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.

I’m not quite sure why people are mentioning that if prices crash the economy goes with it.
Surely the economy is up the creek with out a paddle now anyway.
Well obviously not now as people are still on furlong and there have not been many redundancies.But in another four or five months there will be a clearer picture

Lots of people have huge equity in their house and are just plain greedy

Why? It’s not money they can spend. It’s just numbers. It’s a value.

@safariboot

I don't for a minute believe you and your friends haven't had a massive leg-up in order to be homeowners at 22, whether you realise it or not.

I know someone who is 21 and has bought her first home with her boyfriend. He’s a chef in a pub and she a junior secretary. They didn’t do anything but save. They had no help from parents etc. It can be done with the right attitude.

I was a home owner (of a 5 bed detached) at 23.

South east, if you’re interested.

The only equity in my house is from my paying my mortgage, we bought in 2007 with a tiny deposit and went the following year in to negative equity, we sold 10 years later for just a bit less than we bought for and had improved it as well - eg double glazing. So the only equity was money we had paid off the debt and it is what we used to buy this house 2 years ago and we continue to pay off the debt. No rubbing hands in glee, no magic money from price hikes, pure paying off a debt.

There are few places outside of London that have seen a price rise to near or at the level of the last crash, but any new crash would take them down further and I expect London would still come out nicely.

Rents are too high - too much is spent on rent so that many can't save for a deposit.

Maybe if the BTL market wasn't fuelled by borrowing which forces up rents to cover all borrowing costs plus property overheads plus agency fees plus profit margins - and maybe 'allowed' on a Cash Purchase basis only - then there's room to lower rents, the 'borrowers' are out of the market and more lower priced properties might become available.

Meanwhile, lower rents means more saving for that currently elusive house deposit.

Why is it wishing ill on others wanting house prices to be affordable
Because these houses are currently occupied. By wishing for a price drop you’re wishing for the current owners to be in negative equity or be repossessed and made homeless. You’re wishing for job losses and other things that force people to sell their house at a loss because they can’t afford the mortgage any more.

Schrodinger is correct. It wouldn’t allow people to move to a bigger hose. A house is worth a house. If the next biggest size up has a price drop, so does yours - and broadly the difference in price between them remains the same.

Price drops make it easier to move up the ladder!

I'm a homeowner with a fair bit of equity, caused by the crazy jumps in 2014 although they have pretty much stagnated since then (london). However the housing market is pretty fecked & not good for the economy to have so much income tied up in servicing rent/mortgages. That was true pre Covid.

It's a double edged sword... If the market crashed you would find it very difficult to get a mortgage so it wouldnt actually benefit you.

Also all the other stuff about equity etc. Basically a good market means houses are actually being bought and sold. If I lost equity I wouldn't move until the market picked up again

Compared to wages, house prices are far too high, when I bought my first house, it was only twice my salary, now to buy the same house would be 5 times what I get now which is a lot more than I earned then. I honestly don't know how anyone who has an ordinary job on not much more than NMW can manage to get on the property ladder.

If I lost equity I wouldn't move until the market picked up again

But if what your buying has dropped by the same % it's costing you less!

Example
My house is 800k with 500k equity & the house I want to move up to is 1.1m, so I need to find an additional 300k plus stamp duty of 38k. Market crashes & properties fall by 20%, my house only sells for 640k but I get the house I wanted for 880k which means finding 240k & 19k stamp duty.

I'm from Dublin, where house prices were sky high with first time buyers struggling before the 2008 crash. Let me explain how that went for FTB.

Prices crashed so no one sold unless they had to, massively reducing supply.

Lending reduced hugely, making it much more difficult for FTB to get a mortgage even at much lower amounts.

So nothing much happened in the market for a good few years. You had those who'd bought just before the crash stuck with negative equity, often in ghost estates or poorly completed apartment buildings, in homes that were intended as a first step on the ladder not a long-term investment. Those coming behind them were stuck renting or living with parents.

Things began to pick up.

Suddenly the renters could begin to look at buying again, and some people began to consider selling.

But prices hadn't fully recovered, while several years worth of FTB wanted to buy at once. Demand far outstripped supply, with viewings being crazy and houses selling almost as soon as they came on the market. friends of mine bid on over 20 houses before they were finally successful.

Now, FTB still struggle to buy. The older generation still sit on massive equity with no intention of selling. Those who bought in the run up to the crash are still in negative equity.

Nothing good happened for FTB when prices fell.

The problem is that buying a first house while prices are falling is that you don't know when they stop falling and you could get into trouble. Say it fell 10% and you bought. It then drops another 10% so you're in negative equity. It dropped further because thd economy is worse and now you might lose your job, can't pay the mortgage anymore and are stuck having to sell a house with negative equity, leaving you with debt. Or you can keep the house but not make the money to move on to a bigger house so you can't start a family.

Bad economy is bad for most people with ordinary jobs and finances. It doesn't help make you richer.

Also, it's weird that you want FTB to be able to buy a cheaper house now to get on the ladder, but that ladder implies that you want them to later sell with a profit, leaving the next generation with the same problem again.

This doesn't work. The FTB who wants to get on the ladder may be able to afford a house if prices slump, but won't be able to find one. That's because the Mr and Mrs Blogs in the 2 bed terrace the FTB want to buy are in negative equity and can't afford to sell. And even if they could, they wouldn't be able to find anything, because Mr and Mrs Smith in the 3 bed semi that Mrs and Mrs Blogs want to buy are in negative equity and can't afford to sell. Ad Infinitum.

Surely lowering the amount needed for a deposit would be the most helpful way to get people get onto the property ladder?

Maybe if we stop seeing housing as a property ladder, and buy the accommodation we need for the family we have then we wouldn't be so hung up on values.

We felt the repurcussions of the 2008 crash for a long time and we went into negative equity on our first home. So no, I hope they don't crash.

That's a very nasty thing to wish.

Will put people into negative equity and really affect their mental health. Have a word with yourself for being so selfish!

I understand they are just so far out of reach, I can't even work out how my DS will ever afford to buy close to us. But for some reason they are going up around us. We've just put ours on the market, for 30% more than 2 years ago, expect to take less but even then it's 10-15 or 20% more.

8 years later with £82,000 remaining on the mortgage and a current property value of £54,000

Gosh, where are you that your property has dropped fifty percent in eight years?

We've just put ours on the market, for 30% more than 2 years ago, expect to take less but even then it's 10-15 or 20% more

Why did you list at an over inflated price? Very few if any places have increased thirty percent in two years. Is there something missing, like massive improvements and it was a wreck when you bought it?

@dulciepepp

If I lost equity I wouldn't move until the market picked up again

But if what your buying has dropped by the same % it's costing you less!

Example
My house is 800k with 500k equity & the house I want to move up to is 1.1m, so I need to find an additional 300k plus stamp duty of 38k. Market crashes & properties fall by 20%, my house only sells for 640k but I get the house I wanted for 880k which means finding 240k & 19k stamp duty.

But how much did the million pound homeowner pay for the house? Will they sell it if it's only going to go for £880k? And what will interest rates be like in that economy? How much will you really end up paying, if you can get your new mortgage at all? And if prices have fallen 20%, that means a poor economy. Is your job safe? Are you financially secure enough to buy this place?

This is what some people, including the OP, keep missing. You think that all that would happen is cheaper houses, in a total vacuum with no other issues. I really do feel the frustration of would-be FTBs, I was there myself. I'm not sure what the solution is but new homes and better wages sound better than a housing market crash, because ultimately that really is not the answer.

@Amijustagrump

I am a young person, 22, and we own a home as do several of our friends (in Essex). Those young people who say how unfair it is mostly spend a lot of time and money on themselves and then get upset they can't save. When we saved for our deposit we had a boring time, yes. But now having our own room and the money to do what we want has been worth 2 years of boring and our friends all feel the same.

Well done for saving presumably without any help. But the rest of your post is a load of rubbish. The reason young people aren't getting on the housing market isn't solely because they spend too much money on themselves despite what you have seen amongst your peers. Your post shows a startling lack of awareness of other people's circumstances.

Barring occasional exceptional circumstances, there's no way the average 22 year old today can have put together a house deposit from zero with absolutely no outside help and while paying a standard market rent plus utilities, food and the other costs of total self-sufficiency. If you lived rent-free at home while saving, that's a leg up, and nothing to be ashamed of either.