already struggling with pay rises lower than inflation etc.

There must be dozens of parts suppliers in your area that will lose overtime / move to part time working. Keep an eye on whats happening down below. This market will fall from the bottom.

(PS I realise you arent in Swindon - I am suggesting there will be a ripple effect though)

+1

I've been browsing properties on Right Move in Wiltshire for the last year or so under 200K and more recently have seen an increase in properties coming to the market, between 35 and 50 a day and also some pretty decent reductions, having said that i still believe many are at least 30% overvalued.

[Realistbear]

I am looking to buy within a 10 mile radius of Winchester, and this one has just popped up on Propertybee:

http://www.rightmove.co.uk/property-for-sale/property-17496882.html

Please don't slate me if the link doesn't work properly, as I'm not very good at this.

Just in case it doesn't, it's a SIX bedroom, detached house which came onto the market in November at £299,950, was reduced in January to £289,950, then again in March to £275,000. Now they are saying it's £250,000 "for a limited time only".

My first thoughts were, "for a limited time only at £250,000 - then we will reduce it again..."

These people are obviously very keen to sell - pity most of the other sellers in the Winchester area aren't...

This is happening in my area too. I am about to exchange contracts on a house that was on last summer for £325k. Reduced a few times until it hit £249k earlier this Spring. My offer of £200k was accepted.

If you have to sell its "get out while you can as it ain't going to get any better for years."

I had to buy something because I was tired of waiting and the drop was breathtaking on this particularly nice property with a view to die for.

So--expect more of the same in the coming months. If I had the energy and patience I might have saved another 20% over the course of the next year or so but I am happy with the deal and I think it might have been a bit unusual as the l person one up the 2 house chain is in OZ and didn't seem to give a monkey's so long as they got out--might have had a pressing need to be paid for in OZ--who knows. My vendor got a cracking good deal too but not as good as mine IMO.

The crash has begun.

Edited April 11, 2011 by Realistbear

[WageslaveX14]

I see a possible 10%, maybe 20% fall, over the next few years (I'm already seeing this on an individual property basis courtesy of property bee) but with the Halifax HP data soon to change (in favour of masking falling prices) there'll soon be little point in relying on them for comparison. If a property is at 2003 prices I'll consider buying as I don't see us ever returning to non-fraudulent 2000 or 2001 nominal prices.

What's happening to the Halifax HP data?

Whenever I hear talk in the press about doing away with all the 'confusing' competing indices, and just replacing them with a single 'official' index, I get a bit nervous. Has the govt. got at Lloyds/HBoS to get them to abandon publishing 'bad' news?

[athom]

Yes

I remember those who got burnt last time . One guy I worked with was £33 k in NE on a flat he paid £64k for in 1988. But due to pay rises ( which were high in the last crash ) and interest rates dropping by 1992/93 his mortgage had got very easy to pay. He sold up borrowed £30k from in laws and bought a 3 bed semi for somewhere in the mid £50'sk. His new smaller mortgage and paying back the loan was about the same % of take home pay that his first mortgage had been.

This time around those that took 4x / 5x salary loans are not going to be seeing the burden of those debts reducing as their pay rises . They will not be able to borrow 50% of the original mortgage to pay NE and move onto a bigger cheaper house.

When we were at the bottom last time around IR were high , reducing them kick started the market , this time they are already low and can only go one way.

The bottom this time around will be much longer than last time due to the above.

This is all true IMO but for prices to fall some houses must be sold and for that we need people to move in some way or another which they are currently not able to for the point you make above, and as all the lier loaners know they can't refinance with a truthful loan so they know if they sell they will be renting for the foreseeable future (this is most people i know), the more prices fall the more equity is lost the less people are able to buy again if they sell even at the same value. Also the banks are able to do their forbearance thing seemingly indefinitely, not least because they are partly owned by the taxpayer, and because they have an infinite taxpayer bailout to rely on while waiting and forbearance is a government policy and seen as a "good thing" all round so there is certainly no external pressure on them to change. Forbearance of course limits forced sales, not that those seem to influence asking prices in any way at all anyway.

I agree when we hit bottom we'll be staying there a good while but i think we are in for a long slow slide before we are at a level where i'm willing to buy into it.

[silver surfer]

I believe the bottom will be long lasting

Agreed, maybe lasting a generation or more because that's how long it will take for easy credit to return to 2006/7 levels.

I'm also looking in Hampshire, but because property will be such a terrible investment for the next few decades I've changed my strategy, instead of buying the biggest house I can afford I'll buy the smallest house that fits my needs.