Is housing market set to crash ?

[Moominsweetie]

Talk to me, clever people - what’s the outlook over the next 6-12 months?

It’s not a fundamental economic concept. Just because low interest rates push prices up, it does not automatically follow that high interest rates push prices down. The market forces that push prices up are different to the market forces that push prices down.

And yes, if a concept is not explained in that article then you cannot use that article as evidence of the concept!

@Iamthewombat provide evidence for anything I said being untrue. I didn’t say that prices wouldn’t go down. I said that they won’t go down at the same rate or recover at the same rate. Here’s an article discussing the recovery after the 2008 crash. Recovery after 2008 crash Some recovered after two years, some took 14.

As for my asset being “special”, I am talking about a property that has been bought and sold. The purchase price and sale price are a matter of public record. I can’t be in denial about something that has already happened when I can prove what I am saying is true.

And if anyone is being petulant or spiteful…well re-read your post.

Like some other people on this and similar threads recently, you are doing your very best to terrify people. I am sharing my experience of someone who has lived through a property crash and didn’t have a particularly negative experience.

I'm not using one specific article as evidence, I didn't link to the article anyway.

It's just a well known, accepted fact that house prices fall as the cost of credit increases. Access to cheap credit is the chief 'demand' and the withdrawal of this (as we have now) will cause a fall in 'demand' and price falls.
Some people will still need to sell, a mixture of people, as has already been mentioned.

In addition, you don't have high interest rates in isolation. They have knock on effects, higher borrowing for businesses and private consumers causes them to consume less. A recession is forecast and high interest rates, effectively, worsen this. This dynamic leads to businesses cutting costs, cutting staff hours and making redundancies. This will obviously lead to further falls in house prices.

You don't seem to understand these economic facts.

I’ll rephrase the question then. I know that others have tried asking it, but hope springs eternal.

You dispute that higher interest rates will act as a brake on property prices. Your rationale so far has been:

• HPC forum (whatever that is) isn’t credible. My understanding was that the PP linked to an independent article that also happened to be linked to that site.
• People will stop selling if prices reduce. You do get that a significant number of people will have no choice but to sell if they can’t afford their mortgage and living costs? That’s what happened in the early 1990s. That, or “handing the keys back”.
• People ‘can’t afford to buy’, which you are using as an argument in favour of stagnation as opposed to reductions in asset prices. Can you see that when assets become unaffordable, and where a market still exists, as it always will for property, the prices of the more expensive assets must reduce? A PP illustrated this rather well with boxes of Roses and packets of biscuits, which I see fell on deaf ears.
• The government, according to you, props up the market. Well, they did that in 2008 by accident, when QE and very low interest rates led to a massive expansion in the money supply. More money chasing the same assets: wit didn’t take a genius to work out what would happen. Now, we have to have higher interest rates to control inflation. They aren’t going back to 0.25%. Not unless you want to be taking a wheelbarrow full of tenners to join the bread queue at Tesco. In other words, the government will not be ‘propping up’ the market. They can’t afford to. They have used their only option, which was softening stamp duty in the mini budget. They have nothing left now.

Do you still maintain that higher interest rates do not lead to reductions in asset prices?

Please stop tagging me in your posts. You’re like a petulant teenager. With an average teenager’s grasp of economics (apologies to teenagers doing economics at GCSE or A level; they can probably also tell you that the past does not predict the future).

@Iamthewombat oh come on, is that all you can do, call me names?!

So the past doesn’t prove what will happen in the future, but where is your “proof” of what will happen in the future. You can’t prove something that hasn’t happened yet! And, again, please tell me what isn’t true about saying that all properties will not fall by the same value or take the same time to increase? Do you genuinely believe that every property will decrease by the same amount and will take the same amount of time to recover?!!!

Yawn. I predicted this morning that you’d try to start a semantics argument about the use of the word ‘uniform’, and here you are, doing it.

Thanks for informing us that “you can’t prove something that hasn’t happened yet”. That is real insight.

What I, and other posters, have tried to do is explain fundamental economic concepts in answer to the OP’s question. That you have your fingers in your ears and can’t bear to hear that your house might reduce in value isn’t my problem, or theirs. You give yourself away, moaning that anyone with a view opposed to yours is “doing their very best to terrify people”. Would you prefer if everyone said, there, there! Your two bed terrace in Basildon will be worth £2m by 2025!

@Iamthewombat are you implying that I have a two bedrooms terrace in Basildon (or similar)? You couldn’t be more wrong!

I have never once said that my house won’t fall in value. In fact, I hope the market does dip as we might finally be able to get that dream barn conversion. I am not particulary concerned about a fall because we have a huge amount of equity.

And again, you haven’t answered the question. Are all properties going to come down by the same amount? Will they all take the same amount of time to recover?

@Iamthewombat who is the one hurling insults?!!

So you think wage rises since 2008 can make up for the loss of the global cheap credit machine? That would be like the difference between being in the water with a Great White shark and a sardine, and you think more ex-BTL hitting the market will somehow contribute to keeping prices up? And Foreign "investors" (who are totally independent of the borrowing rates that affect mere mortals BTW) from presumably places like China/HK where they have stable buoyant property markets that just throw off piles of extra dollars to buy ex-BTL shite in Blackpool are going to step in? Excuse me if I just keep getting my info from the HPC forum!

Also if you think that introducing BTL mortgages and allowing people to have multiple BTL mortgages on top of their primary residence mortgage "just happened", then you are pretty gullible IMO.

"That is a group of people who have been largely incorrect in their predictions for about 20 years."

Most posters joined after the 2008 crash and the massive co-ordinated effort by central banks to prevent price discovery that has led us here. Very very few people in the world were predicting a HPC in 2002 (although prices were starting to shoot up as interest rate policy started to change after 2001) The basic prediction on HPC is that the property bubble is kept afloat by low borrowing rates and that it can`t work at current price levels with higher rates, and also that a large number of people will borrow as much as they can for property until the bond markets basically blow the whistle on their mania. All correct predictions so far IMO, obviously they called the extent that central banks would fuck up the economy for ordinary people wrong, they were way out on their timing on that one, but that just means that the damage is far far worse than it could of been and eventually people carrying large mortage debts will get caught out badly.

inews.co.uk/inews-lifestyle/money/property-and-mortgages/mortgage-rates-hit-6-and-could-collapse-market-if-they-go-higher-1895753

You can look at my previous posts outlining exactly at the point we are now from a year or so back.

Am I Mystic Meg? No. Do Loss Adjusters, Actuaries, Insurers, Risk Management and macroeconomists gaze into a crystal ball? No.
They use past correlations, current trends and economic data and future gilt yields in order to determine direction and adjust accordingly.

As in the article above we could see rates get to around 10%. Now BoE use treasury yields to set interest rates (2 year for interest rate rises, 10 year for direction) that’s why they had to intervene with pension funds at 30 year gilt end.

We are currently at 6% mortgage rates. Mortgage rates are based on the gilt swap rates (how much it costs the banks to borrow money) Banks don’t wave their finger in the air and decide to raise mortgage rates and make everyone’s lives a misery. It’s entirely out of their hands.

The BoE are signaling (through their pace of rises not keeping up with the Fed) that 4% base rates is around our limit at the moment. Now in order for that to rise further a few things would need to happen. Firstly November should be the last rise (which has already been priced in) and it requires the Fed to ‘pause’. Then the BoE and ECB can gradually catch up. If they don’t then the rest of the western economy starts to implode starting with pension funds.

They are widely expected to ‘pivot’ and enact yield curve control and further QE as well as tightening at the same time. Inflation would be eating away at the balance sheet faster than they would be adding it on. Now this in turn would cause would cause compounded high inflation by next year. This then would mean that interest rates would eventually have to go even higher even up to 10% eventually.

To quote Stanley Druckenmiller:

Once inflation gets above 5% it's never come down unless fed funds have gotten above the CPI. Frankly I don't think we'll get there because the extent of the asset bubble and the damage that would be done.

Inflation was not driven by supply chains, and demand shortages. They were just catalysts, the cause of today’s was the monetary policy of the last 20 years.
High inflation like today was last seen in the 70’s. It took Volcker 20% interest rates and a recession to get it under control.

inews.co.uk/inews-lifestyle/money/property-and-mortgages/mortgage-rates-hit-6-and-could-collapse-market-if-they-go-higher-1895753

10% well within the range of possibility now, what a difference a couple of weeks makes, LOL. The point they miss of course is that the market will function perfectly well...........if prices drop to pre- cheap debt experiment levels! So simple even a child could understand, and cheap property is absolutely the best medicine for hard striving people!

"It took Volcker 20% interest rates and a recession to get it under control."

Oh Lordy, can you imagine! The boys at HPC would be creaming themselves.

@DeadHouseBounce “LOL”?!! Why would you find people losing their houses funny?

@Lightscribe I think you need to have another read of my posts. Did I ever once say that house prices wouldn’t fall?!! No, I didn’t. I said that they wouldn’t all fall by the same amount and they wouldn’t all take the same amount of time to recover. Nothing controversial about that.

Very few will lose their house IMO, the ones that do are the economic basket cases anyway, the banks are going to let people just stay where they are renting from the bank for life, mass repos isn`t politically doable nowadays probably anyway, although many would benefit from the lesson in not being a diddy with debt and borrowing....and that is what the LOL is for, up until recently many people thought that they could just go on borrowing silly amounts for average property without any problem.....now THAT is funny! Trying to shut down serious discussion by playing the "hater" card just makes you look like an economically challenged teenager (or 30 something, LOL) sorry.

It's really hard to predict what the Fed will decide to do and when. At present, all the noises are that they will continue to raise rates and protect the dollar but they could change course suddenly. I'm sure they will restart QE at some point.

The BOE seem unable to wean the UK economy off QE. They (the BOE) are clearly concerned about protecting the housing market and banks but I don't see how they can stop a collapse at this stage with very high inflation and all the other central banks raising rates.

Looking at mortgage calculators, I think that the current rates (compared to a year ago or less) would cause a fall in prices of 15-20% which will filter through into the figures before too long. However, that is not taking massive inflation into account. If the additional household expenses are taken into account, the fall would be much larger. Once the recession hits and redundancies start, that will lead to more falls in prices. Depending on exactly what happens and the responses from banks, we could very large falls.

Cheap property, but expensive credit does not make houses more affordable. Only if you have a large deposit.

Some sort of scheme where the banks become the owners and people pay them rent seems likely. Maybe with a possibility of buying back if circumstances allow it.

Nonsense, last time rates were really high you could buy a 2 bed ex-council property for 12k in many parts of the UK, if we are to believe many posters on here and elsewhere rent has been super expensive for years, of course people can afford it! What are they going to do, live under a bridge? People will just cut back on gyms, cars, phones, coffee out etc. to pay their mortgage, the key thing is that getting the property cheap allows you to be debt free so much quicker.

It’s quite simple, as I stated if the Fed doesn’t pause and pivot then it breaks the western allies economies as a whole, UK, EU, Japan etc etc.

That’s not what they want, when OPEC and the BRIC nations are coming away from the petrodollar and are loosening ties with the US.
They may threaten and bluster, but they need us as much as we need them.

Without a pause and pivot we break and so does the EU it’s as simple as that. That means we have a lot more to worry about than house prices.

There will always be cheap properties I'd that's what you are after.

Yes, this will be in the planning and costing stages right now no doubt, it still boggles my mind that the public fell hook line and sinker for this ridiculous property ponzi scheme though.

LOL, pull the other one its got estate agents clinging to it, I dont mean somewhere with bullet proof glass I mean AVERAGE BASIC PROPERTY BEING AVAILABLE TO AVERAGE PEOPLE WHO GO OUT TO WORK EVERYDAY AT A PRICE THAT DOESN`T MEAN 35 YEARS SERVITUDE TO A BANK, or going bankrupt when interest rates rise to about half their historical level.