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.

@Babs709 I could take the hit of 20% as I lots of equity & if what I was buying experienced a similar drop. Like I said I think it's quite subjective as particularly in London people price to allow for an offer.

I mean is this an example of a crash or an unrealistic seller? It's already been reduced from 3.2m to 2.7

www.zoopla.co.uk/for-sale/details/46747800?search_identifier=b48fb5c936afed7ab155197efa16d732

@Viviennemary

Lots of people have huge equity in their house and are just plain greedy wanting ever higher prices rubbing their hands in glee without a thought for anybody else trying to buy. If our house dropped 20% we'd still have a lot of equity because we bought years ago when houses were more affordable.

Bully for you. Not all of us are in that position.

I bought my house 3 years ago for £183K. The only way I could buy is with a 5% deposit on a joint mortgage and by buying a house that needed a lot of work doing to it. We have spent approximately £15K on our house in the last 3 years and I think we have another £30k to spend. The house wasn’t updated for many years and the previous owner was a bodger.

Similar houses to ours are currently selling for about £200k, although I don’t think my house is in a state to get that much at the moment. If my house drops by 20% that means my house is worth £160K. My mortgage is currently £167K. Fortunately we have a low interest rate but it would still take us about 2 years to pay off our negative equity. We’d be in a lot better position than most people though.

@RaspberryToupee I am similar, but below 100k. I could withstand 10%, maybe 15% drop ok, and I fixed for longer now so I could wait, but it would feel shit, because it's not gain from nothing. It's partly our payments and partly the value we added by spending that money on doing it up. Still below others as not completely finished.

@SchrodingersImmigrant but how do you plan to move up the ladder without significant wage increases or moving to a cheaper area? We are planning to move next yr & have had some wage increases since we last fixed but we won't be paying 1k a month in childcare & we benefited from the 2014 boom, however it's still going to be a hefty bill circa 1.6k

I don't. I am happy in my house. Plus I am not in the area with super high prices

Maybe that's why we have different opinions, I don't know anything other than high house prices.

It's also important to remember that any recession that comes will most likely be like the 08 one. In that it won't be equal & certain industries/sectors will be hit much harder. It's like now, thousands are losing their jobs but thousands of others are busier than ever & have saved significant sums.

I agree with that. It's a different word.

And yes. Though there were talks of worse than 2008 recession, hopefully they were just being overly cautious.

@dulciepepp trying to think of a scenario where losing equity (even if you have some to lose) is a positive? I’m not arguing with you, just can’t work it out?! You’re always going to be worse off surely? Less equity means your assets are worth less whether you decide to own a big chunk of a medium sized house or move to own a little chunk of a big house.

@Starsabove1

"I honestly think some people do think that a house crash could happen without the rest of the economy crashing as well or that somehow they would escape any impact and buy a mansion for pennies."

A house price crash does not need an economic collapse to take place. In fact the economy has been getting weaker for a many years yet house prices have been going up and up. The reaction to the weakening economy has been one of the main factors in the increasing houseprices. Take a look at a chart of interest rates over the last 30 years and then take a look at a chart of house prices. As interest rates are cut to try and stimulate the economy house prices rise as people can afford to borrow more money. Irrespective of the state of the economy if the BoE raised interest rates house prices would start to fall. Its a simle matter of affordability. I am not saying this is the only reason but its a massive factor.

@Babs709 ok so my house is 800k with 500k equity & the house I want to buy is 1.1m. So I need to find 300k plus 39k stamp duty.

House prices drop 20% my house sells for 640k & I buy house for 880k so I now need to find 240k & 19k SD.

The reaction to the weakening economy has been one of the main factors in the increasing houseprices.

I agree with this, our economy was not great pre Covid.

The reaction to the weakening economy has been one of the main factors in the increasing houseprices.

I agree with this, our economy was not great pre Covid.

I can't see them ever raising interest rates

Though there were talks of worse than 2008 recession, hopefully they were just being overly cautious.

Society is probably more divided than ever since then in terms of the haves & have nots & then if you look at the 0.1% uber rich they are untouchable.

@dulciepepp I see... I think where I am struggling is...
No crash you own 500k of 800k house
Crash you either own 400k of a 640k house or you can now afford a new house and therefore 400k of a 880k house.

Either way you lose 100k if prices crash. You’re not gaining anything by houses crashing because you could afford the bigger house anyway?

@Alsohuman

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.

Yea, you are correct I guess, i can't dispute facts.

[quote dulciepepp]@Babs709 ok so my house is 800k with 500k equity & the house I want to buy is 1.1m. So I need to find 300k plus 39k stamp duty.

House prices drop 20% my house sells for 640k & I buy house for 880k so I now need to find 240k & 19k SD. [/quote]
If your mortgage is 300k, going by your sums, you will not be left with 500k.
If your 800k house loses 20% value you will be left with 340k equity + 300k owed on mortgage. Every time your house loses value it is solely from your equity, not equity and mortgage amount.

Just to check my math. 800k value, 20% from that is 160k. New value 800 - 160 = 640.
Mortgage owed 300. 640-300 = 340. That's your new equity. That's what you have.

Its going to be so difficult to raise rates without it imacting upon many people who are living month to month by the skin of their financial pants, and that was before Coronavirus even kicked off. Sadly these days there is an inherently naive attitude towards debt and everything from cars to televisions are put on the slate. Thats the problem with an economy that is so heavily built on personal debt.

I think my maths is:

No crash:
800k house; 500k equity, 300k mortgage
Moves to 1.1m house, 500k equity, 600k mortgage

Crash (20%):
640k house, 300k mortgage, 340k equity
Moves to 880k house, 340k equity, 540k mortgage

SchrodingersImmigrant and Babs709

Not all houses are going to fall at the same percentage though. The effect of supply and demand still applies even in a market crash and value is always what sombody is willing to pay for a house.

I think we will could end up in a situation where sold prices become very chain specific, where some houses sell for less simply because the people who want it at that moment in time are in a financially weaker position. Yet another chain might have houses selling at higher prices as those fighting over the houses have not been crippled financially.

Averages are just that; averages and you cannot always blanket apply it to every property.

No indeed Slinky I definitely agree. But there’s lots of additional things Dulcie would need to think about. Would she even be able to sell for example. Just showing a basic scenario.

@slinkyStairs Absolutely. But it is definitely easier for an example to just do with all the variables which would normally be there, because that would get incredibly complicated. So just simple thing.

@babs709 I got confused by the "need to find 300 and need to find 240" in there. It's adding up as if there would be no mortgage, isn't it.

*do away with all the variables

@SchrodingersImmigrant haha yes that may have been my confusion.

Btw Dulcie where are you “finding” a few hundred k? Are we talking down the sofa, or on the floor in the local park? Can you take me and schrodinger next time you go? (Btw in case it doesn’t read, that’s a light hearted dig and you using the word “finding”.)