Housing price crash

[Eucalyptusbee]

It's happening!

AIBU to be excited

Not going to happen, banks & private equity are getting on the resi action now, and there is no way their investments are going down. They will just keep buying up everything they can, private landlords who dont have economies of scale will sell to them. Gov wont allow interest rates to go too high as that will surely tank the economy and not make any difference to the real causes of cost of living inflation. Stagnation maybe as we will all be stuck where we are. But over time its just a blip, real estate always goes up - because we are not making any more land.
www.thetimes.co.uk/article/the-banks-beating-first-time-buyers-to-new-homes-flnshrfpx

*Where did he study economics? The back of a fag packet?

A housing crash is good for NOBODY*

^^This

never ceased to be amazed at the stupidity of some posters when this topic comes up. Whilst I understand the sentiment of wanting prices to be affordable, interest rate rises and a looming recession mean banks are LESS likely to offer mortgages and it will be more expensive when they do, particularly coupled with spiralling inflation which reduces affordability further. That’s the whole point of interest rate rises to temper demand. Brilliant economic brains you have between the 2 of you.

Which just then puts rent up because if they don’t get the income and have to factor in court fees etc then the other rental properties go up in price

It us about supply and demand and if the landlords ends up going under then it is more families chasing rental accommodation

i don’t think things are crashing atm But I can see problems ahead of things don’t change.

i think the big house price rises should have happened in 2020 but Covid came and delayed everything.

I think a lot of the increases elsewhere we are seeing is because of the price of fuel

The war in Ukraine doesn’t help

I think if the war was over tomorrow I think we would see some easement in prices.

For me Putin has a lot to answer for.

If your DH has "studied economics" then surely he understands that while house prices may be falling, interest rates are going up - so for those not already on the ladder actually getting a mortgage and one which is affordable will not suddenly become easier overnight.....

It has to happen. Once those interest rates are up a few more notches it's really going to screw people over

In my area a 3 bed is well over 400k. A flat is 220-450 depending on type.

Is can't be sustained. The average wage is 34k but a younger person prob only 24ishk

I'm a home owner and will have to accept my house isn't worth as much until tables turn again.

Same here. I live in a studio and the same style studios in my complex are asking for £300-400 more than what I pay, for a really basic flat with much to be desired

I did study economics, did you? He seems to have some reasonable points there. Interest rates are going to have to go up because of inflation going up, that's how it works, the B of E has to react to high inflation- in fact, I'm surprised they haven't already put interest rates up more than they have. And if interest rates go up, that will exert a downward pressure on house prices as people will not be able to get such large mortgages as they have been used to getting, and others may default which again, has a downward pressure on house prices. Other factors may outweigh those, but that's the pressure those factors tend to exert. And as for your other point, a crash in prices does benefit some people- for one thing, it benefits those currently unable to buy because prices and deposits required are too high for them. Though their repayments would go up if interest rates also rose. Oddly enough, if house prices and therefore also rents fell, there would be less pressure on the B o E to raise interest rates, because inflation would slow or even fall... it's all very complex, because all of those factors affect the others when they rise or fall. Add in unemployment rates and many other factors and it's hard to predict anything.

That doesn't affect deposits, which are often the biggest problem for FTBs. In fact, if interest rates go up, it will be easier for them to save for a deposit. And even easier if rents fall....swings and roundabouts.

It has to happen. Once those interest rates are up a few more notches it's really going to screw people over

Currently, 74 per cent of homeowner mortgages are on a fixed rate contract, with 96 per cent of new borrowers choosing this option since 2019 (as shown in Chart 2). Therefore, a sizeable majority of borrowers will see no immediate increase in their monthly repayments
.HOW THE BANK RATE AFFECTS MORTGAGE RATES

I heard on with some inteviews that more and more people are on fixed rates than in previous decades - this seems to confirm this.

We prefer it but then we spent over a decade renting and knowing the housing cost per month for next year or more is "normal" for us.

I think many are 2 or 5 year fixed rates so eventually people will be hit - but I think there will be this delayed impact that in previous decades wasn't there - and people may well be aware and overpay in meantime or adjust at different times as they hit remortgage dates.

In many respect food and fuel prices are going to hit harder and quicker than interest rates.

That doesn't affect deposits, which are often the biggest problem for FTBs.

Deposits and the shear size of them are frequently the biggest hurdle - something older family members seem to struggle to understand - and yes higher interest rates will help there but higher rents will hinder - so really does depend on rental prices I think.

Prices are shooting up round here, ours has gone up 40k in 3 months.

@Moodycow78

Therefore it's absolutely guaranteed to go up even more over the next few months.

I hope it happens. My place has gone up over 50% in the 6.5 years we have been here which is insane. High house prices stop the younger people buying which breeds inter generational resentment, increases inequality, increases pressure on young people, makes them feel less settled and reduces the birth rate, all of which also affects mental health. Not good.

OP, it’s scary that you are so ill informed about how the economy works and how house prices are linked to this. House prices don’t crash in isolation. A ton of other stuff happens that leaves those non- homeowners in dire straits.

Let’s see what are the other risks that you may not have considered in your gleeful OP. Runaway inflation, we’ll we already have this. So sure, you will be able to buy a house but not much else besides. Slowdown in the economy, perhaps look up Q1 GDP figures? Quantative easing - well that’s what got us into this mess in the first place. All in all that points to stagflation. Much much much worse than inflated house prices. Perhaps you should read up a bit more.

So your worries about high house prices will pale into insignificance as a result of all the other nasties that come with a house price crash. Good luck.

That's completely fair enough

But a house price crash isn't going to make that happen unfortunately

We bought our first home (small terraced house in outer London suburb) with a 100% mortgage in 1989 and sold in 1994 for 25% less than we paid for it. Watching prices sinking and knowing we were in negative equity was a devastating experience. It took us several years to recover financially.

Because of this I'm always expecting the next crash. I really worry about how people are stretching themselves to buy at the moment. I really hope that it won't happen again but I know it's always a possibility.

I think im about to do that. Exciting times.

Fixed rates dont last forever though do they, in 2/3 years when they are all ending you still have to refix at a much higher level than you did 4/5 years ago Pre covid and Pre Ukraine.

And how many can over pay when many are on interest only mortgages and have higher bills to boot?

That capital is not getting smaller.

I have a good salary (not a 6 figure salary)I am an academic in a middle/senir position with estability. My husband has good salary too. We bought a house in Northern Ireland in 2007 with everything we managed for deposit (part of it givent to us by a relative). We bought for 165,000, something we could easily afford. We managed to sell 5 years later for 40,000 before moving elsewhere much more expensive.

We pay a rent that is more than my salary in a very average area outside London (zone 4). I don't wish a price crash on anywone. But we will never be able to pay a house. Cannot see how my kids will be able either. Our saving capacity is close to zero. We could cut here and there but nothing close to enough to pay for a house.

Speculative prices should just not exist, but the full capitalist market is based on what you are willing to pay rather than real value. I wish the value of the labour and materials was in any way related to the price of the house.

I am also sure those who think it is really bad to be happy house prices are lowering, may be happy about the bitcoin crash. In my opinion, both the ups and downs are bad news when they don't respond to any reality. Prices going down when materials are going up and people need bigger salaries is not good news. But prices as they are set up and how people get rich out of speculation is bad news.

Interest rates are going to have to go up because of inflation going up, that's how it works, the B of E has to react to high inflation- in fact, I'm surprised they haven't already put interest rates up more than they have.

@BlueMongoose but raising interest rates only reduces inflation if when inflation is driven by demand. That's not the case here. Inflation is being driven by the cost of imported goods. Raise them much further and the economy will tank.

Yes I think a lot of people have never heard of stagflation, otherwise the debate would be far more informed.

Hopefully not but the days of silly offers over and bidding stupid amounts on garbage properties will be over. Our town has always been offers under until the pandemic I don't want prices to necessarily go down but we always had a lot of choice. I say this as a home owner prices can't keep going the way they are with the high inflation hopefully they will stagnate for the next few years.

@camaleon god, that's shocking. I honestly had no idea NI was hit that badly.

No but they will have time to plan and the fix rates will vary when they end - so it won't have the sudden impact interest rate rises used to have and I did say it would hit eventually and that rising bills will be an issue.

Interest only mortgages are a falling share of the market -

The total interest-only mortgage stock (including part and part) has reduced by 63 per cent in number and 50 per cent in value since 2012

INTEREST-ONLY MORTGAGES

So while some will still be affected the amount of people is smaller than in previous decades.

Plus increasingly people are fixing for longer than 2 years:
Why are more borrowers choosing long-term fixed-rate mortgage products?

Our analysis shows that long-term fixed-rate mortgages have become more popular since 2016. More than half the mortgages issued in 2019 Q4 have interest rates fixed for five years or longer.
But why are more borrowers opting for long-term fixed-rate mortgage products?
There are two factors to consider: new mortgage rules and a shift in interest rates.

Why we loads of people become homeless if house prices crash? What's the correlation?