Wednesday, July 9, 2008

Housing downturn worse than early 1990s

Housing downturn worse than early 1990s

The downturn in the housing market has gathered pace and now feels "an awful lot worse" than the last major correction in the early 1990s, the chief executive of............

Posted by mark @ 01:09 PM (1252 views)
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19 thoughts on “Housing downturn worse than early 1990s

  • mark wadsworth says:

    Far far worse! Not adjusted for inflation, we have managed in less than a year what took about 6 years in the early nineties. You’d have to go a long way back to find a worse one.

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  • Mark Wadsworth says:

    oops, that should say “… we have managed in less than a year ABOUT HALF what took about 6 years …”

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  • Yes, its already worse, but the mainstream media is still in denial.

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  • At last, a powerful figure in a position to know concurs with us. The housing market collapse now underway is going to make the early 1990s look like a piece of cake in comparison.

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  • European-bear says:

    Of course its going to be worse. The bubble inflated more than the 1990s, so the crash will deflate it more than the 1990s. Not rocket science, just economics

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  • I had an discussion recently, with someone who was 32, they trotted out the same old stuff about the 80/90s crash, you know higher unemployment (I told him just to wait and see how high it gets), 15% interest rates (I told him that only lasted a day, look up “black wednesday” you fool) and all the opther guff that does the rounds.

    I told him about the massive personal debt this country has (much larger than the 80/90s crash) , the over inflated property prices (much larger than the 80/90s crash) , I informed him that economies like japan have had a property market in the doldrums for 15 years (he simply didn’t believe that one) and the notion that a 2 up 2 down in surrey can be worth over 250k was just “fooling some of the people , all of the time” – He just wasn’t biting – He believes in the great property gods and goddeses (sorry pornstars) – How could Melissa Porter and Kirstie get it soooo wrong! A slight lowering of expectations before the interest rates would be lowered and the whole she-bang takes off again, that’s what a huge slice of the population thinks.

    Turned out that he (and his parents) have mortgaged themselves up to the hilt – They have removed all the equity from their home (2005) to help buy him a flat (2005) and then remortgaged both again (late 2006) and bought another flat as a pension (late 2006) . I tried politely to let him know how overexposed they where but he just wouldn’t have it. He said they had only had a few months (wouldn’t say) downtime without a tenant and the last tenant left last month and they were still looking for a new one. I recommended trying to sell both the flats, even at a loss, to reduce their exposure, I can’t tell you what he said to that. I gave up!

    You see Denial is still not a river in egypt. These people wont believe this until it’s too late. I was in a relationship with someone who bought a flat (sept 88 – in essex) just before I met her. She eventually rented the flat (sometimes at a loss) because she couldn’t sell it in 92 when she wanted to move. The flat eventually sold, for a loss of nearly £14,000 in 2000 (silly cow should have waited, but there’s nooooo telling some people). She had the flat 13 years and sold it for a loss.

    The point of this story really is to demonstrate
    A: It really is worse this time
    B: How bad it actually was last time – It was mainly concentrated in the south of e ngland – that’s where the largest property hikes happened in the 80s
    C: It’s going to be a bloodbath
    D: It’ll not be all over by christmas…

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  • mark wadsworth says:

    Nooneo, good post, but I beg to differ on one point … it WILL be over by Xmas … Xmas 2018!

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  • nooneo – very good. The problem is i doubt very much that this isn’t typical. The parents helping the kids get on the ladder because property always goes up blah blah …

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  • Whostolemyendowment says:

    Sold my house to rent back in late 2005, having first bought it (well took on the mortgage debt) in 1993. My parents went ballistic – renting is lost money (apparently), nothing safer then bricks and mortar – etc, etc, etc…..no that they every gave me a penny towards it.

    My argument was I needed cash, but not more debt, could see the crash coming – or were we all to eventually live in +£250K houses – which no on could afford to buy?…and was prepared to sit it out until prices were more realistic and I could buy back in….well I guess time will tell.

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  • nooneo,

    It is astonishing how well the media have ingrained the idea of property only ever going up in value.

    In years to come, people will look back and blame the decade of property madness on the meeja pushing out “propertywank” programming for far too long, whipping the docile public up into a credit boom frenzy. Interestingly, I think the BBC will be the most implicated in the whole mess.

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  • little professor says:

    The speed of this crash has taken even hardcore HPC-ites by surprise. As recently as last September, HPC cheerleader in chief FP was predicting prices would be static or have slight fall in 2008, and would really get going in 2009.

    And last month there was a poll on the Nationwide figures – I think the most voted-for option was for a 1.5% monthly fall. The 2.5% fall was off the chart, it wasn’t even an option!

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  • little professor…

    I agree the speed is devastating. You see when people were saying, “it’s not like the 80/90s crash, unemployment, blah, high interest rates, blah, higher demand now, blah, blah, blah.” They were not taking into consideration; greed, massive personal debt, the credit crunch, kirstie allsops knicker elastic (don’t tell me she wears a thong, I don’t think I’d get any sleep at night) and all the other factors that made the current situation inevitable. It’s extemely hard to predict this stuff, but not impossible to get a lot closer to the truth than listening to politicians and property (s)experts.

    Just think how much money/pain/misery this website has saved people from! Apart from the odd w**ker who said “I listened to you guys in 2004 and could’ve made 100k if I’d bought then” this site has actively prevented many people from buying into this property pyramid scheme. You see the internet can be a very friendly place after all.

    Well done all who have contributed and provided an air of sanity in this world shameful smugness and gleefulness at getting on the property ladder can bring.

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  • it_is_going_with_a_bang says:

    It will be interesting to see what David Ritchie has to say in 6 months about the financial position of his company.

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  • bring_it_on says:

    Nooneo, I agree with your comment about how much money/pain/misery this website has saved people from. I was about to buy a sh*thole of house last August, but couldn’t believe how little you could get for your money, even compared to 2 years previously. I was introduced to HPC, and ended up having sleepless nights over whether to buy or not, whilst all my friends were giving me the “house prices always go up” line.
    Anyway I’m pleased to say I pulled out just before exchange and have never looked back. It was the animation of Kirsty Allsop and Gordon Brown saying that house prices would be flat for the next few years, and then a picture of the graph of what that would look like which finally did it for me.

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  • any predictions on the size of the fall (also how far did prices fall in the 90’s??) I’m too young to remember the last fall…

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  • I predict that house prices will fall until the majority of the population thinks that:
    A. house prices are affordable, ei. back to 4 x average wage or so.
    B. They can get credit
    C. Two or three years have passed since Kirstie publicly eats that hat or..
    D. Two or three years have passed since everbody (not here, the VI’s – you know estate agents, money lenders, ) tell you it’s over

    Maybe we are in for the same situation as in Japan, in which case probably 2018 or so.

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  • @ amjidk… 13

    Some properties, and it’s diffcult to say which, fell by over 50%. I know personally of 2 cases where this happened

    Case 1 – £49,950 – Studio flat in essex – Bought sept 1988 – sold early 2000 for £36,950 – Rumour has it that a studio flat and a 12 bed flat in the same block went for a total of £27,500 at auction in 1993, although I have no evidence for this the source was reliable and known to me. – Proabably paid over the odds but still 13 years later still lost money
    Case 2 – £178,000 – 3 bed house hertfordshire – Bought 1987 – sold 1994 for £76,000 at auction.

    Now the accepted average falls in the last crash are closer 30% but obviously averages need higher and lower figures to make an average. It’s also on record that some very expensive properties (millions) lost over 50% before they strated moving again. Just ask Krusty Allsop, rumour has it that she lost 160k on her first flat (in clapham), only bailed out by mummy and daddy.

    The trouble is there are no soft landings in a property crash. I repeat , THERE ARE NO SOFT LANDINGS IN A PROPERTY CRASH. If you can’t sell your house and / or meet the repayments you will be repossessed and your property will be sold, in a falling market, by your mortgage provider for whatever they can get on the open market (auction mostly). They may have to do otherwise this crash because the number of properties will be enormous. This obviously has the effect of dragging it all lower and lower.

    It’s getting pretty obvious that this is gonna be the same, or a little worse, than last time. Unless we go the way of japan……

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  • 12 bed flat should read 1 bed flat, sorry chaps…

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  • Where’s Glorious Sunshine these days?

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