Thursday, October 9, 2008

Steady as they go

House prices drop at fastest rate in 25 years

"House prices dropped at the fastest annual rate in 25 years last month, according to the latest monthly survey from mortgage lender Halifax, as the turmoil in the global financial system escalated."

Posted by letthemfall @ 11:33 AM (1012 views)
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16 thoughts on “Steady as they go

  • mark wadsworth says:

    Wrong! They are falling AT THE FASTEST RATE EVER (short of outbreak of war, or mass crop failures or something).

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  • It seems a very, very long time since there were any bulls on the scene. Everything is moving so fast. 50% off property seems completely reasonable now. Unless the mortgage market starts up soon then I suspect that almost eveyone with less than that sort of equity in their properties are going to have to pull their belts in.

    What say you Kurtsie Allsopp? Stop chewing on that hat.

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  • If acccording to the Halifax, house prices have now dropped to around January 2006 levels, given that house prices didn’t rise much in 2005, are we are going to be down to 2004 prices just after xmas?

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  • I don’t actually beieve 1.3% for September seems far too low given the news through the month, Although it should be a busy month for sales of people looking to be settled by xmas.

    What is a bit of a concern is how the media in general were reporting the news today.

    Almost giving the impression everything was going to be ok now and interest rates are set to plummit.

    If they were to perform a USA style interest rate reduction ie down to 2% or so then that would put an interest only mortgage of £100,000 at a rate of say 3% at about £250 per month.

    That will fuel the House market again. I for one would think seriously about buying because it would be the only way I could protect my savings from inflation.

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  • Presumably recent events will be reflected in next months figures. Any predictions?

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  • Too many million plus houses where I live – Devon for —- sake.

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  • str 2007

    I think your logic is correct – the cost of buying cannot go below the cost of renting in anything but the very short term. There is a floor to the market.

    A 50% fall would be great but I can’t see it happening.

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  • tc
    I know, I’d like to buy mortgage free with my savings, but it’s not unreasonable to assume a certain level of expense for housing (and afterall long term investment if buying at the right time).
    Providing I could lock in those rates (should they occur) for say 10 years then even if they went lower I could live with my decision.
    Taking current inflation into account rates are already negative.
    Providing I could keep earning money myself of course.

    On that subject I believe that 20% of workers were unemployed in the 30’s depression – which means 80% were still working.
    I know things are really bad and I’m as mad as anyone about how they’ve poured money into the system and cut interest rates at the same time, but, you have to work the system and if this is how the system is going to be then I can see an even bigger bailout around the corner if it’s needed.

    Basically I can’t face renting for 10 years while house prices trickle down against a backdrop of high inflation from constant propping up and bailouts.

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  • Mark Lawreson predicts the football results every week. Most week he gets two or three results right. Sometimes he even gets the score right.

    The man is a genius.

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  • We should outlaw ownership of more than one house. It would limit the speculation.

    Pensions should be invested in traditional vehicles and not property.

    When we go on holiday we should stay in B&Bs and hotels – not holiday homes, besides it’s boring after a few years going to the same place – there’s a big world out there.

    The population of this planet is growing – everyone has a right to OWN their own house just a few wealthy individuals who own sometimes dozens each.

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  • I think there is very little chance of houses taking off again, regardless of reductions in interest rates. There will not be the credit available. 2005 prices were way above the long term trend. If inflation does increase – and deflation is looking more on the cards now – house prices will only fall in real terms more quickly. (One has to hope one’s pay keeps up with inflation.) When interest rates plummet, things are pretty bad.

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  • str 2007. Don’t do it mate. I firmly beleive if interest rates were lowered to 0% then property prices would still fall.

    Thye confidence has gone and any more drastic reduction in interest rates would only allow all the big BTL landlords and other large property speculators to ofload their portfolios to suckers who would then see them fall and fall again.

    The game is up, and unless you have a large amount of equity or cash you will not got a mortgage. The money markets are still frozen and will remain so for anything up to 3 years.

    The ponzi property scheme that this country has been in for the last 20 years will have to be worked out of the system. People have now seen the writing on the wall. No-one can deny that property is falling and it will, almost certainly, fall BELOW the underlying HPI rate. It did it last time (88-93) and it will be WORSE now.

    Don’t worry str 2007. You will probably be able to buy in the next year or two, but unfortunately you could then see further (smaller) falls in property values but these (i believe) would be much smaller than before and inline with say just paying market rents.

    I am also in this position and am fairly confident I can take my equity, buy a property at say 50% of peak in 2007 and buy. I will see further falls but I am prepared for this as I intend to spend at least 10 years in the property.

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  • nooneo
    I’ve just been looking for a graph to see how low they dropped interest rates in the ’90-’96 period and haven’t been able to find it, however and please correct me if I’m wrong I think they went down to somewhere in the region of 6%.

    If they did drop interest rates here significantly and by that I mean another 1.5% by Christmas, then money would literally cost half what it did back then. (I know libor is high at the moment but I suspect no higher against base rates than it was back then).

    With money at half price before a recession has really kicked in I believe that the lust there now is for property in this country would be enough for people to start to get back in.

    Rightly or wrongly it’s the herd mentality. I accept alot of people don’t have deposits but alot do and as soon as things start to move you could see the return of 90% mortgages which will get people in at the lower levels when combined with various offers that developers will put forward.

    I might be playing devils advocate a bit here but don’t under estimate the reckless bailouts that will be put forward (even if the tax payer has to pay it off over the next 50 years) and neither under estimate the stupidity of general public.

    I heard about 6 people interviewed on the streets this morning on television and all except 1 thought lower interest rates was a good thing and none mentioned inflation.

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  • Interesting discussion — people who had houses, sold them for a profit and now agonising about how to get in at the market bottom again. Guess you shouldn’t have ‘sold to rent’? In what sense is such activity any less worse than that of the BTL brigade? Most people hoping for an end to HPI have never had the opportunity to own a home…

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  • I reckon the market will polarise. At the top end, I can see a relatively small drop in prices occurring – say 25% top to bottom. However I reckon the bottom end (sub-prime?!?) of the market will totally collapse – You’ll be able to pick up flats for next to nothing, driven by tighter lending criteria. I also think this will be to the detriment of society as a whole. The haves and the have nots.

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  • timmy t
    If it wasn’t for bailouts there would be huge falls, but they will do all they can to support it.
    It will be a tricky balancing act between BTLers being able to keep tenants and renew mortgages.
    If mortgage rates drop quickly 1st time buyers (the majority of renters I guess) may be able to jump ship leaving BTLers with no tenants. Effectively the reverse of what happened as prices increased, on that occassion the BTLers won by pricing out FTB’s.

    As prices fall so it will become easier to get on the ladder and harder for BTLers to re-finance.

    Further up the ladder there will always be forced sales as some have seriously over stretched and then there’s always divorce and deaths. However, renting out a non selling house is easier now than in the last recession. Also people are living longer. These small things combined with significantly lower interest rates, could, I believe be enough to stem the fall of house prices.

    Don’t forget that if they dropped interest rates to 2% and mortgages were say 3% then a £150k mortgage interest only would be about £375 per month. Allowing for repaying (and this is just a guess) Perhaps about £600 per month.

    Assuming a young couple could get £15-20k together then buying a 2 bed flat for £600 per month I would say is quite attractive. Certainly more so than renting one.

    So depending on what they do with interest rates, it’s quite possible there won’t be a total collapse of prices.

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