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Yes, house prices are falling: but they probably won’t fall quickly

There is a small but vibrant web forum, housepricecrash.co.uk, whose members’ outrage at inflated property prices is matched only by their dismay that the longed-for slump has never materialised. 

https://www.theguardian.com/business/2017/jun/04/house-prices-falling-probably-wont-fall-quickly

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Of course, we can’t rule out a house-price crash. The fog of Brexit will becalm the market for several years to come. But a full-scale crash requires a steep rise in interest rates – and, for now, no one is forecasting that.

This is essentially possible without raising rates at all, when 90% LTV borrowers suddenly in negative equity (which is starting about now for FTBerz in London who bought at 15 peak) are stuck on 4.9% SVR after their 2 year fix of 2.1%. Never mind job losses to start adding up as Brexit gets underway. Sentiment is everything.

Nice to know the MSM is paying attention to this forum all of a sudden, interesting times.

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They long for the boom where prices aren't even above inflation rate based real prices and still have to collapse 50%.

 

How ###### stupid ate these people.

 

The slumps been here for a decade now.

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It's a good balanced article:

"Of course, we can’t rule out a house-price crash. The fog of Brexit will becalm the market for several years to come. But a full-scale crash requires a steep rise in interest rates – and, for now, no one is forecasting that".

They also over-estimate the rates of a 2-year fix. We're FTBs and have 1.54% 2 year fix.

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I see an sharp deep HPC as a lottery win, such as with previous crashes. As I'm well suited to take advantage. 

A slow drip down in prices is a bit painfull but effectively puts my savings on turbo boost against house prices, but much harder to talk myself into buying when I can wait. This scenario will be 'ah well at least I now have a decent house' 

best scenario is a tightening of credit so it removes all the chavs with white landrovers with bald tyres from over-extending and bidding against me. 

I don't think interest rates even take part of the calculation for most people, just the ability to borrow. 

The media is waking up to the endless flow of free money ending.

Its going to take a very long time for sellers to come to terms with their 2014-16 bubble +20% valuations being unachievable.

but no more rapid HPI is a start. Brexit, and a raft of BTL measures should pile on some downward pressure. 

all very slowly slowly catchy monkey.

rather not wait too long to buy, I need some decent falls this year to keep holding off.  

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7 minutes ago, jiltedjen said:

I see an sharp deep HPC as a lottery win, such as with previous crashes. As I'm well suited to take advantage. 

best scenario is a tightening of credit so it removes all the chavs with white landrovers with bald tyres from over-extending and bidding against me. 

rather not wait too long to buy, I need some decent falls this year to keep holding off.  

We took the view that, to an extent, people are being a bit more realistic in terms of offers they'll take and certainly in this corner of the SE M4 corridor valuations are fairly sticky. We're in a good position and have found a house we consider to be excellent value (vendors moving into care and wanted a quick sale). 

I love the second part - the new version of all fur and no knickers :D

Fingers crossed for you :)

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We've reached an affordability ceiling despite insanely low rate mortgage fixes and 95% LTV, I don't anticipate rises any time soon, but there are so many other possible causes of a collapse.

We seem to be avoiding the elephant in the room of a cyclical global recession looming, look what the last one did, but now it's possibly China with fingers in ALL the pies.

Nevermind the rapid accumulation of personal debt through credit cards and loans, what happens when you can't shift that 5k onto another 0% balance transfer card because they won't give you the limit you need or your credit rating has taken a dive? Bubble storm.

 

Edited by Barnsey

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1 minute ago, Barnsey said:

We've reached an affordability ceiling despite insanely low rate mortgage fixes and 95% LTV, I don't anticipate rises any time soon, but there are so many other possible causes of a collapse.

We seem to be avoiding the elephant in the room of a cyclical global recession looming, look what the last one did, but now it's possibly China with fingers in ALL the pies.

 

I agree re future price rises. Short of remarkable monetary or fiscal intervention making debt even cheaper (negative interest rates, govt taking on the debts fixed rate for 25 years like in the US, return of MIRAS etc) I do not see what is going to underpin above inflation increases. 

The turning of the business cycle is unlikely (extremely unlikely) to be anything like the GFC. I've been waiting for the crash for years and my thinking now is that if the greatest recession to hit for 80 years can't demolish prices I don't see a mild traditional recession causing too much pain.

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It bizarre that the writer states a crash will be averted as pent up FTBs will buy in as soon as they can afford it, but that misses the most simple of economic principles, that people will hold off buying waiting for it to get cheap if prices fall

Edited by FIGGY

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12 minutes ago, FIGGY said:

It bizarre that the writer states a crash will be averted as pent up FTBs will buy in as soon as they can afford it, but that misses the most simple of economic principles, that people will hold off buying waiting for it to get cheap if prices fall

...and for many of them to afford it the very thing he says won't happen needs to happen.

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1 hour ago, adarmo said:

The turning of the business cycle is unlikely (extremely unlikely) to be anything like the GFC. I've been waiting for the crash for years and my thinking now is that if the greatest recession to hit for 80 years can't demolish prices I don't see a mild traditional recession causing too much pain.

Might seem a bit of an odd take on things, but my honest view is that it's a bit early to decide what the consequences of the GFC were for UK house prices. We're still on so-called emergency rates so the idea that we've emerged from the crisis and are 'back to normal' (whatever that might mean) seems dubious at best. It was always the FSA view (and the FCA hold the same view) that the risks from all the boom interest-only lending don't show up till the mortgages come to term. The timing and nature of the consequences are determined in part by the mechanisms facilitating the mad house price boom and in the UK a key mechanism was widespread use of interest-only borrowing with no provision for repayment.

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For what it's worth I think you're right that the financial crisis isn't over. But for most people in the interim it's been a low interest rate party time. I think for me the issue isn't that interest rates are low because them in charge can afford for them to be so, it's that they are artificially low because they have to be.

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58 minutes ago, spyguy said:

I see youre new to the Guardian..,,

I find personal finance articles are usually sh1te irrespective of newspaper. Economics articles by RB, AEP, VK etc are much more worthwhile.

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3 minutes ago, btd1981 said:

For what it's worth I think you're right that the financial crisis isn't over. But for most people in the interim it's been a low interest rate party time. I think for me the issue isn't that interest rates are low because them in charge can afford for them to be so, it's that they are artificially low because they have to be.

That's not what the boe say. They openly communicate about opportunity for low IRs Vs being forced to raise them.

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1 hour ago, Pumpkin Muad'Dib said:

Might seem a bit of an odd take on things, but my honest view is that it's a bit early to decide what the consequences of the GFC were for UK house prices. We're still on so-called emergency rates so the idea that we've emerged from the crisis and are 'back to normal' (whatever that might mean) seems dubious at best. It was always the FSA view (and the FCA hold the same view) that the risks from all the boom interest-only lending don't show up till the mortgages come to term. The timing and nature of the consequences are determined in part by the mechanisms facilitating the mad house price boom and in the UK a key mechanism was widespread use of interest-only borrowing with no provision for repayment.

Agreed, but i now ask the question how long can they sustain emergency rates, or, at these valuations can i afford a rate hike. 

Japan has been on low rates for decades now. Japan is of course not the uk but without sustained inflation (not erpt inflation) i can't see them raising rates... too much...... yet.

Shortly after the gfc cpi got to 5%and yet no movement on rates. I would not be surprised if the mandate for boe was mood from inflation to  something more spurious like "stable economy".

In the meantime though underlying inflation forecasts are low and they seem keener on pushing up low inflation than they do to reign in inflation when it overshoots.

Regarding IO i guess at maturity of the mortgage some people will only have the option of selling there house to pay the balance, but for most people that would entail only a moderate downsizing. For others they might be able to get a short mortgage if income allows, or use their PCLS to put towards, or clear, the outstanding.

Just musing out loud......

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We must ask ourselves why prices didn't fall harder during the last GFC, and if all those supports will be ever present this time ala BTL and foreign investors scooping up "bargains" since.

My gut feeling tells me since we're already on our knees, and without those buyers when the next crisis hits either this year or next, we could see bigger potential falls.

This notion that FTBerz will jump in at 10% falls with no sight of imminent recovery is largely ridiculous, we're no longer naive early 20's something's, look how long it took for confidence in the market to be regained last time, 3 to 4 years?

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The free money isn't ending.

It's only just beginning.

HPC yes, end of QE no.

Do not believe there is a cap on prices, only that there is a cap on prices to wages.

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3 hours ago, jiltedjen said:

I see an sharp deep HPC as a lottery win, such as with previous crashes. As I'm well suited to take advantage. 

 

15 years ago that would have been true, now it just opens up the possibility of maybe being able to buy at a fair price in a few years time.

It's only a lottery win if you think todays prices are reasonable.

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a real HPC would be a housing crash, where people are forced to liquidate, and prices move quickly enough that they dive well below 'fair value', thus on the recovery you end up with an asset at fair value far above what you bought it for. I.E HPC'ers buying cheap property from the worst of the debt-heads.

the last opportunity for that was in the 90's.

Unless that ever happens, there will be no 'payment' for being frugal and patient, no compensation for the long commutes or suffering the bragging. No big 'win'.
But thats OK, im passed the point of wanted to 'win big' in an HPC, now i just want a reasonable sized home for hobbies and to 'get on with my life' (i personally feel im just wasting my life waiting)

Thankfully, i have been forced to be mega frugal, and i have my life set up that im slightly better off not owning, than if i had bought, but its very slim and being a few grand ahead each year (and suffering a long commute) over HPI, is not fair compensation. 

Stagnant prices, or slightly falling prices will mean a reasonable house and reasonable mortgage, and suddenly im not sprinting to keep slowly gaining ground against the running HPI. i will be getting much further ahead. But it would not feel like a 'win', just an OK outcome.

I personally would rather be ahead of my debt head peers, as i have worked a lot harder for it and been much more sensible, but unless we do get a HPC i will only be in a slightly better situation. But i guess to end up in a 'slightly better situation' is pretty amazing seeing what has been thrown at the debt heads over the years to ensure that they are rewarded and me (us) are punished. 

guess you win some you loose some. And by their very nature the 'debt heads' will do what they do best and keep crippling themselves with self imposed financial roadblocks (posh cars on the tick etc). Us HPC'ers have probably learnt a lot more about finance in the last few years, than those rewarded for their ignorance.

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1 hour ago, adamLancs said:

The free money isn't ending.

It's only just beginning.

HPC yes, end of QE no.

Do not believe there is a cap on prices, only that there is a cap on prices to wages.

Qe stopped years ago in uk.

Its not been unwound.

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Quote

There is a small-minded but vibrant newspaper, The Guardianwhose readers’ outrage at stagnating property prices is matched only by their dismay that their much fetishised "Mad Gainz!" have not continued.

 Fixed!

Edited by Diver Dan

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