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First Proof Of Decline In Housing Market

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Guest wrongmove

First proof of decline in housing market

"The first cracks in the housing market emerged yesterday as the number of new mortgages fell to its lowest level in a year.

After months of mixed signals on the future of Britain’s property market, data from the Bank of England at last confirmed that activity is slowing.

New mortgage approvals are frequently an early indicator of the path of house prices. Potential house buyers now appear to be taking fright at the rising costs of home ownership, after the Bank of England’s four interest rate rises since August.

The market is expected to take a further hit this summer when the Bank is expected to raise rates again – perhaps as soon as next week. Some City analysts are predicting that rates could hit 6 per cent by August.

The number of new approvals slowed to 107,000 in April, official figures from the Bank showed, down from 112,000 the month before and the lowest such figure since April 2006. ........."

The link between MAs and future HPI seems to have become accepted by the mainstream. The MA figs are still high by historical measures, but they are dropping. If this continues down below about 90k (SA) I believe we can become confident of zero or negative HPI in the next 6 months or so. In the past, approvals at 107k would have still meant double digit HPI in Q4 2007, but the link seems to be weakening, with higher MAs required to sustain prices than in the past - less cash buyers around now perhaps?

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First proof of decline in housing market

"The first cracks in the housing market emerged yesterday as the number of new mortgages fell to its lowest level in a year.

After months of mixed signals on the future of Britain’s property market, data from the Bank of England at last confirmed that activity is slowing.

New mortgage approvals are frequently an early indicator of the path of house prices. Potential house buyers now appear to be taking fright at the rising costs of home ownership, after the Bank of England’s four interest rate rises since August.

The market is expected to take a further hit this summer when the Bank is expected to raise rates again – perhaps as soon as next week. Some City analysts are predicting that rates could hit 6 per cent by August.

The number of new approvals slowed to 107,000 in April, official figures from the Bank showed, down from 112,000 the month before and the lowest such figure since April 2006. ........."

The link between MAs and future HPI seems to have become accepted by the mainstream. The MA figs are still high by historical measures, but they are dropping. If this continues down below about 90k (SA) I believe we can become confident of zero or negative HPI in the next 6 months or so. In the past, approvals at 107k would have still meant double digit HPI in Q4 2007, but the link seems to be weakening, with higher MAs required to sustain prices than in the past - less cash buyers around now perhaps?

Awesome headline, and nice dispassionate analysis Wrongmove :)

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First proof of decline in housing market

The link between MAs and future HPI seems to have become accepted by the mainstream. The MA figs are still high by historical measures, but they are dropping. If this continues down below about 90k (SA) I believe we can become confident of zero or negative HPI in the next 6 months or so. In the past, approvals at 107k would have still meant double digit HPI in Q4 2007, but the link seems to be weakening, with higher MAs required to sustain prices than in the past - less cash buyers around now perhaps?

Many places throughout the UK are seeing neg MoM HPI already so if MAs drop to 90000 I reckon that will probably signify a crash.

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They are talking about this in the media now but the general public sentiment is still bullish, at least the people i speak too

I wonder what we would need to change that?

Another interest rate rise next week? :)

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They are talking about this in the media now but the general public sentiment is still bullish, at least the people i speak too

I wonder what we would need to change that?

Probably not too dissimilar to public sentiment being bearish towards the late 90s. It lags somewhat behind cycles. The smart money flows in the opposite direction and is more in sync with the cycles.

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It is a figure below 80,000 that indicates future price falls. Don't get carried away yet we have been here before in August 04.

But interest rates are higher now - with no magical cut coming to the rescue. Affordability is stretched even further, debt problems have increased, more people are out of work...

Yes we have been here before, but to compare now with August '04 skims over too many factors.

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They are talking about this in the media now but the general public sentiment is still bullish, at least the people i speak too

I wonder what we would need to change that?

I've noticed the opposite - people I speak to are becoming increasingly bearish.

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I've noticed the opposite - people I speak to are becoming increasingly bearish.

Same here.

Even my mum, who has nagged (and I mean NAGGED) at me for that last two years to take out *any* mortgage to "get on the ladder", admitted that I was right by waiting. I nearly fainted.

I think sentiment is changing more and more.

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Guest Shedfish
£58,196: Average house, May 1997

2.3: Ratio of average price to first-time buyer earnings

53%: Payments as a percentage of first-timer’s take-home pay

-------- forward 10 years ---------

£181,584: Average house, May 2007

5.1: Ratio of average price to first-time buyer earnings

121%: Payments as percentage of first-timer’s take-home pay

Source: Nationwide; affordability indices are for first quarter

apparently not just about low IRs making the ratios meaningless then

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I think sentiment is changing more and more.

First post on here, although reading for over a year now, so go easy on me.

I have been increasinlgy bearish since our (FTB) purchase fell through in Enfield last year, and although we lost a not insignificant amount on fees etc, I am starting to feel glad that it fell through as I'm not tied to a huge mortgage in this market.

I have been discussing and trying to convince people the market isn't healthy for a while, and last year felt I was bashing my head against a brick wall. But slowly things have changed, first the GF has been convinced by my views, then her parents, and now more friends are starting to think I might have a point.

Last night I was discussing our situation with an acquaintance in the pub in Islington who knew we were buying last year. After a long day at work I couldn't be bothered with explaining my position as to why we had changed our mind about buying, but for the first time in my experience, he actually started giving reasons as to why he had stopped looking for a house to buy, including increases in deposits being asked for by banks, dropping asking prices, and that him and several of his friends had decided to hang back and wait to see what is happening as he thought there could be drops in prices for him to "pick up a bargain" later this year.

This on its own was quite good news I thought, but only a one off, but standing in the stationary room in the office, 2 of the older colleagues in the office were having exactly the same conversation.

Sentiment is really changing I'm finding, and one big headline or TV program would really start the panic I think

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Guest grumpy-old-man
2nd Q 2007 :)

yes RB, I think this will be the start of the proper drops.

it's finally happening. :)

edited.

Edited by grumpy-old-man

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First post on here, although reading for over a year now, so go easy on me.

I have been increasinlgy bearish since our (FTB) purchase fell through in Enfield last year, and although we lost a not insignificant amount on fees etc, I am starting to feel glad that it fell through as I'm not tied to a huge mortgage in this market.

I have been discussing and trying to convince people the market isn't healthy for a while, and last year felt I was bashing my head against a brick wall. But slowly things have changed, first the GF has been convinced by my views, then her parents, and now more friends are starting to think I might have a point.

Last night I was discussing our situation with an acquaintance in the pub in Islington who knew we were buying last year. After a long day at work I couldn't be bothered with explaining my position as to why we had changed our mind about buying, but for the first time in my experience, he actually started giving reasons as to why he had stopped looking for a house to buy, including increases in deposits being asked for by banks, dropping asking prices, and that him and several of his friends had decided to hang back and wait to see what is happening as he thought there could be drops in prices for him to "pick up a bargain" later this year.

This on its own was quite good news I thought, but only a one off, but standing in the stationary room in the office, 2 of the older colleagues in the office were having exactly the same conversation.

Sentiment is really changing I'm finding, and one big headline or TV program would really start the panic I think

Welcome to the boards, PompeyVin!

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