House prices and recession

[Mumof22020]

Whats everyones thoughts on house prices are they likely to come down in price if theres a recession? The prices are crazy at the moment and with the cost of living going through the roof we're surely going to hit a recession.

@65honeybee There's no conspiracy here: the people that believe rising interest rates will lower house prices tend to be slightly more "economically aware" of how the two are interrelated. If you read the comments section in the FT, you'd see a greater portion of these so called doom-sayers, regarding this topic, compared to, for example, the Daily Mail

Thanks for that @ledbydonkeys I don't actually use the daily Mail as my source of information. As I've said I don't foresee (or want) house prices to continue to rocket, it's crazy. I am hoping there is a slow down in the rate of increase to a levelling off. And that will take time so if my adult offspring were able to buy now I'd absolutely say do it, don't wait for a 'better time' to magically appear. I don't foresee a crash either, which bizarrely some people seem to get a thrill out of predicting, it would be an economic disaster

I hope not. We bought earlier this year and thankfully did a 5 year fix at 1.29% (58.5% LTV) so we do have some wriggle room if they do, but I really hope they don't.

@ledbydonkeys - are they the same economically aware people that have been waiting on a crash since 2000 ? People have paid off over priced houses in the time some have been lamenting about “ the crash “.

@65honeybee

Thanks for that *@ledbydonkeys* I don't actually use the daily Mail as my source of information. As I've said I don't foresee (or want) house prices to continue to rocket, it's crazy. I am hoping there is a slow down in the rate of increase to a levelling off. And that will take time so if my adult offspring were able to buy now I'd absolutely say do it, don't wait for a 'better time' to magically appear. I don't foresee a crash either, which bizarrely some people seem to get a thrill out of predicting, it would be an economic disaster

People get emotionally attached to what a house is ‘worth’ as an investment when it should just be a home. For some it’s the biggest purchase they will ever make so it’s natural they get defensive. Property is a ‘growth’ asset class however (for those who do view it as such) and this can change depending on monetary cycles just like any other asset class. If say you invested in a tech fund like ARK at the start of the year (which incorporates innovative quality companies) you would be down -40% so far. I’m sure people didn’t want a crash in that asset class either. That’s not to say the fund is bad, it’s just that ‘growth’ asset classes do badly in an inflationary cycle. They provide little return (if any) as they rely on ‘growth’ and money flowing in. To find a return during times of inflation money flows to the likes of high dividend paying value stocks and commodities. If interest rates rise substantially then money leaves the stock market all together and goes into banks for definitive no risk returns (like the 70’s). No one here has ‘control’ or is ‘wishes’ for people to suffer in a recession so house prices drop. Governments aren’t in control of inflation, it’s only central banks can only react (by raising rates) to help contain it (although you could argue they helped create it). People will have less money going forward, higher cost of living and banks are removing cheaper rate mortgages, so it’s only natural to expect some reaction as speculative growth cannot continue in these circumstances.

its a no brainer. prices will fall and will become visible in quarter 3 this year. once that starts, the herd mentality will change and people will want to pay less. interest rates will continue to rise to about 3% this time next year. cost of living going up. banks will lend less as peoples outgoings will be more. not many props left to keep the bubble inflated

You think it's a no brainer that prices will fall this year?
I predict a slower rate of increase then a flattening; I think it'll be in the much longer term if at all that there'll be an actual drop.
Of course, there's a fair bit of variation with location, and who'd a thought a couple of years ago that London housing would become less desirable as now many people's office can be anywhere so they're choosing prettier places. I honestly think it'll be a long time before it's anything like a buyers' market again. Sadly.

@Nothappyatwork "People have paid off over priced houses in the time some have been lamenting about “ the crash “."

Yes, those poor, indebted, sad souls who are the average readership of the FT. If only they simply believed in Britain and that market only goes up. Then they would be absolutely minting it like the average Daily Mail reader. Who needs economic analysis, facts and experts anyway right?

@ledbydonkeys but the analysis is just been just plain wrong for nearly 23 years. I do realise that’s a bitter pill to swallow but it is a fact.

I actually used to date somebody who ran a private bank and I asked him, for some insightful moments of genius that had led to his success and he admitted that it was a calculated risk but frankly most decisions could go either way no matter how well researched. But of course if we didn’t all believe that the FT readers and their like were geniuses who knew something that we didn’t then of course we have no need for the entire financial services sector and all the advice that they charge us for, that the millions out of work world wide …. best keep up the smoke screen eh ?

And of course you havent addressed the elephant in the room which as I factually state that people have been discussing a house price crash since 2000. I remember going to buy a house in 2001 and being told I was a fucking idiot because the prices were gonna crash shortly and that was when the average price in the UK was 200,000 now it’s what 300k ?

And I have indeed paid off a mortgage in that time, thank goodness I didn’t listen to “the experts”.

@Nothappyatwork we bought our current house in the late 90s but you're dead right... friends of ours looking to buy around the turn of the century were told to hang on and wait because there was 'definitely' going to be an imminent crash. Fortunately most of them didn't listen to the doom mongering 'experts'

I have to say that all the economic signs point to stagnation of the housing market this year at the very least. There could be significant falls which I would also expect to start more in the Autumn too.

I agree that people in the UK have become very attached to the idea of their house going up in value and that speculation and BTL have caused major problems. The UK property market is a national obsession. As @Lightscribe says, houses should be homes and not money making vehicles. With markets, it seems that, if sentiment changes, the herd of sheep can entirely change direction and very quickly. There has been a huge FOM herd in the last 18 months which I have found very difficult to understand looking at the outlook.

@Nothappyatwork- I'm puzzled as to what analysis specifically you are referring to.

Some people have commented that the government will do everything they can to prevent prices falling. I'm sure that's true judging by policies of the last few decades designed to rocket values. However, at present, they (including the central bank in this) are very limited in what they can do. In addition, people are worried and many are naturally reigning in their spending already. There is a recession around the corner and this concern will get worse as people tighten their belts more, leading to more redundancies, companies not surviving.

@Nothappyatwork House prices have crashed since 2000! You are looking at absolute value over a large enough window of time.

Based on your logic, one could say the stock market has never crashed, gold has never lost it's value etc.

@65honeybee Funny how those doom-mongering experts, on average, tend to be the ones financially better off than people who tend to ignore experts. What a curious correlation.

@ledbydonkeys prices have not returned to or even got anywhere near to 2000 prices never mind pre-2000 prices, even in 2008 which I presume you’re going to count as a crash… most people would describe as a bit of a blip despite a global meltdown in the financial services industry. If it didn’t happen then i dont think its ever gonna happen personally.

@ledbydonkeys ok you win, house prices will fall by 20% by Christmas.

It clearly means a lot to you, but forgive me if I don't bet any money on it

Also, @Nothappyatwork "he admitted that it was a calculated risk but frankly most decisions could go either way no matter how well researched"

Sure. I believe you. This sounds exactly like the CEO of a private bank. In fact, pretty sure when Goldman's CEO talks to his shareholders, that's the same language he uses.

@Nothappyatwork "despite a global meltdown in the financial services industry"

What financial crisis? S&P500 is nearly 400% higher than in 2007. That's nearly 200% more than house prices have risen. There was never any crisis. Fake news.

The government will do everything in its power to prop up prices

Difference is interest rates. If they rise significantly then people may struggle.

@ledbydonkeys

Also, *@Nothappyatwork* "he admitted that it was a calculated risk but frankly most decisions could go either way no matter how well researched"

Sure. I believe you. This sounds exactly like the CEO of a private bank. In fact, pretty sure when Goldman's CEO talks to his shareholders, that's the same language he uses.

@ledbydonkeys - People have conversations in private that they wouldn’t necessarily repeat to their customers. I do it all the time, I do it on Mumsnet 🤣

@billysboy

The government will do everything in its power to prop up prices

Sure but how much can they (and the bank) actually do at the moment?

Interest rates will make a difference to what people can afford as will the much higher energy bills, council tax, food and travel costs.
Plus there is the change in sentiment; people are tightening their belts.

Which is why I expect a slow down in the rate house prices are increasing, and then maybe a levelling off. I don't think many people are denying that. That's a very different scenario from the housing market crashing by the end of the year which a couple of people seem to want predict.

@65honeybee

Which is why I expect a slow down in the rate house prices are increasing, and then maybe a levelling off. I don't think many people are denying that. That's a very different scenario from the housing market crashing by the end of the year which a couple of people seem to want predict.

I guess it depends how you define a crash ? > 20%. It's possible that it might happen within a year although I haven't noticed anyone give specific predictions either in percentages or time frames. Overall, I would be very wary of over paying, bidding way over asking price, etc as has been happening a lot recently.

So would I... In theory! But it's easy to say that as a home owner with my mortgage paid off. If I was desperate to get on the ladder, or desperate for more space/ a better location etc then I can absolutely understand why, with such a shortage of housing, people feel pressure to pay the best price.

At the other end of the market, where you're talking about eg houses in desirable areas, near the coast or in lovely countryside, where people might wish to retire, I imagine property will continue to increase in price or hold its value because this demographic won't have young families to support and will be cash buyers; there's also a limited stock of houses in such areas which again makes them more valuable