Jump to content
House Price Crash Forum
Sign in to follow this  
Guest Winnie

Why The Big House Price Plunge Is Yet To Come

Recommended Posts

Guest Winnie

Looks like everyone is now on board - this lot are last bastion of bowler hat brigade IMHO, never say anything extreme

Why the big house price plunge is yet to come

15 July 2008

A couple of months back I compared the housing market to a rock climber climbing down a cliff face. He can’t see how far above the ground he is. He prods and probes with his foot, trying to find a toe-hold... or, ideally, terra firma.

A month or so back, some felt house prices were stabilising. Maybe my climber had reached solid ground. Maybe the market was in equilibrium...

"Nonsense," wrote one Fleet Street Daily reader in an email to me last week. "That was because there was little or no activity in the market, not because the worst is over."

It was an interesting email to get, especially since the chap in question works as a property sales manager.

And it seems his experience is shared across the board. The Royal Institute of Chartered Surveyors (RICS) today reports that the average estate agent sold only 15 properties during the second quarter of the year.

That’s the lowest level since RICS began the survey back in 1978.

What’s happening is very simple. Fewer people want to buy, because they think house prices will fall.

But fewer want to sell at the prevailing price. Some are in denial, and won’t accept that their primary asset is worth what they hoped. Others are deciding to stay put and wait for things to improve.

It’s like a big staring contest between buyers and sellers. Who’ll blink first?

I’ll tell you who — the sellers. It’s already happening. House prices are gradually creeping downwards, as our climber finds toeholds and moves down the cliff. But right now, I’d say we’re on a bit of a ledge. The big plunge is yet to come... but it could be just around the corner.

Look at what’s happening in the States with Fannie Mae and Freddie Mac. The mortgage twins, as they’re known, specialise in packaging up mortgage deals and selling them onto Wall Street (probably the worst business you can possibly be in right now).

The two companies’ share prices took a hammering last week. Investors fear the twins are on the brink of insolvency.

Sure, the US Fed has now agreed to bail them out. But that only underlines how serious the situation is.

And do you think mortgage lenders over here aren’t taking note? You think they’re not alarmed?

Of course they are! One of the major reason volumes are so low is because even those who want to buy a house often can’t get the funding. Lenders simply won’t give it to them — they’re paralysed with fear.

The whole demand side of the market is being squeezed. And that can only mean one thing — lower prices.

Maybe the storm blowing over the Atlantic won’t be the final straw. Maybe it’ll come from elsewhere — like higher inflation further impinging on people’s ability to save a deposit. The official inflation rate, announced today, is 3.8%. That’s 1.8 percentage points above target.

Or maybe the recession will simply make house prices unaffordable — or undesirable — for the majority of would-be buyers.

But we can be sure of one thing. Very soon, something’s going to blow us off that ledge...

Share this post


Link to post
Share on other sites

anybody so stupid to believe that this is the bottom would have been stupid enough to think £180k would be a bargain price for a BTL flat in bradford.

this hasnt even started. whats happening to bank shares will be whats going to happen to house prices.

Share this post


Link to post
Share on other sites

You know it's funny. Not so long ago Fleet Street letter were saying that the "False prophets of UK house prices are like a stopped clock". Stagnation of house prices more likely than a crash according to Brian Durrant.

And another good part was that Britain's prosperity is no illusion too.

Just another bunch of people making money by spouting cr*p.

Share this post


Link to post
Share on other sites
You know it's funny. Not so long ago Fleet Street letter were saying that the "False prophets of UK house prices are like a stopped clock". Stagnation of house prices more likely than a crash according to Brian Durrant.

And another good part was that Britain's prosperity is no illusion too.

Just another bunch of people making money by spouting cr*p.

And there was me thinking there was nothing worse than an ex-smoker...

Share this post


Link to post
Share on other sites
Guest Winnie
You know it's funny. Not so long ago Fleet Street letter were saying that the "False prophets of UK house prices are like a stopped clock". Stagnation of house prices more likely than a crash according to Brian Durrant.

And another good part was that Britain's prosperity is no illusion too.

Just another bunch of people making money by spouting cr*p.

Yep. True - they have had a tradition of being in the pay of their sponsors and masters - which is why I posted this because even they have had to change their tune! Great to behold isn't it?

Share this post


Link to post
Share on other sites
You know it's funny. Not so long ago Fleet Street letter were saying that the "False prophets of UK house prices are like a stopped clock". Stagnation of house prices more likely than a crash according to Brian Durrant.

And another good part was that Britain's prosperity is no illusion too.

Just another bunch of people making money by spouting cr*p.

If someone had paid me as much as a lot of these people were paid just to spout cr*p, I would have happily spouted it as well!

Share this post


Link to post
Share on other sites
anybody so stupid to believe that this is the bottom would have been stupid enough to think £180k would be a bargain price for a BTL flat in bradford.

this hasnt even started. whats happening to bank shares will be whats going to happen to house prices.

Wow 180K for a BTL flat where do I sign?

I can sense the only way is up from here.

Share this post


Link to post
Share on other sites
Looks like everyone is now on board - this lot are last bastion of bowler hat brigade IMHO, never say anything extreme

Why the big house price plunge is yet to come

15 July 2008

A couple of months back I compared the housing market to a rock climber climbing down a cliff face. He can’t see how far above the ground he is. He prods and probes with his foot, trying to find a toe-hold... or, ideally, terra firma.

A month or so back, some felt house prices were stabilising. Maybe my climber had reached solid ground. Maybe the market was in equilibrium...

"Nonsense," wrote one Fleet Street Daily reader in an email to me last week. "That was because there was little or no activity in the market, not because the worst is over."

It was an interesting email to get, especially since the chap in question works as a property sales manager.

And it seems his experience is shared across the board. The Royal Institute of Chartered Surveyors (RICS) today reports that the average estate agent sold only 15 properties during the second quarter of the year.

That’s the lowest level since RICS began the survey back in 1978.

What’s happening is very simple. Fewer people want to buy, because they think house prices will fall.

But fewer want to sell at the prevailing price. Some are in denial, and won’t accept that their primary asset is worth what they hoped. Others are deciding to stay put and wait for things to improve.

It’s like a big staring contest between buyers and sellers. Who’ll blink first?

I’ll tell you who — the sellers. It’s already happening. House prices are gradually creeping downwards, as our climber finds toeholds and moves down the cliff. But right now, I’d say we’re on a bit of a ledge. The big plunge is yet to come... but it could be just around the corner.

Look at what’s happening in the States with Fannie Mae and Freddie Mac. The mortgage twins, as they’re known, specialise in packaging up mortgage deals and selling them onto Wall Street (probably the worst business you can possibly be in right now).

The two companies’ share prices took a hammering last week. Investors fear the twins are on the brink of insolvency.

Sure, the US Fed has now agreed to bail them out. But that only underlines how serious the situation is.

And do you think mortgage lenders over here aren’t taking note? You think they’re not alarmed?

Of course they are! One of the major reason volumes are so low is because even those who want to buy a house often can’t get the funding. Lenders simply won’t give it to them — they’re paralysed with fear.

The whole demand side of the market is being squeezed. And that can only mean one thing — lower prices.

Maybe the storm blowing over the Atlantic won’t be the final straw. Maybe it’ll come from elsewhere — like higher inflation further impinging on people’s ability to save a deposit. The official inflation rate, announced today, is 3.8%. That’s 1.8 percentage points above target.

Or maybe the recession will simply make house prices unaffordable — or undesirable — for the majority of would-be buyers.

But we can be sure of one thing. Very soon, something’s going to blow us off that ledge...

Property has a long way to fall yet. It will stop when the average house is somewhere roughly roundabouts vaguely circa 3.5 times the average wage, or, if you prefer, just a touch under £100k.

Share this post


Link to post
Share on other sites
Property has a long way to fall yet. It will stop when the average house is somewhere roughly roundabouts vaguely circa 3.5 times the average wage, or, if you prefer, just a touch under £100k.

I think it could easily overshoot (undershoot?) that, as it has in the past. It could well bottom out at 2.5x average income before market sentiment turns around.

Share this post


Link to post
Share on other sites
I think it could easily overshoot (undershoot?) that, as it has in the past. It could well bottom out at 2.5x average income before market sentiment turns around.

It wouldn't surprise me, Johnny. Trick for buyers is make sure you buy before the end of the drop, and don't wait to try and squeeze a few more grand out a further decline. All you will succeed in doing is delaying your purchase until it's a sellers' market. I have slightly longer (I hope) to play this game as I am waiting to buy in Australia, which is a little behind the UK crash.

The Great Crash of 2009, that is!

Share this post


Link to post
Share on other sites
It wouldn't surprise me, Johnny. Trick for buyers is make sure you buy before the end of the drop, and don't wait to try and squeeze a few more grand out a further decline. All you will succeed in doing is delaying your purchase until it's a sellers' market. I have slightly longer (I hope) to play this game as I am waiting to buy in Australia, which is a little behind the UK crash.

The Great Crash of 2009, that is!

I think once I can get something decent for less than 3.5x my income i'll be ready to buy, depending on how much deposit i've saved by that point. I almost wish the crash would slow down a bit so I can save some more.

Share this post


Link to post
Share on other sites

"The whole demand side of the market is being squeezed. And that can only mean one thing — lower prices."

At least someone agrees that demand is supported by lending, and not the way the Bulls would have it.

Share this post


Link to post
Share on other sites
Guest KingCharles1st
I think it could easily overshoot (undershoot?) that, as it has in the past. It could well bottom out at 2.5x average income before market sentiment turns around.

Yes

Share this post


Link to post
Share on other sites

The comments at the beginning of this thread surprise me. I made the mistake of signing up for The Daily Reckoning (email - no money changed hands) and I would say they are the most depressing, doom-laden bunch ever to walk the earth.

They have been saying the whole thing is a house of cards for at least 5 years - maybe they always say it.

Interspersed in their reasonably serious commentary are loads of adverts for crappy 'I've made more money out of trading options than a man has a right to - give me just £99 and I'll show you how to do the same. Hell, I'll even teach you how to do your laces up properly. But, one thing I won't do is have enough faith in my bullsh!te to let you try it free to see if it is any good. No way man! Just give me that lovely number on the front of your credit card and, even if you cancel after a couple of months, I dinnae give a fook! Most suckers don't get around to canceling for a year and, of course, what many people don't know is that YOU cannot cancel a direct debit on a credit card - only I can do that!!!'

But, as I say, they've been saying sell shares and property and buy gold for years and years.

Share this post


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...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 395 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%



×
×
  • 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.