Friday, April 3, 2009

Normal service resumed

House prices 'drop 1.9% in March'

UK house prices fell by 1.9% in March compared with the previous month, according to the Halifax.

Posted by holding out @ 09:14 AM (3205 views)
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37 thoughts on “Normal service resumed

  • A short, statistical summary of the continued fall in the market in this article vs. a long rambly effusive and upbeat, jingly article talking about market recovery yesterday:

    ‘Surprise bounce’ in house prices

    Those BTL empire owning BBC editors must be feeling the pain …

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  • This data seems a bit more sensible than the nationwide data published yesterday. It is normal to expect the occasional fluctuation in the data. The fact that every now and then nationwide and halifax publish a rise probably indicates that the pace of the crash is slowing, but I expect that this will be a long and drawn out decline. Just as the bubble was unusually large in its size and duration, the decline will probably be similar.

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  • Pity the BTLers..

    ..well don’t then..!

    ..yesterday, for one fleeting moment, the certainty of their financial demise was called into question; a little ray of sunshine fell on their fevered brows..

    ..sorry guys – the storm clouds are back, and there’s an old hoody with a scythe, waiting outside your door…

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  • tyrellcorporation says:

    TFFT!

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  • I wonder what Stuart Lawz will have to say about this? since he called the bottom of the market yesterday after the Nationwide data was published.

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  • @tyrell…… agreed!

    -1.36% NSA & -1.87% SA in March.

    5 year is now 4.8% and 3.8% respectively, so a 1.8% fall next month will put both measures into the red over 5 years……. does this matter? I reckon it does because……….

    anecdotal……. was speaking to my neighbour the other day…… his place is up for sale……. it’s been on the market for well over a year, initially at 275K, then 250K and now 235K……. no takers…….. I said to him “are you not tempted to whack it down another 15K or more to get rid of it? he answered that he “couldn’t afford to sell it for less” as it would be “throwing money down the drain” because “he paid 170K for it 5 years ago”. I said “well, 220K or even 200K would be a reasonable profit” and he said “well, it’s not really worth less than 235K”………. etc etc, denial, denial, etc………. then he tells me than he had an auctioneer round who said it would probably go for no more than 180K at auction. he said he couldn’t let it go for 180K as he paid 170K and has done some work on it,

    i.e. he can’t sell for “a loss”……… he needs the haliwide surveys to go 5 year negative for him to start accepting that houses will soon be worth less than mid-2004…….

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  • mark wadsworth says:

    What RM90812 says. Long, drawn out etc.

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  • analytics,

    Yes, five year figures are significant as there are quite a lot of people coming to the end of five year fixes and trackers at the moment; and when prices go 5yr negative, most of them will be forced onto their original lenders SVR, as they won’t be able to negotiate a new deal.

    Those coming off 2yr and 3yr fixes have been suffering this for some time now, but it’s the five year tracker crowd who are going to go suddenly from mega cheap monthly payments to mega expensive..

    ..expect a few howls of dismay..!

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  • mark wadsworth says:

    @ Ana Lytics (a fellow five-year-negative junkie), Halifax monthly all-buyer non-seasonally adjusted figure for April 2004 was £154,433 and for May 2004 was £159,103; as against £157,226 for March 2009.

    As I posted yesterday on the Nationwide figures “We may have to postpone five-year-negative until May 2009. NB, average price now =£151,000 ,average price in May 2004 = £149,000” I think their April 2004 was £147,000.

    So both NW and Halifax indices will both go five-year-negative (non inflation adjusted!) in April or May 2009 at the latest.

    Fionnuala’s Flux Capacitor is going to be running HOT.

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  • little professor says:

    Graph is still turning up though – rate of decline seems to have peaked.

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  • mark wadsworth says:

    LP, of course it’s turning. But the best time to buy is when the y-o-y change line crosses 0% on the way up; if you get in any sooner you are still losing money!

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  • The stark difference in all these statistics just shows that your own finance and the wider economy are probably the two most important things when you buy a house, NOT the indices or words of others. People try to predict the market based on indices are getting the wrong end of stick.

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  • Hang on though, why is the graph showing an uptick for Halifax when they’ve just announced that prices are down a further 1.9%?

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  • Oh I see it’s the rate of change of decline, not the decline. Sorry. Move along.

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  • There isn’t enough data to say whether the rate of decline has peaked. While property is too illiquid to see proper bear market rallies the rate of decline will almost certainly fluctuate so as to look positive and might do so for a few months esp in spring.

    It seems to me however that the real impact of this crisis while having largely played out within the financial sector has still to really impact on people and jobs. The rate of job losses has still to peak and distressed selling ( which will be a major factor in revaluation) has a long way to go. On that basis prices will keep falling and the rate of decline may well increase. The decline in the end will be as exhausting as the rise.

    Inflation is the variable.

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  • Is there any merit in generating a ‘poll of polls’ accross all the indices to smooth this data ? or does it become even more meaningless ?

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  • It seems strange that the Halifax and Nationwide both have a sharp uptick(is that the right terminology?), but separated by a couple of months.

    Does anyone have an explanation? Do the Nationwide figures lag the Halifax?

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  • Uncle Tom @3 …….the storm clouds are back, and there’s an old hoody with a scythe, waiting outside your door…

    Cheered me up no end for the weekend…… Ha!! Cheers….. :O)

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  • Good news !
    Yesterdays nationwide data hasn’t lasted too long, has it ?
    Steady as she goes.

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  • Moneyweek produced a lovely graph recently of the UK house price variation over the previous boom and bust in the late 80s/early 90s. It would appear that any upturn in the market now is a mirror of the bull trap experienced back then when after initial falls it recovered (tempting in a few bullish buyers) and then fell again soon afterwards. Although the situation is grim for many people who have lost their jobs already it would appear that much worse is still yet to come. So we can probably expect this ‘recovery’ to also end soon and the greatest part of the correction still to come. If it goes anything like the 90s crash it will take many years to fall and be followed by many years of stagnation. The only way out for Gordon is to print so much money that everything is inflated away. This would lead to hyperinflation and probably anarchy but I suspect he will/is trying it.

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  • UT, Bellweather & Mark W……… yep, agree with all that……..

    For me, the goal is to get “in” before inflation (& IRs) go ballistic, but after the lion’s share of the nominal price falls………. I think I’ll be going in a little earlier than most folk on here, just through personal circumstances, job, etc, and size of mortgage required (better for me to take a slightly (smidge) bigger mortgage at much lower fixed IR, rather than wait for HPs to fall further and get stuck with a hefty IR – the better scenario for some folk who don’t need finance)……. i’m looking at late 2009, early 2010 possibly (depending on how things pan out obviously)…….. as long as the Income/HP ratio is approaching 3.5 I’ll be happy……… but I do accept that it will go lower than that………… just my circumstances will necessitate a purchase sooner rather than later……..

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  • britishblue says:

    What is interesting to me is that the Land Registry survey has nearly caught up with the Nationwide survey. The Land registry is always behind because it collects data when properties change hand and is understated because it doesn’t include repossessions, but it does include all other transactions. Whereas the Halifax and Nationwide only record sales with mortgages. Their surveys will therefore be understated because they don’t include the discounted properties which are being sold to cash buyers. I dont know what percentage difference this will make, but it could be significant. Surveyors meanwhile are valuing property based on what other property has sold for. So if you have had a couple of re-possessions on your street and have received an offer for your property, you may indeed find that it is down valued at survey.

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  • Putting the latest figures into my own spreadsheet of the Halifax series, house prices have now dropped 21.2% from their peak in August 2007. Nominal prices are exactly what they were in May 2004.

    rm96696 @ 2 and Mark Wadsworth @ 7, I think this fall will drag on and on for years, until anyone who suggests that you could make money on property is seen as an idiot, just as in 2003-7 anyone who suggested that it was possible to lose money on property was seen as an idiot. That’s how bubbles and crashes work – the market only turns at the top when the last mug punter has put his stake in, or at the bottom when the last loser has given up hope and sold.

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  • 19: britishblue: Its an excellent point you make. Also, the amount of “double counting” is also not included. The fact that Nationwide figures are based on OFFERS made against houses. It isn’t actually ones where there has necessarily been a sale.

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  • mark wadsworth says:

    @ Monty, thanks for update. I also think it will drag on for years and years, but unlike Ana Lytics, who has to weigh up advantage of artificially low interest rates and house prices, I’m a cash buyer (earning no interest, let’s assume), so for me the equation is simple:

    IF cash rent for next year > expected nominal capital loss from buying
    THEN buy
    ELSE rent
    ENDIF

    As our rent for a year is only a quarter of the capital loss that I’d expect to suffer if we bought e.g. where we are renting now, we shall continue renting. Once prices are low enough, who cares if prices fall another few per cent? Better a small unrealised capital loss than a larger cash outlay.

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  • Mark W said:
    “LP, of course it’s turning. But the best time to buy is when the y-o-y change line crosses 0% on the way up; if you get in any sooner you are still losing money!”

    In principle yes, but by the time it starts rising up to zero, sentiment has changed and you won’t get such a good deal e.g you won’t be able to get the same reduction. Also, it’s quite likely that the at the point where prices are heading towards 0% YoY, employment prospects would have likely improved and the number of forced sellers will decrease.

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  • mark wadsworth says:

    Denzil, I bought one house and four flats between 1995 and 2000. It was all quite gentle and relaxed until 1999 or so, you’d just offer roughly the asking price or five per cent less, the offer would be accepted and then it all hummed along smoothly.

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  • britishblue says:

    There is no one solution fits all to buying a house.

    I will buy a houses when they are clearly on the way up again. Having said that I will have to make a rationale decision as to whether there is a dead cat bounce or whether the price rise is real. This will be based on how far house prices have fallen and other economic factors.

    However, if I were cash rich and looking for a dream home that met all of my criteria, I would start looking earlier. Because when property starts turning slightly, then more properties will come onto the market and buyers will have a choice of wonderful properties and have the time to compare and contrast different options, which you cannot do in a buoyant market.

    It comes down to whether your next house will be primarily a quality of life issue for you or an investment issue, If it is more of a quality of life issue, jump in early and you may lose 10% of the value (which will be regained in a few years). If it is a about maximising your investment, wait until the market has clearly turned at a 0% year on year (as Denzil says); make offers on a series of properties and buy the one where you feel that you are getting the best value for your money. The market may have appeared to have turn, but believe me if you are a seller and there are slightly better presented properties on your street you still wont sell and will have to take lower offers. AS a buyer you can capitalise on this.

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  • This upturn is refered to as the dead cats bounce. It is used to catch suckers into entering the market, while the smart money use the opportunity to move out. By the time the suckers realise it’s too late and they are left with donkey ears! Ehhh Ohh

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  • @various

    Remember that the LR data excludes repos AND auctions, and only covers data in England and Wales (not NI or Scotland).

    Haliwide is indeed based on offer price, but post-survery offer price, so fairly serious offers (i.e. not someone chancing their arm).

    The NI & Scotland element will create an imbalance balance between the indices, as will Repos & Auctions, as will Cash buyers being excluded from the Haliwide………. Nationwide collects data up to the 20th (i think) of the month, Halifax is month-end, LR is month-end but delayed, etc…….

    Hard to accurately compare the indices really, but they will be broadly similar on the way down and way up, but it’s at the “flat bits” and turning points in the market that you will see the variation I think……

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  • flintster1994 says:

    ana,

    “Haliwide is indeed based on offer price, but post-survery offer price, so fairly serious offers (i.e. not someone chancing their arm).”

    Surely with Hips north and south of the border in force now, people can still put in chance offers before considering doing a survey of their own?

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  • … I think it’s just the Halifax vs Nationwide dead cat bounce being out of sync by a month.

    There’s no way we’re not going to see another 20-40% drop, as affordability is still no where near so, and – anecdotally – since we sold our house in 2006 it has apparently only recently “lost” what it had in theory “gained” over the 6 months following the final frenzied buying binge to the peak i.e. only the peak has been clipped off the manic price curve according to BS figures.

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  • so house prices have fallen another 1.9% last month ??? . i must be living in a very exclusive part of the uk ” dudley west midlands ” as the houses i have been looking at have fallen between 0 and 10 % over the last 15 months in this area , i feel someone is telling lies

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  • Because no-on knows how far prices will drop (this is afterall a cyclical house price correction + world recession) I’d suggest that the risks of being too soon are far higher than the risks of being too late. In fact I’d suggest you would struggle to be too late as propety never takes on a V shaped recovery but more of a u shaped one (if you were to draw the u with a really large basin)

    Appreciate there is a risk (and I stress risk rather than certainty) of inflation but this in itself does not mean that property will not keep falling in real terms particularly in an environment of high unemployment.

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  • mytimeisnigh says:

    Mr Messy, lovely in Dudley, prices are falling but asking prices are remaining high. In order to acheive a sale there has to be a big discount, which is the sale price. In fact, I can tell a story about property close to Dudley, in Tipton, where a new estate was built with ‘executive’ three storey new builds. The houses on the perimeter were built first and were sold, then the housing crash started and the plans to build four bedroomed properties in the centre of the development have been replaced by plans to build two bedroomed flats, a number of these flats will be bought by housing associations for social housing. Someone I know paid £189’000, for a three bed roomed three storey and it is now valued at £169000, but it would never acheive that asking price, so your talking about a loss of at least £30000.

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  • Not been there for 30 years or so, but ‘TIPTON’ ……’EXECUTIVE’ …. in the same breath….???

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  • mytimeisnigh says:

    Exactly.

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