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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Housing price crash

534 replies

Eucalyptusbee · 12/05/2022 09:58

It's happening!

AIBU to be excited

OP posts:
Whammyyammy · 12/05/2022 10:34

Is it an inset day today?

SarahSissions · 12/05/2022 10:34

Prices will drop because people can’t afford to borrow in order to buy. Those who can’t afford now, won’t be able to afford in 6 months which is why prices will drop.
if interest rates go up and borrowing becomes more expensive then fewer people can afford to buy so demand drops and that is what drives prices down.
all this means is some people will go into negative equity and end up stuck in homes that aren’t suitable or others will lose their homes completely

Whinge · 12/05/2022 10:34

WhatsHoppening · 12/05/2022 10:30

Why would you be excited then if you have a house @Eucalyptusbee ? Are you excited for your mortgage payments to spiral beyond what you can afford? Are you looking forward the value of your biggest asset dropping considerably? As a homeowner there is literally nothing 'exciting' about a recession and market crash.

Agreed. I thought the OP was a FTB.

A housing crash is never a good thing, but being a FTB it would have at least helped explain why the OP might have been excited by the news. But I really can't wrap my head around anyone who owns a house being excited by a housing crash. Confused

ReeseWitherfork · 12/05/2022 10:35

Perhaps if your DH thinks he's so knowledgeable, he should talk to some older relatives who were adults in previous recessions.

if OPs DH is mid thirties then he is definitely old enough to be affected by the recession in ~2008. In theory he would have been leaving uni just as no one was hiring etc. I can’t picture a scenario where he somehow missed the fallout. Makes it all the more baffling.

WhatsHoppening · 12/05/2022 10:36

Right...so OP owns a house...mortgage free...and is excited for a housing crash for her siblings? Seems legit.

Thehop · 12/05/2022 10:37

That’s an awful OP.

SamphirethePogoingStickerist · 12/05/2022 10:38

Eucalyptusbee · 12/05/2022 10:09

Exciting because buying a home might become affordable again

No, it won't.

Chances are that exactly what happened last time will happen again. Many people living on the financial edge will go under with huge debts. Banks will pick up housing stock and will wait, mainly because lending criteria will be tightened so much that you and your DH won't be able to qualify. Interest rates will remain high, very high, like 20% high. Deposits required will be a minumum of 25/30% of the value of any property.

And all will return to 1970s, early 80s style of lending. Strict criteria, low multiples of salary, every bank having to clearly show that they have done due diligence on every applicant - so much so it will feel intrusive to an extent that nobody who has applied for a mortgage or loan in the last 20 years will recognise the situation.

Credit of any kind will be tightened, similarly intrusive searches will be done for applications of any reasonable sum.

All sorts of other financial issues wil happen as the housing crisis hits everything else and Loh! Another Credit Crunch. And this time happening to a generation of people who have never really had any experience of the utterly patriarchal banking system that treats everyone like small children. The clash between staid banking and the current commodity based society will ring loud.

Housing stock will be bought by larger firms, insurance companies, pension companies. Rents will increase - oh yes, you read that right! - and home ownership will recede even further.

Yes, some will strike it lucky, will have deposits etc ready to go and will be able to buy as the first tranche of housing hits the market combined with the government squashing lending rates. But they may become victims of the bounce, just like the second crash back in 1991 - the one everyone talks about which was the bounceback crash after the late 80s boom and bust. You have to wait for a few more years until it is safe to buy again.

We did that in 1989. Managed to buy a very cheap flat. But we were then unable to sell it for about 20 years because nobody would look at it. That effectively meant we had an unsaleable property, 100% negative equity. Houses were eventually cheaper, you got more for your money than if you bought a cheap to run, newish build flat. So we went to University instead, taking advantage of its cheap to runness. Eventually, in 2000, we sold the flat for what felt like a fortune, almost at the peak of its saleability. And found we couldn't afford to buy anywhere else. So we rented a property we couldn't afford to buy.

After another 20 years we have finally managed to buy another property. Far, far away from areas we would like to live, where we work. But it is a lovely house, nice place and we will be able to retire here without being too stretched.

So rein in that glee. Start looking up, reading around the realities of what might happen. Work out what your real situation is and what you really can afford. For example, we bought our cheap flat when interest rates were at about 8% - sounds horrendously high now but was relatively low back then. We worked out what we could afford at 20% and stuck with that. With our 1% over base rate mortgage the interest rates topped out at about 19% and we just managed to keep everything together and not lose it.

It was those who had bought relatively recently that got hit by that second hit. Those who had 2 year fixed rates that ended as the second wave came in. Young people who had thought they had caught the wave at the right time. Regardless what many here have said over the years, people really did hand their keys back to the bank and give up their homes. They couldn't afford the mortgage and nobody was buying. Banks ran out of patience or the ability to wait and so took back properties, which were then sold off cheaply to investment buyers, leaving the original mortgage holders with large debts! That won't be so easy these days as social housing won't be thre to pick up the pieces. Low as stock was back in the 90s it did exist, the 1988 Housing Act saw the development of Housing Associations, so they were in the first flush of building.

So, whilst your DH has some idea he hasn't got the whole picture. The whole picture is miserable! Much more so than now!

Stop smiling, start reseacrhing and checking your actual financial position!

bumblefeline · 12/05/2022 10:38

Nice goady thread for a Thursday morning OP.

Fluffycloudland77 · 12/05/2022 10:38

People have been saying this since 2008.

Whinge · 12/05/2022 10:38

WhatsHoppening · 12/05/2022 10:36

Right...so OP owns a house...mortgage free...and is excited for a housing crash for her siblings? Seems legit.

You forgot her husband is a lawyer. Wink

thetemptationofchocolate · 12/05/2022 10:39

I remember the days of 15% interest rates. Housing was certainly not more affordable then.

UniversalTruth · 12/05/2022 10:39

Eucalyptusbee · 12/05/2022 10:32

No mortgage and not planning on moving .

You have no mortgage and a house big enough for the foreseeable future so you are happy that house prices may crash?

You seem as naïve as the Tory MP who yesterday said we don't need foodbanks, it's just that people don't know how to cook (but he claims £200k expenses/year).

Maybe you need to get out and try someone else's shoes for a while.

SliceOfCakeCupOfTea · 12/05/2022 10:39

I have absolutely no evidence to back this up but I think that if house prices crashed, we'd have many of the rich or those who have paid off their houses buying second/third/fourth houses to rent them out or keep as holiday homes.

SamphirethePogoingStickerist · 12/05/2022 10:39

Damn! That took so long to type I missed the siblings post!

FFS!

ItsSnowJokes · 12/05/2022 10:40

Think OP may be being goady. The only people that win in a housing price crash are cash rich people. People who need a mortgage find they need a much bigger deposit, and more affordability issues from the mortgage company especially will bills rising at the alarming rate they are. There will be a lack of supply still as people who are in negative equity and really don't have to move, won't, they will stay put. People who have to move and are in negative equity will still have to find that shortfall to pay off the bank so have that debt looming over them.

CornishGem1975 · 12/05/2022 10:40

It won't make houses affordable, it won't help people on the ladder. Interest rates are rising and lenders will just get tighter and tighter when working out affordability, especially given the rising cost of living.

SamphirethePogoingStickerist · 12/05/2022 10:40

You seem as naïve as the Tory MP who yesterday said we don't need foodbanks, it's just that people don't know how to cook (but he claims £200k expenses/year).

Yep!

TropicalPotatoes · 12/05/2022 10:41

Can you not see this for what it is?

Talk of price crash=loads of people try to sell to beat "crash" = booming property market

Grumpyoldpersonwithcats · 12/05/2022 10:42

Having lived through the housing crash of the late 80's (bought a London suburbs flat for £65k in 1988, sold for £38k in 1995), I do think a price crash is overdue, and I don't understand how the current market is remotely maintainable.

It wouldn't impact me personally, but would make life FAR easier for my children. And yes of course I have sympathy for those caught in negative equity, just as I had for people I knew in the early 90's who were forced to hand their keys back. But I also have sympathy for those forced to pay inflated private rents for life.

ThereWillBeSnacks · 12/05/2022 10:42

You're being extremely naive.

The market may well slow in some areas, and that would be a good thing. I live in an 'up-and-coming' seaside town in the SE. The market was insane last year as people (mainly Londoners cashing in) paid well over the odds for properties. The town featured in loads of those 'where to move to' lists and houses were going to best-and-finals 24 hours after coming onto the market. We managed to buy but had to make BIG compromises on the property in the end (still love it though!)

Now, the gorgeous, 5-bed Victorian with all period features intact opposite me has been on for 3 months and reduced its price by more than 10%. Lots of others are hanging around and being reduced on RM. This is not a bad thing, they're still going to sell for x2 what they paid for it 10 years ago.

But a 'proper' crash is nothing to get excited about. It goes hand-in-hand with recession, job losses and of course re-possessions. FTBs won't get mortgages. People will be stuck in negative equity and unable to move. A crashing market is a really bad sign for the economy as a whole, not a cause for celebration.

OneTC · 12/05/2022 10:43

Eucalyptusbee · 12/05/2022 10:08

www.telegraph.co.uk/business/2022/05/08/borrowed-time-bad-will-housing-crash-finally-comes/

Didn't mean to come across as gleeful. Just hoping that those left off the ladder might finally have an in after so long.

Husband (lawyer but studied economics and works closely in markets / property) said things looking very bleak, in 6m time we will long for today's prices / interest rates

And in the midst of that you're gonna afford a house?

easyday · 12/05/2022 10:43

Really? Stagnate maybe, drop slightly (though no evidence of that happening yet as still very active market here sw London, though things didn't go fit over ask like some places).
I've been buying since the 80s. First flat £80k and I saw interest rates around 14%. The flat last sold last year for £795k. So I think while there are occasional dips, the trend is always up. And it would take a catastrophic fall for it to drop so far as to suddenly make huge swathes affordable to those who can't buy now. And that has never happened.

TropicalPotatoes · 12/05/2022 10:44

Also, if prices do fall. People won't move. Which creates a slow/stagnant market.

Obviously people that had no choice would move, but fewer available houses.

TropicalPotatoes · 12/05/2022 10:44

DappledShade · 12/05/2022 10:13

It wouldn't help people get on the ladder as lending would become far tighter and so it would be more difficult to get a mortgage. Might benefit those who are cash rich and can buy several properties cheap to sell after a dip. The Telegraph are always predicting this though and have been for about the last 10 years!

Also this!

edwinbear · 12/05/2022 10:45

I'm an economist, working in investment banking, advising corporates on managing their interest rate exposure. Your husband's undergrad degree in Economics 10y ago really holds no relevance to the current situation. We're in unprecedented times, if you're husband is so sure of how markets are going to react, he's in the wrong job and should consider becoming Governor of the BoE.

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