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The psychology of the current housing market - UK and US


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I'm a long time 'lurker' on this site, but this is my first post. Cards on the table, I'd love to see a significant reduction in current house prices. I'll openly admit I've made a number of poor life decisions, one of which has been to not buy a house earlier in my life, but renting instead. Despite my best efforts to save, as each year has gone by, getting on the housing ladder has a more and more distant objective. For the first time though, I am pretty clear about the area I want to live in relative to where I work (Suffolk). 

Perhaps naively, faced with the greatest economic downturn in the economy in a generation and with nearly all housing commentators seemingly almost without exception predicting falls in house prices (even those affiliated with Estate Agents and other VIs), I assumed that I might see at least some reductions in current prices.

However, the latest data out of the US and anecdotal information from the UK has me worried. It does indeed seem that sale volumes are rebounding at a pretty astounding rate:

https://www.cityam.com/us-pending-home-sales-post-record-jump-in-may/

The signs (commentators such as Henry Pryor, Estates Agents  - I know!!!!!, other members of this site) are also suggesting that June's housing activity in the UK is also remarkably bullish.

What I don't understand is what is driving and motivating these sales? If I hear the phrase 'pent up demand' one more time I might pop myself!!!! Surely, the rational logical thing to do, faced with a mountain of evidence that the economy / restricted capital availability is going to put significant downward pressure on prices would be pause and see what unravels, possibly saving a fair bit of money in the process?

Are people panic buying?

Is the housing market, both here in the UK and across the shore that irrational? I suspect the answer is yes. Will this new surge of demand be maintained?

Thanks for reading.

 

 

 

 

 

 

 

 

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“What I don't understand is what is driving and motivating these sales? If I hear the phrase 'pent up demand' one more time I might pop myself!!!! Surely, the rational logical thing to do, faced with a mountain of evidence that the economy / restricted capital availability is going to put significant downward pressure on prices would be pause and see what unravels, possibly saving a fair bit of money in the process?“

A friend of mine restores classic cars. The last recession didn’t affect him? Odd you might think. Thing is people want It and they will have it! Rational doesn’t seem to apply. The same I believe with house purchases, you can leave ‘rational’ at the door!
 

As for ‘pent up demand’. Throughout the brexit buggering about people were advised by agents to wait.  Wait they did, and come the start of the year the market erupted. Then the pandemic, and guess what people have had enough of waiting. So, nothing rational going on at the moment, that will come once the furlough scheme ends and the tide goes out so to speak.

Deeply frustrating for the moment, but look ahead. Do you believe prices will increase over the next two years? Highly unlikely. 

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Wait until the end of the year. If the end of furlough, the job losses, further lockdowns and Brexit don’t hammer the housing Ponzi scheme, then nothing will. If, however the govt do find a way of keeping prices high through all of this, then sad to say, I think we’ll finally have to accept defeat at the hands of institutional corruption. 

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Andy, it's been stated many times: sale prices of May and June won't be in Land Reg till August or so.

The unemployment is not there yet due to Furlough schemes.

There will be no evidence of a change till October, maybe November.

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Stuff does seem to be going STC fast, but we won't know what completes and sells for months.

And besides, the stockmarket defied gravity at the start of coronavirus, I'm not sure this isn't the same issue. 

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Worry not Andy, for the reasons identified by others, this will take time to feed through the market.

Expect the government to weigh in as they have done on multiple occasions in the last two decades to try and keep the plates spinning, in fact I am counting on it, as if they don't it will be full on Armageddon.

Even with the inevitable props I expect good sized falls, not the 50% some people are hoping for, but decent enough.

If I am wrong and they actually save this ponzi yet again, which I think is highly unlikely, ForGreatLager's right, it's time to emigrate.

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The majority of people agreeing "sales" now will be using pre-covid AIP's or similar calculations to make their offers. A lot of people will either find their lending ability has declined post-covid or their mortgage in principle has gone. All of this so called pent-up activity will only be confirmed as fact in 3 months time when the sales appear in the LR data.

FWIW another 5 houses in my search areas have come back on the market after being SSTC across March/April just today.  I expect this trend to continue, if not accelerate as chains collapse due to a combination of failed gazundering, down valuations by surveyors and disappearing mortgage LTV deals.

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26 minutes ago, Smiley George said:

The majority of people agreeing "sales" now will be using pre-covid AIP's or similar calculations to make their offers. A lot of people will either find their lending ability has declined post-covid or their mortgage in principle has gone. All of this so called pent-up activity will only be confirmed as fact in 3 months time when the sales appear in the LR data.

FWIW another 5 houses in my search areas have come back on the market after being SSTC across March/April just today.  I expect this trend to continue, if not accelerate as chains collapse due to a combination of failed gazundering, down valuations by surveyors and disappearing mortgage LTV deals.

^ this.

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Hi @AndyRB5,

I take a different perspective to the majority of HPC forum.

I essentially believe house prices will rise, over the next few years, within 5 years, they may be 20-50% higher in price. That may come much sooner.

You may see some properties, even entire areas, fetching below their recent sold prices, due to panic selling and reorganizing of finances. Most who are in difficulty are doing so now. These are individuals, whom are over leveraged. You also have to understand, that different areas of the country are impacted by different forces.

Do not, compare data in London to data in other regions, the economics of these regions and what underpins their house prices, are different.

Auction prices have increased due to people, moving money out of the banks/shares and as they bet for inflation and I agree.

Fear not, your wages will increase also, possibly not relatively, but you'll have more £1s in your pocket.

What you'll see now and in the coming months is deregulation, increased goverment spending and money creation, wether through QE or debt on GDP. You will see inflation and increased benefits. The banks, will also take measures to reduce the volume of sales.

I would suggest, you look at data from previous pandemics, such as the spanish flu.. where house prices rose 20%+ over 2 years and wages increased. 

All the best..

 

Edited by Speed1987
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20 hours ago, AndyRB5 said:

I'm a long time 'lurker' on this site, but this is my first post. Cards on the table, I'd love to see a significant reduction in current house prices. I'll openly admit I've made a number of poor life decisions, one of which has been to not buy a house earlier in my life, but renting instead. Despite my best efforts to save, as each year has gone by, getting on the housing ladder has a more and more distant objective. For the first time though, I am pretty clear about the area I want to live in relative to where I work (Suffolk). 

Perhaps naively, faced with the greatest economic downturn in the economy in a generation and with nearly all housing commentators seemingly almost without exception predicting falls in house prices (even those affiliated with Estate Agents and other VIs), I assumed that I might see at least some reductions in current prices.

However, the latest data out of the US and anecdotal information from the UK has me worried. It does indeed seem that sale volumes are rebounding at a pretty astounding rate:

https://www.cityam.com/us-pending-home-sales-post-record-jump-in-may/

The signs (commentators such as Henry Pryor, Estates Agents  - I know!!!!!, other members of this site) are also suggesting that June's housing activity in the UK is also remarkably bullish.

What I don't understand is what is driving and motivating these sales? If I hear the phrase 'pent up demand' one more time I might pop myself!!!! Surely, the rational logical thing to do, faced with a mountain of evidence that the economy / restricted capital availability is going to put significant downward pressure on prices would be pause and see what unravels, possibly saving a fair bit of money in the process?

Are people panic buying?

Is the housing market, both here in the UK and across the shore that irrational? I suspect the answer is yes. Will this new surge of demand be maintained?

Thanks for reading.

The reason you are hearing pent up demand is because frankly, despite what everyone says on here it does exist.

The news that FTB are struggling to get on the ladder and have been for a long time is not new - we must be on year 10 of this? therefore there has been an every building cohort of people like yourself who have been renting but would like to buy.

As others have said you add in a very low transaction count for Brexit and corvid etc has lead to a build up as well.

When (my view could be if) prices drop people will want to buy as rent is more expensive, and people wont want to sell as well.. rent is more expensive - so worst case just rent it out...

For every 5% drop there are people who couldnt buy but now can.. 6, 7, 8% etc Always been the case.

 

If you require / looking for major falls mortgage rates need to rise to become more expensive than rent. Then buying / just renting it out rather than selling, is no longer a no brainer. Mortgage rate rises are your bet for large falls.

 

 

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On my local area Facebook group (close to downtown Chicago) people are upset that even though their houses/apartments are being listed for lower prices than 3 years ago (with the obligatory comments on "how much we've spent upgrading it") they aren't selling, or are receiving much lower offers than asking. A combination of job losses, inner city riots, and 3.5 months and counting of being stuck in a shoebox with your laptop on the kitchen table (whilst your friends on Facebook are posting pictures of drinks and barbecues in spacious backyards, and their home office setups) mean that the "downtown lifestyle" isn't what it used to be.

Although I must admit that I own a one bedroom apartment in London, so it isn't all good news for me!

 

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As others have said, you are still about 5/6 months too early, like the excited child calling out ‘are we nearly there yet?!’.

The catainb above said there will be pent up demand and fear of missing out will still be strong initially so people might pile in first. However I believe that eventually this will turn to plain old fear. So I think it’s steady as she goes for now with a rapid plunge at the end of the year and 2021 to see the crash.

Edited by LetsBuild
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  • 415 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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