AIBU to want house prices to fall

[Viviennemary]

I thought a house price fall was on the cards but it doesn't seem to be happening. It would have been a good chance for first time buyers to buy their first house and get out of rented accommodation. And a chance for people to move to a bigger house for more space.

It is falling, it won’t happen over night. 0.1% here, (Already happened) then 2% then 5%. I predict a 20% fall at its lowest. But what do I know 🤷🏼‍♀️

There were talks of depression coming, which would cause the fall, however, it would be in combination of lack of lending, loss of jobs, rise in suicides, rise in homelessness.

At this point we should all be praying for economy to recover as much as possible, not wish for it to go down the gutter.

House prices are so skewed against wages.

When my parents bought their first house, it was 3k. Two years salary for my dad. Ordinary working class "normal" job.Just a standard 3 bed semi detached family home. Northern England.

For me to buy that same house now with 2x salary, I'd have to be earning 125k a year, hardly a 'normal" salary. Or, for me to buy that house would be 10x my salary, vs his 2x.

@moopoohootoo

I think that the fact some people cannot afford to get on the housing ladder will come back to bite us on the arse later down the line. As a society I mean. We have an ever increasing number of people who are forced to rent at a rate that is generally more expensive than a mortgage on the same house. I fear that in 20 or 30 years we are going to have a load of people who have no financial security to fall back on in their retirement. And who will end up paying for it.......

Totally agree. I think going back a couple of years so something like 2018 the figure for housing benefit alone is 24 billion.

I once tried to buy a repossessed house. The bank made it clear from the start that they wouldn’t accept any lowball offers - the debt owed on the house was £181k and they couldn’t accept less otherwise they wouldn’t get their money back. They also wouldn’t accept offers from anyone in a chain or who had a house to sell - only those who had the cash or mortgage up front. So I greatly doubt that banks will be repossessing houses and selling them to FTB at bargain prices. They won’t sell for less than the debt owed.

The suggestion appears to be that there are lots of FTB out there who can’t afford to buy a house.

In scenario A:
200 FTB
200 houses
House prices too expensive, only sell 100
100 empty houses
100 FTB without a house
Supply = demand but prices don’t reflect the market; potentially fixed by dropping prices

In scenario B:
200 FTB
100 houses
100 “richest” FTB get a house
100 “poorest” FTB miss out
Supply of housing < demand for housing; potentially fixed by building more houses

I don’t think we’ve got a scenario A problem, I think we’ve got a scenario B problem.

Of course there is a scenario C:
200 FTB
200 houses
House prices too cheap
Everyone battles for housing.... which pushes the house prices up.... and I think that’s where we welcome Adam Smith and his Invisible Hand?

Lots of comments saying OP doesn’t realise house prices aren’t a vacuum. That’s OK, ceteris paribus and whatnot. And she raises an interesting point generally about house prices not being in line with wages. But I think the issue here is (as many PP have pointed out) the first step in fixing “the housing issue” is building more.

[quote SchrodingersImmigrant]@ShebaShimmyShake oh wow. Thank you. Really. I think that was misunderstanding. I do sometimes get syntax mixed up so it can be taken wrongly🙈[/quote]
You're welcome, just telling the truth. I wish we could have a comment rating function, it would give a better idea of what the consensus is. Anyway, back to the studio.

I once tried to buy a repossessed house. The bank made it clear from the start that they wouldn’t accept any lowball offers - the debt owed on the house was £181k and they couldn’t accept less otherwise they wouldn’t get their money back. They also wouldn’t accept offers from anyone in a chain or who had a house to sell - only those who had the cash or mortgage up front. So I greatly doubt that banks will be repossessing houses and selling them to FTB at bargain prices. They won’t sell for less than the debt owed.

I may be wrong, but I don’t think that’s true. I used to sell repossessed houses. We’d get 2xEA and 2xRICS in, take an average of their valuations and that would be our target. Acceptable offers were on a declining sliding scale of that target: so in week 1 it would be 105%, week 2 100%, and keep declining until we’d accept fucking anything 😂 We never even knew what the debt was. My understand is that a lot of time the banks would make losses, especially as most owners left them in a total fucking shithole almost not fit for human habitation.

What concerns me is the quality of housing, on offer for millennials.

I am an mortgaged owner with significant equity, in my early 30s.

Theres a big problem, where we have older boomer couples, in 5 bed houses worth 500k+... With working millennials, crammed in to a 3 beds, with 3 kids, 150k-300k.

Now most Millennials will not achieve the earning power, to buy that 500k+ house.

Quality of life is significantly poorer, for the millenials, when it comes to housing and space.

Now, if house prices crash, that doesn't make the situation any better for millennials, whom have bought over the past 10 years. It's like a double punishment, particularly if they've not used HTB also, like myself and generated wealth. HTB owners would also argue, they now have a house which lost value on purchase and negative equity from the crash (painful). Especially, when these groups, are just trying to progress their families lives.

Most millennials are on the first rung of the ladder in their regions, now to make the jumps upwards, is going to be difficult, without some monetary inflation.

I assume, that the most equal way to move things forward, would be to increase the money supply, to erode millienials debt, so they can trade up (or maybe that's what I wish for).

The Tories, would find it extremely difficult, to keep the millennials vote, if they didn't offer support to the recent millennial buyers. Particularly as, the boomer vote will steadily decline now. If these recent buyers, were plunged into significant negative equity, resentment would be extremely high and bad deflation would only serve to compound matters.

When my parents bought their first house, it was 3k. Two years salary for my dad.
But you’re comparing the present day against a very unusual time in the mid 20th century when houses were 2x salary. They’ve never been that cheap before or since. Fifty years earlier they’d have paid 8x salary for a house. A hundred years earlier it would be more like 13x salary for a house. Houses are pretty much a normal price right now - what’s abnormal is the time when houses cost 2x salary.

Our neighbours put their 5bed house in a popular area just outside London for sale and it is now ( 2/3 weeks) sold SPD they bought it less than 2 years ago and are making a good profit. It seems the market is as active as ever!

@Rollingfog

Our neighbours put their 5bed house in a popular area just outside London for sale and it is now ( 2/3 weeks) sold SPD they bought it less than 2 years ago and are making a good profit. It seems the market is as active as ever!

It's slowing down, but not prices dropping, where I am. Not much coming on a market. Surprisingly same goes for rentals. Oddly few. I wonder if it has anything to do with the changes or if it's all just covid.

Are people saying a 20% reduction is a crash?

Yes

And are lots of people buying without at least a 20% deposit?

Surely it's subjective the most Ive ever paid for a home is 15% under what it was listed as. I was chatting to my neighbour today as they have accepted an offer. It's about 18% under (although the asking price was a little ambitious), it's not a "crash" to them as they have been here 15 yrs & have a tiny mortgage & about 700k equity.

Bit of a difference between seller who can afford it selling with lower price and younger families who didn't own too long having large part of equity disappear.

Are people saying a 20% reduction is a crash? Depends how quickly it happens, but yes. Remember 20% will be an average.

If my house was worth 700k and dropped by 20% I’d be losing 140k. Thats pretty eye watering. Although I appreciate that’s not what you said at all.

@dulciepepp

And are lots of people buying without at least a 20% deposit?

Yes. I think average is 15% which means hell of a lot of FTBs have less.

We have just accepted an offer of 16% under (zone 3 London). But the house we are buying is about 17% cheaper (amazing). We got it for just under a 1m so big stamp duty save too. They sellers wanted a quick sale.

Bit of a difference between seller who can afford it selling with lower price and younger families who didn't own too long having large part of equity disappear.

Well yes everyone has different circumstances. I'm in my 30s with young dc & prices generally went crazy in 2014. We have loads of equity as do my friends, I know people who made close to 1m in 5 yrs.

Yes. I think average is 15% which means hell of a lot of FTBs have less.

Well because it's average plenty will have more. I think it's crazy to have such a tiny deposit.
The housing market is so skewed, you have my parents generation with 1m plus homes with no mortgages. My generation with biggish mortgages but big equity & then those on the bottom with no hope of seeing the equity gains experienced by the previous generations. Appreciate my experience is very London centric.

YABVU. A house price drop will not happen in isolation, it will come along with job losses and a bloody recession.

The Tories, would find it extremely difficult, to keep the millennials vote, if they didn't offer support to the recent millennial buyers

That’s based on the erroneous assumption that the Tories have any millennials’ votes to lose. Voting intentions to the left increase in inverse proportion to age. The oldest boomers are 75, the youngest are 56, they’re not all going to disappear any time soon.

I feel like I can't debate the political side since I can't vote😂