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What Reaction To Expect, From Equity Rich House-Owners, In Prime Areas, To Sudden And Sharp Losses Of Housing Peak Value Wealth, In Hpc?

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"It is part of the British DNA to believe house prices must always go up." - TW.

Can we guess what wider reactions of older home-owners, with lots of bubble equity housing wealth, might be (low-mid-high prime areas) into a real HPC?

For mainland UK, 2007-09 was pretty much a non-event for the overwhelming majority of home-owners in low-mid-high prime areas of UK, apart from those who in that window sold for less than houses had been selling at peak. (Except for £1m+ outside London/SE where affects still linger with improved lower prices).

HPC was stopped so quickly in prime areas (from 2009), as interest rates cut and cut, QE multi £100s Billions, FLS, Fed low rates, Global QE Trillions ..... that I don't think the majority of prime home-owners accepted their own homes had fallen in value during that oh so quick window of time.

"Other people's houses fell a bit perhaps" - but theirs 'special' and other house that sold for less "doesn't mean mine is worth less than peak". It was followed by reflation to new, greater valuation peaks soon after (except at very top end outside London/SE) regardless.

There's not much on internet - studies or research, to reactions of large losses in wealth from former peak values by many asset holders. Nothing to suggest riots from older equity rich owners who lost value in 1990s recession, or too many Tokyo older owners at loss of peal real estate value and their bubble equity.

Regret at not downsizing sooner with money to put into savings? Quiet acceptance mostly? Riots? Serpico moaned in early 90s, from his joy of the years before expanding, adding 3 companies, new Bentley every 3 years, private plane, racehorses, live in staff, luxury mansion he bought cheap in 70s as a repo - happy at getting it cheap at someone else's loss - having bank not want him to miss mortgage payments he still owed - but his fury at an economic correction "caused by others" got him nowhere. He was obliged to meet his financial commitments and suffer consequences of having no money vs his huge debts. Loads in asset wealth (leveraged) and expensive toys but loads of debt and no savings and his income dried up so quickly.... or was drowned out by the joy of younger people finally able to buy at lower prices, including the neurosurgeon who bought his mansion at 50% off peak value.

We've got so many whipped* and surrendering HPCers who now have belief in forever bailouts for the housing market, QE, reflation upon reflation (even when banks much better positioned for big crash, this time around.) and never seeing it can become untenable (NOW..10 years ago eve) to extremes already for massively hit upon renter-saver generations, over the years and decades.

And on the other side, majority of prime housing asset wealthy, very low inventory on market (still very few owners on market looking to sell up at high high hyperinflated house prices) seem to now have a coarsened expectation they will continue to get supported by Gov and Central Banks and that 'ever more people = hpi forever' dumbness - quite a few who've gone into BTL at beyond 2007 peak prices (Timak's parents-in-law). Some now hypothesising their house is the new substitute for money/value, and economy works all around keeping housing inflated values.

*

True - normally cheaper energy is great news but we are seeing the bursting of a bubble fuelled by QE and the consequences threaten the status quo. (Venger agrees with this part, low interest rates and QE reflated bubble to override last 'crash'... possibly bursting now with consequences)

Difficult to see anything except more money printing happening as a result. Although there may need to be a 'crisis' to scare the public - despite the fact that the mainstream media is doing its best to portray cheaper energy as a bad thing, the public aren't going to see it as a crisis that needs action. Now , plunging markets (your pension is at risk!!!!) or bank wobbles (your savings are at risk!!!) will be required to create the level of frenzy and paranoia at which the masses unquestioningly accept yet more plundering of their wallets.

Once the money starts flowing freely to the top people, back to 'business as usual'. At least until the system becomes untenable.

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Older people who thought it was locked in will go through all sorts of weird internal distress as they try to process "losses" , many younger people are already in NE so they will have realised that they are stuck, those with extra property may panic sell a bit, and those who need to sell will just have to take the price they can get. A big crash now won`t have the same psychological effect on the country as it would have in `08, we have moved on, the EZ is a big issue, terrorism is back on the agenda, there is a new generation of young who won`t buy at bubble prices etc. etc. "Homeowners" are not as important as they were.

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"And on the other side, majority of prime housing asset wealthy, very low inventory on market (still very few owners on market looking to sell up at high high hyperinflated house prices) seem to now have a coarsened expectation they will continue to get supported by Gov and Central Banks and that 'ever more people = hpi forever' dumbness - quite a few who've gone into BTL at beyond 2007 peak prices (Timak's parents-in-law). Some now hypothesising their house is the new substitute for money/value, and economy works all around keeping housing inflated values"

I am not sure that is the prevailing view. I do not have an expectation that the house will keep going up nor does anyone I know because we do not want to further damage the income price ratio for our children. Many of us are engineering our own soft landing using cheapo interest rates to pay off debt. A good few on offsets which become a potential line of credit to help our kids get a house or soften the vagaries of the economy.

So if the house dropped say £200,000 and I had no mortgage I would still be in a better position then when I brought it in late 2009.

In addition prudence says I won't downsize or swop houses because that might disturb a finance arrangement that as I have said above works for me (including aiding with business cashflow)

I change my car less than I did and buy less etc, perhaps at the higher end of the market realism has set in so houses will be released as and when there is a genuine requirement to not a vanity sale.

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The old folk at the BOE will panic, print up billions and devalue the currency again.

They will then provide 0% apr 100% LTV mortgages to anyone.

My gut feel is this won't happen this time. Was required to get through the first parliament not the same drivers in 2015

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The old folk at the BOE will panic, print up billions and devalue the currency again.

They will then provide 0% apr 100% LTV mortgages to anyone.

This is what I mean about the non-owner renting side having now been whipped into submission... that because the authorities overrode the market again and again since 2009, they will be able to continue to do so. Sorry WoH... and you may be correct, but I hope that will not be 'the solution' yet again.

There is even hard acceptance that the authorities have continued motive for propping up markets via QE, even as BoE Dep Gov Broadbent says the most important thing is writing lots of new mortgage debt... not protecting house prices, but getting more mortgage debt out there. Osborne's parents already sold into reflation, circa £12m, and downsized.

...vs much by way of many prime home owners at top side of the layer cake.

Others outright/equity rich prime owners though, still have strong belief that prices can't fall hard. If not capital gain, then little by way of fear of capital loss, with property, at new peak prices, from Timak style relatives (below). A view of housing offering best capital preservation (and maybe hope for HPI) for some of the biggest winners of longwave HPI who have been doubling down.

It could be stomach churning for many such types into a HPC. Any of us who have traded financial markets have, once or twice, experienced hard swing losses in our positions. Need a stomach for it, and it hurts, even when the loss is not much against your overall net-equity balance of position.

Hopefully hpc won't affect the psyche of those who don't daily count the value of their homes, but use them as homes. Non-owners have had their psyches challenges under years of strong HPI gains. Wont' affect Greg B's homeowners who have this sensible position ('I do not have an expectation that the house will keep going up nor does anyone I know because we do not want to further damage the income price ratio for our children.) Still they can't have it both ways.... outright owned house £750K house is not £750K cash in the bank as the same time.

Oap Property Boom: One In 12 Over-60S Owns Second Home As 'grey Savers' Buy-To-Let

There are different types of BTL investors.

My parents-in-law would never have bought a BTL flat (indeed they were massively against it) however they had several hundred k sitting in a bank account earning 1%.

If they'd shopped around they'd be getting 2% at best in a savings account (maybe slightly more)

If they'd bought shares they might have gone up, maybe down and with dividends they'd be making maybe 4%. However in living memory the stock market has lost and recovered 50% of its value.

With the flat they bought they get a yield of about 4% (after costs and contingency), price might go up or down (up about £50k so far) in the long term.

Put it this way if they could get 4-5% in a savings account - like was common up to 2008 - there is no way they'd own a BTL flat. But as they want an income in retirement BTL is a sensible way of getting a BTL income.

Now levereged BTL for flats in Bulgaria is another matter...

Edited by Venger

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Older people who thought it was locked in will go through all sorts of weird internal distress as they try to process "losses" , many younger people are already in NE so they will have realised that they are stuck, those with extra property may panic sell a bit, and those who need to sell will just have to take the price they can get. A big crash now won`t have the same psychological effect on the country as it would have in `08, we have moved on, the EZ is a big issue, terrorism is back on the agenda, there is a new generation of young who won`t buy at bubble prices etc. etc. "Homeowners" are not as important as they were.

That will be an interesting time indeed.

Although I think a real HPC will have even greater psychological effects on the long-wave HPI prime winners, than 07-09. Prices much higher in my non-London/non SE since then (except at £1m+ end).

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Anecdotally, every boomer colleague I work with,

has said, once the topic of the housing market comes up that the 'government will not not let prices drop' I've heard that sentence dozens upon dozens if times.

There is definitely an expectation of intervention. They're right so far.

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Anecdotally, every boomer colleague I work with,

has said, once the topic of the housing market comes up that the 'government will not not let prices drop' I've heard that sentence dozens upon dozens if times.

There is definitely an expectation of intervention. They're right so far.

I think there are a fair proportion of boomers in the professional classes who have have been shielded from the vicissitudes of the world for two generations or more They are about to find out how the world works.

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If the PTB could override market forces we wouldn`t be in deflation? They won`t hold the property market up indefinitely.

Roll back to 2007. Shut down the banks.Bail out the savers. Lock up the frausters. House prices collaose.

Where is Britain now ?

MUCH BETTER BY NOW.

Instead, we have the poor struggling to eat, the rich paying silly money for shoe box houses and everyone in between paying for it.

Shameful.

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I think there are a fair proportion of boomers in the professional classes who have have been shielded from the vicissitudes of the world for two generations or more They are about to find out how the world works.

A lot of mortgage free boomers who tbh don't have to work...it would take some change to break that shield.

They have reserved the ''vicissitudes'' for their kids. Possibly having had a nice upbringing, a four year rite of passage at a Russell group Uni, wining and dining at Frankie and Benny's at £50 a pop on Mum and Dad's money...but then what?

Edited by crashmonitor

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I think there are a fair proportion of boomers in the professional classes who have have been shielded from the vicissitudes of the world for two generations or more. They are about to find out how the world works.

Powerful stuff.

From memory, below tweaked from Matter.... (2008 - Iain M Banks) something I hope occurs, in market correcting terms, for many complacent older prime high equity wealth owners; well the ones who push the HPI is good message, counting their HPI, and who are way too complacent about possibility for serious HPC.

They could sell for money right now if they chose, perhaps accepting 5-10% below current peaky prices in order to sell, so if they choose to ride a HPC down, it's their choice. Just as market went against many renter-savers for many years, then into policy reflation.

It must have hit very fast and very hard; when regaining consciousness it was to find themselves in the grip of something adamantinely hard and utterly unforgiving. Dear ****; it had eviscerated them all.

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Why on earth wouldn't equity rich/outright owners just shrug their shoulders and go "oh" ? It's not like a crash would materially reduce their standard of living in any way.

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Why on earth wouldn't equity rich/outright owners just shrug their shoulders and go "oh" ? It's not like a crash would materially reduce their standard of living in any way.

Don't know too many boomers with motgages, so exactly. Can only really see a problem if gold plated final salary pensions start getting haircuts, Greece style, or there is a major change in pensioner welfare provision. And hell would freeze over before any of that happened.

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Powerful stuff.

From memory, below tweaked from Matter.... (2008 - Iain M Banks) something I hope occurs, in market correcting terms, for many complacent older prime high equity wealth owners; well the ones who push the HPI is good message, counting their HPI, and who are way too complacent about possibility for serious HPC.

They could sell for money right now if they chose, perhaps accepting 5-10% below current peaky prices in order to sell, so if they choose to ride a HPC down, it's their choice. Just as market went against many renter-savers for many years, then into policy reflation.

Got a mate around the corner who is exactly this was COO of one of my clients mid range privately owned biz thinks he is a FTSE 100 level COO made redundant two years ago and lived on his laurels with a six figure pay off (don't know but probably around £130k). Has applied for all the wrong jobs (no qualifications, only worked in smallish private businesses) Scratching around now and broken up with his wife.

House on for £980k got snotty about a £940k offer (and spent money doing it up for sale .... :huh: ) now seen it on for £920k OIEO needs to be on for sub £895k and he will get £850k he is now in a chase it down spiral.

Contrast that with the guy I bought my house off in late 2009 (I rented for two years) pitched it somewhere too high and then sold it to me for £150k less than any other priced house at a price nothing had sold at since 2002. But Bob was one of those blue collar success stories I mention, his business had gone bust and he needed to get out quick it was empty and felt like a repo. Saw Bob the other day back on his feet - crisp decision making (strategy as opposed to tactics to link to my last post)

Edited by Greg Bowman

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Why on earth wouldn't equity rich/outright owners just shrug their shoulders and go "oh" ? It's not like a crash would materially reduce their standard of living in any way.

As just posted personal circumstances change but agree with the point

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Why on earth wouldn't equity rich/outright owners just shrug their shoulders and go "oh" ? It's not like a crash would materially reduce their standard of living in any way.

Yeah right. Close off the avenue to houseswap without much competition from below? Hell will freeze over first before some of these types will give up even imaginary, unrealizable numbers even if it means a very real improvement in prospects for people who might be interested in reasonably priced family accommodation.

Look at NIMBY objections, plenty of 'impact on house prices' in there.

Edited by Joan of The Tower

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Why on earth wouldn't equity rich/outright owners just shrug their shoulders and go "oh" ? It's not like a crash would materially reduce their standard of living in any way.

I have a guitar sitting in the corner which an old drunken roadie friend of mine gave me, saying it used to belong to Jimi Hendrix, everyone who hears about it agrees that it would fetch at least $50,000 at auction, I feel quite smug, thinking that the longer I hold it the MORE it will fetch, if I could ever bear to part with it that is. Later I hear that the roadie chap just nicked it from some young band he was helping out, and they got it from a high street music shop, on a good day it might fetch 150 quid. There is a psychological effect, and this impacts peoples notion of how well off they are. Many have probably been spending and borrowing based on HPI assumptions, this will come to a sudden halt when they realise how much the house has "lost".

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Why on earth wouldn't equity rich/outright owners just shrug their shoulders and go "oh" ? It's not like a crash would materially reduce their standard of living in any way.

Quite...would make no difference..... They I would hope, would rather their children were able to save a deposit for themselves and have the same opportunities of buying a property at 3.5 times their gross annual earnings in a place close to where they live and work.

I doubt equity homeowners relish the thought after working hard to pay for their home over a lifetime of working of taking on more debt from the equity to help the kids out late into their working life.....most middle aged homeowners had no help whatsoever from their parents they didn't need help.

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Yeah right. Close off the avenue to houseswap without much competition from below? Hell will freeze over first before some of these types will give up even imaginary, unrealizable numbers even if it means a very real improvement in prospects for people who might be interested in reasonably priced family accommodation.

Look at NIMBY objections, plenty of 'impact on house prices' in there.

Totally agree, seen this so many times. Gold plated final salary, six figure investments, but the house is not going to be given away even though they picked it up for diddly squat. Even if that means not getting on with life. It's in their DNA,

The less important the proceeds becomes, the greedier it gets. Totally inverted.

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Why on earth wouldn't equity rich/outright owners just shrug their shoulders and go "oh" ? It's not like a crash would materially reduce their standard of living in any way.

Don't know too many boomers with motgages, so exactly.

It would have some sort of effect; it seems to me many older prime owners always know how much their house is worth, at ever peak values. Better summarised below, by Juvenal.

Not all, I agree, but for many the value of their home (owned outright/equity rich)... the wealth thereof is a source of deep personal pride and achievement.

8msmuggerman.jpg

SMUG much?

http://www.dailymail.co.uk/property/article-1267221/Out-ashes--Sandbanks-developer-shows-traditional-8m-New-Forest-manor.html

http://www.rightmove.co.uk/property-for-sale/property-27261892.html

If owners of prime weren't so bothered, then why into mini HPC was is, almost everywhere, 'Can't sell my house'... "market is wrong.. not price.. make banks lend more" from the owner side mostly. Why so many owners refuse to cut asking prices... well know why... they got a big glut of QE/0.5% and global frenzy for assets against irrelevant dead money savings.

These type of house price increases are speculative moves by greedy idiots. Only when the tabloid press consistently banners index price falls for several months will they get the point, and get real.

There is a bungalow near me sold 12/07 (absolute peak) which has reappeared for sale with a £65K increase in price over what it was bought for. There is nothing you can do to a bungalow, other than a solid gold front door, which can justify this.

It's been said on here before that it takes 10 seconds to convince someone their house has gone up in value, and 10 months to convince them it's gone down.

It's the way people are. Greedy, stubborn and unrealistic.

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Won't it be the usual stages of grief:

1. Denial - "my house is different" - "this area is different"

2. Anger - "the banks should be lending more" - "these youngsters should stop eating £2 porridge" - "the government needs to do something"

3. Bargaining - "I can cope with 10% off, but anything more is just giving it away"

4. Depression - "this was supposed to be my pension..."

5. Acceptance - "It's still the same house it was three years ago"

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The penny will drop when the house next door that they know is worth more than theirs sells for less than what they thought theirs was worth. ;)

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