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Blackholeshine

What If House Prices Crash By 40%?

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http://business.timesonline.co.uk/article/...2206820,00.html

What if house prices crash by 40 per cent?

Few economists expect a crash, but the combination of a falling dollar and rising oil prices could force American interest rates higher, triggering a global recession and undermining confidence in the housing market. Greg Fuzesi, of Nationwide, says: “The chance that house prices will be lower in two years’ time is less than 10 per cent.”

Should prices fall, the biggest risk is negative equity, when mortgage debt is greater than the value of a property. But Bernard Clarke, of the Council of Mortgage Lenders, says that this is only a problem if you need to move.

“If you can afford the repayments, just sit tight until prices recover,” he says. “Otherwise, you need to have a discussion with your lender as soon as possible. Banks will do all they can to help people to stay in their homes.”

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Having a cash reserve is vital. Mr Dampier says that this should be the foundation of everyone’s finances. “It may take several months to get another job, so having three to six months’ salary in cash should tide you over.”

yeah... come back to the real world... someone who is in financial worry is really going to have six months salary in reserve...

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yeah... come back to the real world... someone who is in financial worry is really going to have six months salary in reserve...

Technically if you become unemployed and have 10p in your pocket you have an infinite salary multiple... as you earn nothing.

Edited by BuyingBear

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Technically if you become unemployed and have 10p in your pocket you have an infinite salary multiple... as you earn nothing.

I always liked that relationship between zero and infinity.

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If the likelihood of a house price crash (<10% according to the man from the 'wide) is so unlikely why mention it at all in this kind of article. Sounds like something that you don't need to plan for.

I don't think he said that the chance of a crash was <10%. He said the chance of prices being lower were <10%.

He'd probably put the probability of a crash as much lower still.

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This is what it meant to say:

Few economists working for mortgage providers expect a crash. Greg Fuzesi, of Nationwide, says: “The chance that house prices will be lower in two years’ time is less than 10 per cent.”

However, the "Economist", widely regarded for it's intellectual vigour, has warned that the current property market is the biggest economic bubble in history, and that the correction in the market was beginning.

Edited by BandWagon

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I don't think he said that the chance of a crash was <10%. He said the chance of prices being lower were <10%.

He'd probably put the probability of a crash as much lower still.

And the obvious question is: how do they calculate the 10% The problem with markets is that they are fiendishly difficult to predict.

Billy Shears

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“If you can afford the repayments, just sit tight until prices recover,” he says.

What a stupid piece of advice. If you are looking to trade up - it there couldn't be a better time to do so! If you bought a place for 100k on an 80% mortgage, to move you would need to find the extra 20k negative equity, but you could buy a 200k place for 120k; add on the 20k negative equity you lost and you still get it for 140k.

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“If you can afford the repayments, just sit tight until prices recover,” he says.

What a stupid piece of advice. If you are looking to trade up - it there couldn't be a better time to do so! If you bought a place for 100k on an 80% mortgage, to move you would need to find the extra 20k negative equity, but you could buy a 200k place for 120k; add on the 20k negative equity you lost and you still get it for 140k.

Propaganda like this isn't aimed at people who already have houses, it's aimed at those thinking of buying houses. The image that they "cannot lose" has to be maintained or the pool of people prepared to buy will dry up.

Billy Shears

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The whole article seemed to be about conning people to take on ridiculous amounts of debt to make more profits for estate agents, banks and building societies.

To state that the chance of property prices being lower in 2 years than they are today is less than 10% seems a very strange comment for the Nationwide guy to make!

What happens if there is a recession, we go to war in Iran, there is a bird flu epidemic or some chemical weapon is let off in the City of London or Westminster? The chance of at least one of these things happening (probably a recession) must be at least 1 in 10?!

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According to the ODPM prices in my area for detached houses dropped 8.2% last Q. The chances that they will be even lower in a couple of years looks good to me. In fact, at the current rate of decline I would say a 10% fall by the end of this year is a virtual certainty.

Stratford-On-Avon £328,827 -8.2% (Annual: -8.8%)

http://news.bbc.co.uk/1/shared/spl/hi/in_d...html/44uf.stm?d

Edited by Realistbear

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According to the ODPM prices in my area for detached houses dropped 8.2% last Q. The chances that they will be even lower in a couple of years looks good to me. In fact, at the current rate of decline I would say a 10% fall by the end of this year is a virtual certainty.

Stratford-On-Avon £328,827 -8.2% (Annual: -8.8%)

http://news.bbc.co.uk/1/shared/spl/hi/in_d...html/44uf.stm?d

Yes -- and on the Hants/Witls borders - and the Wilts/Dorset/Somerset borders -- there have been q a few detatched props for sale for 18-10 months -- and they have put asking prices down by as much as 20% or even a bit more...... Fact is -- the VI bullsh@t is just a waste of time -- "prices" have come down big time since peak in 2004 -- anyone who has observed market can see this in many places......

Edited by eric pebble

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I don't think he said that the chance of a crash was <10%. He said the chance of prices being lower were <10%.

He'd probably put the probability of a crash as much lower still.

according to the land registry they are already lower.. in most of the country..

HELLO THERE>>> CoFFEE WAKE UP..

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  • 302 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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