Housing price crash

[Eucalyptusbee]

It's happening!

AIBU to be excited

It’s been explained multiple times on the thread already.
House price crashes historically exist alongside periods of economic hardship and high unemployment. If people can’t afford to pay their mortgage and are in negative equity, they lose their house.

I was FTM during the 2008 crash. DH and I had saved and saved and managed to pull together a 10% deposit on a teeny postage stamp sized flat (that we loved, incidentally). Lending criteria kept tightening even whilst our application was in flight. At the last moment, our lender suddenly declared their criteria had changed again and they'd only accept 15%+ deposit. Clearly we didn't have another 15% lying around (we were going to have to put solicitors fees on our credit card as it was!) so we had to pull out. The irony is we ended up having to continue renting which was more per month than the mortgage payments we were applying for.

So, crashing prices doesn't always make it easier for FTBs. The economy is more balanced than that, and generally when it swings for one section it'll still have an impact for the opposite side.

Hopefully the majority won't have to move and will have secured longer term low interest mortgages. Some negative equity can still be preferable to not having bought and having to have paid rent.

The landscape is very different now eg

Lenders stress test to 3/4%
Most people fix
there are gov backed 95% mortgages

We will just see stagnation but I think it's a good thing to not have such low interest rates, it's fuelled the boom & devalued wages

Or just remove the tenant with a baseball bat and change the locks because the police won’t come to your assistance they’ll tell you it’s a civil matter.

If you use CreditLadder your rent counts as part of your credit rating...

In the 2008 recession & aftermath around 200,000 homes were repossessed. The '90 s recession was even worse with negative equity & crazy interest rates pushing people to just hand the keys back to the bank. And it's mostly the people who've just bought a house after saving up while renting for years (if you've owned for a while you have an equity cushion so less of a hit).

Just as context for why people aren't welcoming the news.

I don't think it'll be that bad this time as rates won't go anywhere near that high and banks have been much more cautious in lending and affordability calculations but no seismic economic activity is likely to be good for mere mortals.

This time the new post 2008 stress tests/rules which in my view are too strict and do not give bank's enough discretion, should mean people will be okay if rates rise a bit. However I don't see a glut of properties for sale when I look - there are hardly any in many areas and agents have written to us quite a bit asking if our house might be sold as they want houses like ours on their books (mine won't as I want to stay here 20 or 30 years so they will have a long wait)....

i remember that 90s one it was awful , loads of houses being repossessed and i was 19 out of work and it was impossible to get a job . id been made redundant from my previous one due to them not needing as many staff as we were so bloody quiet , and everytime i took one of the cards off the board and took it over to the woman at the desk in the job centre i got told oh they have so many applicants they arent taking any more interviews and that was me going in there frequently , not that there were many cards up , i was reduced to doing agency work and there wasnt a lot of that either , finally got a part time position in a different shop of the same company id worked for before , but it was a trying time for a while

I'm saying 10% correction. It's just happened in NZ. They raised interest rates faster than us.
A 10% correction won’t help FTB get on the property ladder. Prices have trebled in the last 20 years. 10% isn’t enough to make a difference.

The British aversion to flats is due to the feudal leasehold system.
Flats used to be very popular for people in their 20s. The problem is that prices have risen so high that people are 35+ before they can afford to buy. By that time their needs have changed and they need a house with a garden for kids. The 20-somethings who want the flats can’t afford them.

Well house prices might dip, but interest rates will likely rise, so mortgages will become less affordable

Flats used to be very popular for people in their 20s. The problem is that prices have risen so high that people are 35+ before they can afford to buy. By that time their needs have changed and they need a house with a garden for kids. The 20-somethings who want the flats can’t afford them.

exactly this & people now just don't move very often as it's so expensive.

If I was younger I would skip the flat stage & go straight to a house, unless I was happy to stay in a house or buying at 25.

This is what I did. I bought a house when I was 24 because flats were barely any cheaper! Around here flats are mostly new, so get a price premium for being a new build/luxury/whatever. Whereas the houses are mostly Victorian (but not with amazing period features, so no premium for that). And also because I have a friend who had bought a 1 bed flat with her DH in their 20s then couldn’t afford to move and got caught up in the cladding problems so were stuck in it with a baby. So I bought a 2 bed in case of unexpected pregnancy.

If I was younger I would skip the flat stage & go straight to a house
Where I live, a new build flat costs the same as a crappy 1960s terraced house with a small garden. When you’re a 35yo FTB you need the garden. So the flats aren’t selling while the cheap little terraces sell like hot cakes. Meanwhile 20-somethings look longingly at flats they can’t afford (they have to rent the flat they’d like to buy).

You don't need a house if you have kids. This is my point. Its an aspiration thats very British. Its certainly not the case, even reasonably affluent families.

This is my point.

It’s really distasteful to be so happy about this. Even if this is true, as yes the market is slowing in some areas but I doubt it will crash. It won’t be easier to borrow, it will be harder, probably harder than it was in the last recession. It also does not mean houses going for £500.000 will suddenly be £70.000 they will just get taken off sale and put back on when the market is better.

A crash won't help them either as per my response earlier. In a crash, it's harder to get a mortgage and you need a higher deposit. Cost of living rises make deposits harder to save for.

Its happening.. going to get messy

popcorn at the ready

People just won't sell and stay where they are... and negative equity misery ..am old enough to remember high inflation /double digit mortgage rates, the number of people stuck in shit relationship/inadequate housing due to negative equity, 100% mortgages and the death of social housing due to right to buy...
Housing in this country is very depressing...supply is still sl much lower than needed

The UK has a huge supply shortage of housing. This prevents a true crash. Yes falling prices dents investment demand, but people still simply need a roof over there head, so prices just won't fall crazy low.

A crash won't help them either as per my response earlier. In a crash, it's harder to get a mortgage and you need a higher deposit.

It will defo help some. The people who are buying now are generally privileged eg good wages, help from family eg living at home &/or cash. They will still be able to buy.

Not round here it's not...

Unfortunately there is a delay in the sold prices being released. We only have accurate data until February 2022. We won't know if prices are dropping now until late summer.

You can get a general idea though from seeing how quickly houses are selling in your area.
In my area there has been a definite slow down. 2-3 months ago houses were selling within days of going on the market. Now they’re sitting for a couple of weeks before being reduced, then selling fairly quickly after the reduction. The ones that are priced on the higher side with no reductions are just not shifting.