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Uk Housing Market Hits Tipping Point

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Article in Observer today...

Britain's property market is now at a turning point, according to research by property website Hometrack. It says house prices have stagnated or fallen in almost two-thirds of UK postcodes this month, as rising interest rates squeezed cash-strapped buyers out of the market.

http://observer.guardian.co.uk/business/st...2088805,00.html

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There is a definite feeling in the air, certainly out here in the provinces, that a tipping point has been reached.

One aspect of the psychology of bubbles and crashes that always seems to be overlooked is 'vested interests'.

What I mean by that is that EVERYONE has a vested interest in the housing market. For years now the received wisdom has been that a rising housing market was 'a good thing'. The majority of people had a VI in prices continuing to rise. Now, with huge numbers of would be FTBers in rented accomodation or living with parents, the VI pendulum is beginning to swing the other way.

For anyone not on the 'housing ladder' a crash would be wonderful.

For anyone established in a property and with a low or no mortgage, a crash would be neutral; if it allowed your kids to be able to afford to buy houses, then it would be welcome. If it bankrupted a few of the loud-mouthed know-it-all BTLers down the golf club, all the better!

To me, the important 'tipping point' will come when people with a VI in a crash outnumber those with a VI in rising prices. It will then be impossible to sell a house at current valuations.

This day looms ever closer. :lol:

Cheers

Brad

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We live in a town in Bucks where prices "always" go up, the demand for houses in our town is stupid. However, a house put on for £850k two weeks ago has already been reduced to £790 "to try to get a quick sale". This is unprecedented here and for Mrs Grommit and I is first visible confirmation that where we live, the market has gone over. I think we are rapidly entering the "anxiety" phase now.

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Guest grumpy-old-man
Q2 2007.

Lovely Jubbly!

indeed RB, it is turning very fast & by the time the general public realise that the crash is here,then it's to late to get out. Massive oversupply, makes the crash accelerate, lots of downsizers who have bought big houses on small salaries, oh dear. :o:o

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a Crash will not happen unless banks tighten credit.

prices may steady or go down slightly with increasing interest rates, but no crash until the 100% LTV mortgage is gone.

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indeed RB, it is turning very fast & by the time the general public realise that the crash is here,then it's to late to get out. Massive oversupply, makes the crash accelerate, lots of downsizers who have bought big houses on small salaries, oh dear. :o:o

I think you called it for 1st Q 2007 GOM? That was certainly when it started to turn and I think we will see the hard evidence by the end of this Q. Indeed, Hometrack and the LR are already calling it.

What the Neithers* seem to misunderstand is the fact that crashes have their germination point as soon as the slowing begins. It is like a fulcrum which reaches equilibrium very slowly and then tips very slowly gathering momentum as the angle increases. I also like Warren B's example of the pendulum (see below).

___________________

* Neithers appear to be bulls who say that a crash will come some day (they always do) but that there is no evidence of one yet. They share a similar optimism with the bulls who see no cloudy days ahead. Both are therefore bullish about the state of housing and that prices will continue to rise.

Edited by Realistbear

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a Crash will not happen unless banks tighten credit.

prices may steady or go down slightly with increasing interest rates, but no crash until the 100% LTV mortgage is gone.

This is very true. IR alone never impacted the miracle as credit (and inflation) simply increased in line with the rates. Merv discovered this too late. He should have read Miltie Friedman's book on the subject.

Credit will tighten as the threat of insolvency rises. See thread on Debt.co.uk setting up shop in Scotland. They are getting prepared.

The collapsing sub-prime market is already busy tightening credit. Its a done deal. I do not think we have more than a few weeks before the banks shut down all forms of imprudent lending. BTL will see 20% even 50% deposit requirements and 100% mortgages will be a thing of the very ugly and very stupid past.

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a Crash will not happen unless banks tighten credit.

prices may steady or go down slightly with increasing interest rates, but no crash until the 100% LTV mortgage is gone.

As repos go through the roof, bank profits fall, the crunch will follow shortly after

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What the Neithers* seem to misunderstand is the fact that crashes have their germination point as soon as the slowing begins. It is like a fulcrum which reaches equilibrium very slowly and then tips very slowly gathering momentum as the angle increases. I also like Warren B's example of the pendulum (see below).

___________________

* Neithers appear to be bulls who say that a crash will come some day (they always do) but that there is no evidence of one yet. They share a similar optimism with the bulls who see no cloudy days ahead. Both are therefore bullish about the state of housing and that prices will continue to rise.

Ah, I see that we now have a systematic campaign against posters labelled as ‘*Neithers’ :rolleyes: – surely we don't want HPC descending into a cult that’s intolerant of rational and informed debate?

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Guest grumpy-old-man
a Crash will not happen unless banks tighten credit.

prices may steady or go down slightly with increasing interest rates, but no crash until the 100% LTV mortgage is gone.

yes, I agree, but I thought some lenders had started to tighten their lending criteria already ??

also, don't forget this one could also unfold under it's own weight (1.3 trillion of it :o ), their must be a limit to what people can afford to pay back regardless of the IR's/multiples etc ?

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Ah, I see that we now have a systematic campaign against posters labelled as ‘*Neithers’ :rolleyes: – surely we don't want HPC descending into a cult that’s intolerant of rational and informed debate?

now here's a thing, some of the guys I know, who RB would perhaps describe/deride as neithers, are the ones that have made fortunes (relative) out of property, banked those 'fortunes', seen the market for what it is/was and moved on :rolleyes:

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now here's a thing, some of the guys I know, who RB would perhaps describe/deride as neithers, are the ones that have made fortunes (relative) out of property, banked those 'fortunes', seen the market for what it is/was and moved on :rolleyes:

Absolutely, and when large amounts of money are on the table you really need to adopt a fact-based view of the housing market, rather than a faith-based or ideological one, and, crucially, take an honest and rational view of what’s happening, i.e. try to avoid seeing things coloured by pre-existing beliefs or overly biased by what you would like to see happen.

Edited by spline

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As said before IR alone can not bring about a crash etc, But would this kind of info have an influence on the BOE to keep IR frozen or maybe even drop them like they did last time.

I have heard it many times that their aim was to cool the market not crash it and rising IR are surely going to contribute to tightening credit as banks start to panic and start the downward spiral, Could we really be heading for a few years of very little movement in the market and where some get a bargain here and there with some desperate to sell or for other reasons.

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Ah, I see that we now have a systematic campaign against posters labelled as ‘*Neithers’ :rolleyes: – surely we don't want HPC descending into a cult that’s intolerant of rational and informed debate?

Indeed not, i read the term "neither" as people who know they don't know enough to make a decision that could be wrong or know that the market can defy rationality, it has nothing to do with their sentiment or their ability to analysise the data in front of them.

Without them or the bulls this forum would just turn into a circle jerk.

To quote berty russell

"The whole problem with the world is that fools and fanatics are always so certain of themselves, but wiser people so full of doubts.”

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ok it all started back in july/august 2006 2Q 2007 price drops i'd say 4 months tops and the crash starts, iam still sticking with my dates so far ive been proven right.

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This looks like an ideal headline for photocopying and then sellotaping to your local EAs windows !

Nothing like adding a little grease to the crash wheels eh?

I think the Sun will do the job soon enough. Screaming headlines to follow soon: "PANIC STRIKES HEART OF PROPERTY MARKET" "Millions try to beat crash" "The end of BTL" "Doomsayers proven correct" "Brown accused of engineering house crash" "I TOLD YOU SO, Merv King" "1989 ALL OVER AGAIN" "Thousands leave house keys with bank" "What goes up...."

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Guest Cletus VanDamme
I think you called it for 1st Q 2007 GOM?

I distinctly remember PropertyGuru being the first to call Q1 2007, but I'm happy to be proved wrong if someone can dig out the relevant posts.

Q2 07 has definitely seen the turn of media sentiment (from uber bullish at the start of Q1 07 to bearish). I'm not sure about the widespread effect on prices yet though, I still think that'll be Q1 08.

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I distinctly remember PropertyGuru being the first to call Q1 2007, but I'm happy to be proved wrong if someone can dig out the relevant posts.

Q2 07 has definitely seen the turn of media sentiment (from uber bullish at the start of Q1 07 to bearish). I'm not sure about the widespread effect on prices yet though, I still think that'll be Q1 08.

Welcome to the bear camp Cletus!

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a Crash will not happen unless banks tighten credit.

prices may steady or go down slightly with increasing interest rates, but no crash until the 100% LTV mortgage is gone.

and lose of jobs :(

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and lose of jobs :(

perhaps, but MEW to buy TV/Car/Holiday/ Restaurant would not last for ever anyway, the HPI economy is one that WILL collapse its just when! not even the most uber bull says HPI above inflation will continue for ever

the government could quite easily stimulate the economy by making planning permission much much easier to obtain. even with a crash it would mean it is cheaper to build your own property than to buy one. construction would boom! forcing rentals and prices down further.

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