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The form of the crash


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HOLA441
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I think the crash will take the form of far fewer listings and transactions. I think popular locations as well as ‘good quality’ housing will sell near to recent prices, if not more. But broadly prices will be down as the market becomes saturated with undesirable flats and houses needing a lot of work but where it longer seems financially viable.

When I look back to 2010-2012 I see so many insane bargains and they were mainly projects. Flats took a massive hit, many never recovered. In fact, some offers I placed on flats that were outbid in 2008 remain higher than current market values today, 12 years later!!!!

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HOLA444
 

I think the crash will take the form of far fewer listings and transactions. I think popular locations as well as ‘good quality’ housing will sell near to recent prices, if not more. But broadly prices will be down as the market becomes saturated with undesirable flats and houses needing a lot of work but where it longer seems financially viable.

When I look back to 2010-2012 I see so many insane bargains and they were mainly projects. Flats took a massive hit, many never recovered. In fact, some offers I placed on flats that were outbid in 2008 remain higher than current market values today, 12 years later!!!!

Quick bounce for this one. What's the latest morphology of the market?

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HOLA445
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HOLA447
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HOLA448
 

Quick bounce for this one. What's the latest morphology of the market?

Registers of Scotland has our prices up 0.4% this year. I think that’s skewed by second steppers and in reality, prices are down by 2-3%.

Where I live 700 properties sold in July/August of this year - they call it pent up demand? Well in 2007 over 2000 properties sold in those months...

The types of properties being sold is skewed heavily toward the mid to top end of the market. There are very few small flats/houses coming on the market where I live. 

Edited by Pmax2020
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HOLA449

Of the flats added to right move in the last 14 days in my town, only 4% have gone ‘under offer’. Of the houses, it’s 40%!

This seems to of been the general trend this summer. Traditional FTB go to’s areas in my town have gone very quiet. Few are being listed in the usual streets, and of those they are they aren’t selling very well. 

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HOLA4410
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HOLA4411
 

I think the crash will take the form of far fewer listings and transactions.

If there are far fewer listings it will prevent a crash - supply and demand.  You may be right though in that of people think the market is stagnant many homeowners will just not bother to try to sell and leave it until it improves.  

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HOLA4412

Because house sale transactions take such a long time to go through, when the sellers finally realise that the market is slipping away it will be too late for them to bail out at the levels they expected. At the same time a falling market will make buyers back off and wait, not rush in. At the moment sellers are convinced the goverment is behind them propping prices up, which they are, but the minute this support stops and gets diverted to a more important cause, then the whole market will collapse very quickly, sellers will be powerless to prevent it.

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HOLA4413
 

Because house sale transactions take such a long time to go through, when the sellers finally realise that the market is slipping away it will be too late for them to bail out at the levels they expected. At the same time a falling market will make buyers back off and wait, not rush in. At the moment sellers are convinced the goverment is behind them propping prices up, which they are, but the minute this support stops and gets diverted to a more important cause, then the whole market will collapse very quickly, sellers will be powerless to prevent it.

What makes you think that if a buyer doesn't exist at say £375k, there isnt one at £350k?

Collapses tend to happen when it fundamentally changes - i.e interest rates rose tomorrow from 0.1% to 5%.

Otherwise its a slow burn up or down. Dull i know but thats the reality of these things.

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HOLA4414
 

image.png.a288cd73c8d8f37ff004f76293faeb53.png

Yeah, sure they are.  That's the graph for Turkey. 

Soon as a currency collapses the sky is the limit for IRs.

We are not living in normal times on any level.  Inflation is coming, massive inflation and with the massive inflation will come the massive IRs.

It is unstoppable now.  

Real or nominally, house prices are going to be toast.

What is going on with the values on the y axis?

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HOLA4415
 

What makes you think that if a buyer doesn't exist at say £375k, there isnt one at £350k?

Collapses tend to happen when it fundamentally changes - i.e interest rates rose tomorrow from 0.1% to 5%.

Otherwise its a slow burn up or down. Dull i know but thats the reality of these things.

Didn't work like that for Tulips

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HOLA4417
 

What makes you think that if a buyer doesn't exist at say £375k, there isnt one at £350k?

Collapses tend to happen when it fundamentally changes - i.e interest rates rose tomorrow from 0.1% to 5%.

Otherwise its a slow burn up or down. Dull i know but thats the reality of these things.

Following black Wednesday in 1992 when IRs peaked they then declined gradually accompanied by the snowballing house price crash.

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HOLA4418
 

What makes you think that if a buyer doesn't exist at say £375k, there isnt one at £350k?

Collapses tend to happen when it fundamentally changes - i.e interest rates rose tomorrow from 0.1% to 5%.

Otherwise its a slow burn up or down. Dull i know but thats the reality of these things.

Im sure there would be a few buyers for a reduction from £375k to £350k, but not many. Most will wait for any potential further reductions. A rising market appeals to buyers who want to jump on the band waggon before the next price rise. This is partly what fuelled it in the first place. 

On a falling market the opposite works, most will hold off , the £350k house that might soon be worth £325k doesnt have the same appeal.   Banks are much less willing to lend money to buy the £350k house on a falling market than a rising one, even though its the same house. 

I dont think high interest rates are coming anytime soon, but the market can crash without them. If a sudden and unexpected hike in interest rates left some people unable to pay their increased mortgages, then the same people loosing their jobs leaving them unable to pay their existing ones would broadly have the same effect.

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HOLA4419

Fwiw what I see in Leeds. Base level 2 and 3 bed generic suburban houses are flying off the shelves. Within the realms of average salaries basically.

The layer above is seeing reductions. 

Apartments do not seem to be selling well, look like stagnant prices.

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HOLA4420
 

I dont think high interest rates are coming anytime soon, but the market can crash without them. If a sudden and unexpected hike in interest rates left some people unable to pay their increased mortgages, then the same people loosing their jobs leaving them unable to pay their existing ones would broadly have the same effect.

This seems to be the core debate. Will unemployment alone crash house prices or will low IRs prevent this?

The liberal elite response sides with the latter. The more radical outlook sides with the former.

Usually in such circumstances I split the difference in my outlook, so given that a proper house price crash is an average national correction of 30% after inflation, then I'll go for 15%.

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HOLA4421
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HOLA4422
 

real house price trend graph

They fell from 2007 to 2012 ish and 2018 to now.

The price rise in that graph can be attributed full to London and the SE.

But the trolls don't like this inconvenient truth.

Relative to wages though, house prices are insane.

 

Nominal is what matters here, not real. You spend 13 years waiting for a 'real terms' discount before buying and end up paying £32k more in average house land (per hpc's table £216, 2020 versus £184 Q3 2007). 

So Renty McRentFaceand Shouty McNeverbuy sit there renting and saving (savings getting eroded in real terms if this is your preferred base). Meanwhile the person buying even at the 2007 peak would have 13 years of repayments under their belt plus a 17.4% rise in values meaning that even with the shallowest of deposits they'd have a 50%LTV by now as a minimum.

If you don't like that I guess you're a troll?

As has been discussed on other threads the average earnings of a couple of first time buyers to house prices are not insane. Far from it in fact. What is insane is expecting that you can compete with two earners and buy the same as a single earner. What is insane is doing the same thing repeatedly and expecting different results.

Sorry to break it to you but we're not going back to the 1960s of three times the man plus one times the wife's earning. 

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HOLA4424
 

So if folk are getting less money for their flats, how are they paying more to move up to houses?

That is a huge question.

From the increasing stories of long chains, hard to get loans and surveys coming back with lesser valuations....looks like they are not.

It may very well be that a load of people thought their flats were worth X hundred grand and went to x location and bid x hundred grand in the countryside....... and then waited for 15 weeks and it never happens.

Personally I have lost out to bidders on say 10 houses (bidding 5-10% off no chain) over the years in every single situation the person whom outbid me was a mover reliant on the sale of another home (full to -5% off).  I would say circa 50% fell through and then half again just did not list and the vendors are still living in those houses years later.

We have demand falling for flats and homes with no garden, harder to get mortgages and searches taking sometimes months.

It's a Disney scenario where a contrived make believe buyer uses a fairy tale value of their property to bid higher on an equally fantasy priced home. 

Some will have cash, inheritance etc and actually buy but imho its like competing against the wall in an auction the other buyer does not exist.

 

 

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HOLA4425
 

The whole thing is going to collapse and by the whole thing, I mean western consumer capitalism.

The lights are going out, but most don't know it, yet.

Let's see where we are by mid 2021.

I think we will see collapse(ish) over the next couple of months as it becomes clear you cannot buy a house before the deadline.

My 2p

Optics wise the government will then be able to be seen as saving the market as opposed to boosting it (even though thats the reality).  It may even be better to let it fall 5-20% to enhance the subsequent boost.

Rather than offer 30% deposit mortgages (bad idea but would put a floor in and allow falls/improved affordability).  The paymasters of the conservatives will insist on 5-10% mortgages and then at a stroke the government will as in HTB become the mortgage market provider.

This will close that "bargain" window and maybe boost things until the election banks will suffer as all will be on the gov socialises the mortgage market.

The brexit/covid recession will be so severe that the temptation to meddle will be too great so the gov loans will of course be silly and reflect high risk loans rather than prudent ones and then after a while of boosting will have a recession but this time the government is on the hook for the whole lot.

Massive inflation > misallocation > socialism proper following inability to evict non payers (government defacto owners).

At this point who can then put the money into the ponzi machine as unless the government pay owners to have mortgages (and by then its possible interest rates and inflation could be higher.

 

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