Jump to content
House Price Crash Forum

Recommended Posts

My forecast is, and remains, 50-60% down from the peak. If the recession turns into a depression anything is possible, even 80% down.

I bought a 2 bed terrace in the south-east 1995 for 49K, it has recently sold for 180k. If it fell back 60% we would be talking around 70K. That would be a sensible price - around 3.5x joint income for the area. At 49K it was undervalued. I don't see a 60% fall as completely crazy but people had better start saving a deposit if they want to jump on this housing roller coaster at the bottom. I needed 25% and a secure job in 1995 to get a mortgage from the Halifax, and that was on 1x annual salary!

Link to post
Share on other sites
  • Replies 72
  • Created
  • Last Reply

Top Posters In This Topic

Top Posters In This Topic

The housing market was due for a correction around 2003-4 if it had followed the pattern of GC1. Had it occurred at that time far fewer people would have lost out; probably people who had bought in the previous two to three years and the majority of the population would have been carrying larger volumes of savings and far lower levels of debt on which to offset the economic side-effects. That the boom continued for so long beyond that point makes this entirely new territory.

Quite right.

They pushed the throttle forward and climbed in altitude when the best thing would have been to engineer a safer crash landing... sadly, we're now at 40,000 feet and falling fast.

Link to post
Share on other sites

I would have to agree with RB. 50% is no longer an unreasonable expectation for the price reduction. If we enter a sustained depression, RB's figure of 80% will also look reasonable. Kirsty can run the supply and demand arguement all she wants, the reality is that there are a lot of empty properties out there; the eastern europeans have had enough and are also vacating, leaving more BTL empires floundering. The UK is being left with the dross that the rest of the world does not want. Food is becoming expensive, we have a welfare system that was once the pride of the globe and is now abused to the point where it is no longer sustainable. We provide tax breaks to importers and tax the crap out of exporting companies. We graduate fewer and fewer science and engineering graduates year after year, but allow universities to provide courses in "David Beckham" studies.

Now Gormless Gordon is going to ask the banks to help UK citizens take on more debt. Moral Hazard successfully implemented. Wage slavery now common place.

Incidently my firm is exporting more and more equipment to Russia, Brazil, India and Pakistan. If the energy industry is spending that is generally bad news for Retail, Services and other soft commerce.

Link to post
Share on other sites
On the programme last night a woman couldn't sell a flat at auction at nearly 50% of its purchase price a couple of years ago. I drew the conclusion that the answer to the question now is likely to make many of the predictions on this site (including ones I have made) look optimistic. We failed to factor sentiment onto the curve. We are only starting to feel the impact of the credit crunch that hit the US in 2006 - looking at price falls in the 50-70% fall region is not unreasonable in this situation.

No, they failed to factor other people's stupidity onto the curve. The fact is, she was the last idiot in the pyramid, and she can't find a bigger one to take it off her hands now.

The only factor that really is onto the curve is the same one it's also been: an ability to pay for what you've purchased. In my eyes, that's why prices will drop hugely - people just let the thought of finding 25 years of high(er) interest payments slip from their minds. Your figure of 50-70% for some parts of the UK seems perfectly reasonable to me. :)

Nomadd

Link to post
Share on other sites

The reason for the speed of the media turnaround is that they are fearful that they will get some of the blame from an angry (and bankrupt) population. I had to laugh at Declan's sign-off on Panorama last night: 'Don't say we didn't warn you'. :o Shameless! After relentlessly ramping the property market as the source of all riches for the best part of a decade he finally issues a 'warning' 9 months after the credit crunch when prices are falling at 2.5% a month. NONE of the mainstream media comes out of this mess with any credit. The timely words of caution were limited to Vince Cable, Moneyweek, the Economist, a few economic think-tanks and this website as far as I'm concerned. Jeff Randall was the last to be able to claim foresight. The likes of Declan and our new legion of foul-weather friends are just stating the bleeding obvious.

Link to post
Share on other sites
You ain't seen anything yet.

The collapse of managed markets, in particular the bond and currency ones will be spectacular and will happen virtually overnight.

This is why you should protect yourselves NOW.

http://benbittrolff.blogspot.com/2008/04/t...-scary-bad.html

Starting.

State collapses will happen virtually overnight. Uk.US government are going to vanish into history, probably replaced by dictatoships in short order.

Fun, fun.

Link to post
Share on other sites

> It's insane! Is it the speed of the internet or the Credit Crunch? Or a bit of both?

Things are happening more quicky these days. In the dot com crash it took just 12 weeks for the programmer's job market to collapse.

Link to post
Share on other sites
I agree! One of the hardest things to swallow from all the Bearish media reporting is the sudden amount of experts who knew all along that HPI couldn't tend towards infinity!!

Pathetic isn't it , most of them are just jumping ship to save there skins and jobs , still there is a use for these two faced scribes , in that they ramped it up now thet can ramp it down .

Link to post
Share on other sites

There are various ways of predicting how big the correction will be. If I look in the Estate Agents window in my town and think what I would be prepared to pay, I am on about 50% down for most, and a lot more for the upmarket places.

It does sound crazy when you don't have the actual photos and prices in front of you though.

Link to post
Share on other sites
Which makes me think that having a degree in economics means nothing. In fact less than nothing. Having a degree in ecomonics paradoxically seems to create econonists who do not understand how economies work. How many have said the UK housing market is about supply? Tosspots the lot of them.

Being in possession of aforementioned worthless instrument I must disagree with you, if only becuase it gave me the confidence to stay out of the market when all around me thought I was mad (not loosing £50,000 - £100,000 by buying at the wrong time well worth 3 years boozing & clubbing :P ).

Also, I think plenty of (perhaps most?) economists did recognise the bubble some time ago (read Andrew Farlow's work from the resorces section); the problem really lies with the media.

The likes of Phil & Kirsty are treated as "experts" (question for Phil, where do you stand with regards to the rational expecations hypothisis?) wheras the doubters become doomsters and are relegated to the lunatic fringes, perhaps a quote or too at the end of an article.

Add in the power of the VI press departments (read pretty much any property article and you'll find it's sourced from either a lender or an EA) and it's no surprise that the true experts (i.e. those who actually understand how economies and markets actually work) are drowned out by the armies of salaried bulls who's job is to keep pumping hot air into the bubble.

Quite frankly people didn't want to read the truth, so the media simply didn't publish it.

Link to post
Share on other sites

I know it has been said before, but I am absolutely astonished at the speed that 'everything' has turned bear.

I just backed out of a house buy cus the numpties had let the roof and chimney stack rot away and the damp course deteriorate and expected to be able to negotiate what they would pay towards getting it fixed with me! :rolleyes:

So, just before going off on holiday I tried to view another property to be told by the arrogant EA that it was SSTC. <_<

It was on at £104,950 then.

Get back from London to guess what? An email from the EA. The sale has fallen through and would I be interested in it at £96,000.

I've decided to step back from looking for 6 months and see what the state of the market/my future job prospects are and have stuffed my deposit funds into various ISAs.

I think I can finally say we are seeing REAL, on the ground-type signs of change now.

The house looked OK in the limited amount I could see from the outside - three story, three bed with a newish roof in a quiet mews. And there were a couple more for sale there too, so I'm going to see what price they take if they still haven't shifted it later this year.

Link to post
Share on other sites
The answer to the question as to why the press are so bearish is simple. They are reflecting the emerging sense of horror that HPI could have been allowed to get out of control to the incredible degree that it has--almost 300% since Brown took over as the financial leader for this nation. Further, the press are simply stating that a bubble of that magnitude will have a severe and prolonged effect on the economy as it bursts.

The credit crunch is a SYMPTOM of the bubble not a cause. Prices reached dizzying heights and the market began to look down and saw there was nothing holding it up other than "creative financing." The market got scared, withdrew credit and the crash began.

The press realised that ramping the market was no longer credible so they jumped on the bear bandwagon. The press have added lubrication to the slide that is for sure. But a cause? No way. Listening to R4 this morning as they interviewed very scared homeowners all of whom blame the press for changing peoples' attitudes toward ongoing HPI. This is nothing more than symptoms of shock that Brown's promise of no more boom and bust (just boom) was a lie.

The Tories, BTW, are just Johnny-come-latelys in my view. Vince Cable was almost alone among our "leaders" to spot the bubble and send out warnings well in advance. I would have much more confidence in Vince as the next Chancellor (PM?) than Osborne who is a lightweight. Osborne had a terrible performance on CH4 news last night--just terrible. :(

There is nothing strage at all about what is going on. Its just the business cycle reflecting a reaction to 11 years of miracle economics.

My forecast is, and remains, 50-60% down from the peak. If the recession turns into a depression anything is possible, even 80% down.

I'm sorry Mr Bear, but 80% down is too pie in the sky for me (first post after months of membership BTW). That would mean that our entire system would change. I grant you things do need to change, but a £150k house coming down to £30k? I seriously doubt that would ever happen- people with savings of £10k+ would be getting 5 year mortgages and owning their property very quickly. In our fair (lol) isle I can't see that ever being the case. My humble opinion would be a 20%-30% drop and (God let's hope so) a reasonable level of growth from that point forward.

In the immortal words of G Brown- no more boom and bust....

Link to post
Share on other sites
Hurrah! Yes! In fact so delighted am I this morning that after a year of hanging around this forum I decided to celebrate the news with registering and posting my very first post. Yes! Huzzah! etc etc and so on.....

Welcome to the site

Link to post
Share on other sites
I have a theory. An understanding of economics without an equal understanding of history is worthless. History is required to bring the quasi-science of economics into the realm of practical application.

And vice versa.

The extent to which history can adequately inform any understanding of global trading, never-before created financial products (MBS, CDO etc), and systemic contagion is surely limited. Most economists would not understand a program a Quant had written, and history speaks to this not one jot. The social dynamics of greed and sentiment in GC2 would take several PhD theses to disentangle.

I suspect in human terms we're seeing something more akin to the information overload and lack of 'whole picture' thinking that led to the meltdown of Three Mile Island. Everyone knew a bit of the technical picture but the conflicting 'signs and symptoms' were so contradictory that a diagnosis could not be made - resulting in Ka-boom... Does anyone have the 'full global economic picture' ? I suspect 10 economists will come up with 11 different diagnoses/solutions.

Link to post
Share on other sites

I am delighted but only mildly surprised at the speed that the whole thing has turned on a sixpence. We live in a world where we are swamped in up-to-the-minute headlines. They need something to write about, and just as they fueled it on the way up, they'll play their part in tearing it down. The meeja both reflects and is a driver of public sentiment.

Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
  • Recently Browsing   0 members

    No registered users viewing this page.



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.