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Sour Mash

What Shape Is The Crashing Market Going To Take?

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It's pretty clear that the era of HPI is now a fading memory.

Despite the protestations of the bulls and VIs we sure aren't looking a plateau so what shape is the crash going to take?

I'm thinking a relatively short but very steep drop as BTLs bail - maybe lasting a year - followed by years of stagnation or slow drops as the public loses confidence in buying and recession makes people loathe to borrow money.

Or could it just be a constant decline over a long number of years, depending on how much inflation is going to be needed to equalise prices (and inflation we most certainly will get).

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My guess is we'll see gentle declines this year, followed by two years of pretty rapid drops in '09 and '10, levelling out into a "trough" that'll run for another 3-4 years after that. Why nothing big this year? I just think it'll take another six months or so for the effects of tighter lending to work their way through to consumer spending, and then into the job market. Unless something Magical happens during the year, Xmas '08 may well be the first of a few Black Xmases.

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Blackpool Pleasure Beach.

The Big One

The up ramp>

The top> we are in the front carriage, dangling over the drop, staring down excitedly, only the back carriage stopping us from falling.

Soon.

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Last year, I thought it would be a gradual and tedious decline, but following the last couple of months credit tightening, which was more extreme than I'd ever imagined it would be, I'm now convinced that it'll be very quick.

Peopl on here spoke about sentiment, but I never realised quick how important it is. Basically, one or two lenders pulled their products and the rest of them almost got injured in the crush to the door to follow them.

The BBA figures are out on Tuesday (I think). The last figures showed 30% declines in new lending from 12 months ago, if that continues there is nothing anyone can do to stop the big drops coming. Forced sellers (which starts with developers) are going to have a very sharp reset of expectations especially if they were in church this morning praying for the spring bounce.

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Two things are going to happen in the next month to accelerate things dramatically. New data which no longer lags the Crock period will look truly grim and no amount of seasonal adjustment will change it. The powers that be know this - hence the frightened little meeting between the Banks and Merv last week and the BoE's shocking interest in central banks taking on mortgage books..................

1. BTL Landlords will exit in droves after 5 April - this is already documented as happening, and the next set of housing data will clinch the exodus. Flood of supply................

2. Non-Doms and City Boys will start leaving London - some by choice, some via redundancy. Reports of these redundancies will gather pace. Ironically both will also leave the UK - the first set with their children and art collection, the second set with their knapsacks to "go travelling". London wil start to PLUNGE...

WHATEVER Gordon and the BoE muppets do, it is way too late the Great Ship HMS Sentiment has started its inexorable turn (it started loosing anchor last summer). :P:blink:

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So far it has been happening faster than last time. The 1980s boom peaked in autumn 1988 but prices did not fall until over a year later despite a collapse in volumes. Now people have better access to market information and price falls are already recorded in the form of completed sales months after last autumns peak. If this trend continues the fall will be steep. Prices have a long way to go to get back to a sane multiple to incomes. Of course sellers will resist but the inevitable drivers of death divorce & debt will force reality on the market.

edit typo

Edited by Freeholder

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Assuming nothing worse than further controlled failures in the financial world then:

For 08 & 09 there will be two markets. Those with ready cash will be able to pick up a substantial volume of properties for 60% of peak prices at foreclosure auctions. The regular market will be extremely thin driven by the few new entrants to the market who can obtain an affordable mortgage at 80% LTV. Prices in this thin market will be 20% down from the peak.

There will be a phenomenal number for foreclosures over the next 18 months comprised mostly of BTL landlords and bankrupt builders. Towards the end of the next 18 months regular home owners will top up the foreclosure figures as unemployment from a weakening economy kicks in.

Banks will drip feed foreclosure properties into the auction rings to avoid a complete valuation meltdown below 60% during the 08/09 period.

A few hundred thousand economic European migrants will head home during this period due to the slumping value of the pound against the Euro and Zloty further adding to BTL woes. During 2009 as New Labour foot soldiers measure the sense of outrage over immigration during the electron run up, New Labour will try to act tough in their final 6 months in power resulting in another wave of immigrant exodus as a result of urgent government regulation = more BTL woes.

London will feel the pinch with absolute price falls but again due to its status as a world city, new money swashing around the globe will mitigate falls compared to the general UK market.

The market will then bump along the bottom until 2013 at which point additional tax levies to pay for the Olympics will permit only a modest recovery in the housing market.

That is my most optimistic prediction:

Watch out for:

Any news headline containing the phrase "systemic financial collapse underway" = we all get interviewed by BBC News 24 talking about the Dunkirk spirit in queues outside banks.

Bush throwing a knockout punch at Iran during his final 6 months in office = S200 barrel oil.

China repatriating funds from the US to influence US foreign policy (the Yanks did similar to us in 1957 over Suez so it would be just deserts) = too awful to contemplate.

If any of the above events happen forget about property, instead buy Gold and Rice.

Edited by dreamOn120k

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I reckon a fall of 15-18% this year and in 2009, and a fall of 10-15% in 2010 flattening off in 2011 when prices will have dropped by 40% from todays levels. I think MOM falls will peak at around 2%

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So far it has been happening faster than last time. The 1980s boom peaked in autumn 1998 but prices did not fall until over a year later despite a collapse in volumes. Now people have better access to market information and price falls are already recorded in the form of completed sales months after last autumns peak. If this trend continues the fall will be steep. Prices have a long way to go to get back to a sane multiple to incomes. Of course sellers will resist but the inevitable drivers of death divorce & debt will force reality on the market.

Couldn't agree more; the internet will be a very powerful catalyst this time. If I were looking to buy this year (which I'm not, end of 2009 is my current thinking), I'd be ringing up the EA a day or two after a viewing and would be having the following conversation with them;

Me; "Hi, yes, it's Mr. Paddles here, I went to view 19 Acacia Avenue at the weekend and would like to put in an offer"

EA (blowing the dust off the unused box of kleenex); "REALLY? That's fantastic! What's your offer?"

Me; "I'm prepared to offer £,<ridiculous figure which makes me visibly blush>"

EA (noticebly less sunny in disposition); "Oh no, I'm sure the seller won't accept that, it's insulting"

Me; "Well, I notice that, according to Rightmove, the place has been on the market for 9 months"

EA; "Yes, but still..."

Me; "And that, according to the Land Registry, the vendors originally bought it for less than I'm offering so they shouldn't be losing money, unless they've been silly and remortgaged to buy a car or holiday"

EA; "Yes, but still..."

Me; "And according to houseprices.net, a very similar place round the corner went for about the same amount as my offer only last month"

EA; "Ok, I'll put the offer to them"

Me; "Good, because that's actually your legal obligation. The offer reduces by £1,000 per week, by the way. Good day".

Edited by Paddles

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Couldn't agree more; the internet will be a very powerful catalyst this time. If I were looking to buy this year (which I'm not, end of 2009 is my current thinking), I'd be ringing up the EA a day or two after a viewing and would be having the following conversation with them;

Me; "Hi, yes, it's Mr. Paddles here, I went to view 19 Acacia Avenue at the weekend and would like to put in an offer"

EA (blowing the dust off the unused box of kleenex); "REALLY? That's fantastic! What's your offer?"

Me; "I'm prepared to offer £,<ridiculous figure which makes me visibly blush>"

EA (noticebly less sunny in disposition); "Oh no, I'm sure the seller won't accept that, it's insulting"

Me; "Well, I notice that, according to Rightmove, the place has been on the market for 9 months"

EA; "Yes, but still..."

Me; "And that, according to the Land Registry, the vendors originally bought it for less than I'm offering so they shouldn't be losing money, unless they've been silly and remortgaged to buy a car or holiday"

EA; "Yes, but still..."

Me; "And according to houseprices.net, a very similar place round the corner went for about the same amount as my offer only last month"

EA; "Ok, I'll put the offer to them"

Me; "Good, because that's actually your legal obligation. The offer reduces by £1,000 per week, by the way. Good day".

I am so glad I dont work in sales

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Couldn't agree more; the internet will be a very powerful catalist this time.

Right on that man.

I don't think any of the bumbling professors of Economics or commercial Chief Economists have factored in the internet effect. Like military generals they are modelling the situation using rules from the pre internet era.

Take the bumbling fools of the Treasury, FSA and BoE triumphrate, they were completely wrong footed during the NR debacle because none had considered the reaction of the populous in the age of 24 hour news.

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EA; "Ok, I'll put the offer to them"

Me; "Good, because that's actually your legal obligation. The offer reduces by £1,000 per week, by the way. Good day".

I didn't know of this obligation until a couple of years ago, though I guessed the EA would pass-on low offers because they are ultimately after their commission – and right now, as quickly as possible. It’s a tip that somewhat empowers the buyer. Use it!

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Right on that man.

I don't think any of the bumbling professors of Economics or commercial Chief Economists have factored in the internet effect. Like military generals they are modelling the situation using rules from the pre internet era.

I agree completely.

If you want proof of just how powerful the electronic media rumour mill is these days,then look no further than HBOS,Bear sterns and Northern wreck.

If we had still been sending communications bu carrier pigeon/royal mail,then the authorities would have had time to prepare a response.

This is quick-time thinking folks.....news travels fast these days,and it cuts BOTH ways.

wasn't it albert einstein who said,"always tell the truth,that way you don't have to remember who you lied to"?

Edited by oracle

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I didn't know of this obligation until a couple of years ago, though I guessed the EA would pass-on low offers because they are ultimately after their commission – and right now, as quickly as possible. It’s a tip that somewhat empowers the buyer. Use it!

It depends how realistic/stubborn the vendor is being ... they might have instructed the EA not to pass offers below a certain threshold on, in which case I don't believe the EA has any obligation to do so.

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My guess is we'll see gentle declines this year, followed by two years of pretty rapid drops in '09 and '10, levelling out into a "trough" that'll run for another 3-4 years after that. Why nothing big this year? I just think it'll take another six months or so for the effects of tighter lending to work their way through to consumer spending, and then into the job market. Unless something Magical happens during the year, Xmas '08 may well be the first of a few Black Xmases.

Completely agree. Values have already crashed with the removal of credit, but not everyone neccesarily wants to sell or is even aware of the credit crunch.

It takes a while for people to realise that they can't get what they think their property is worth, and for forced sellers to appear after their they can't re-mortgage.

This is all based on averages though, so there may well be serious bargains appearing mid / end of 2008.

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  • 295 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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