Is housing market set to crash ?

[Moominsweetie]

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

If prices drop much below 20% I would be extremely surprised. Maybe I am too optimistic but I doubt that.
The fact is when prices fall, only those that really have to sell or those with big equity and looking to move up will go on the market. Either way, there will be a lot less properties coming to market, so choice will be restricted.
But I have posted enough on here, so am not going to predict or argue on here anymore.
For the stats this makes interesting reading
www.riskconcern.com/post/how-much-do-house-prices-in-the-uk-fall-or-crash-in-a-recession-50-years-of-data-analysed

I'm actually less pessimistic than I was a week ago. Kwarteng is having to react to the markets (whether he likes it or not) and has met with mortgage lenders. So while a fall is still on the cards think it may be more gradual (hopefully)

Out of his (and the government and retail banks hands) whatever he does or says is just theatre. This is global, credit tightening is global, monetary policy effects is global, inflation is global.
It’s entirely in the hands of the central banks and how their actions, and they are running out of road.

Yes and I see that their latest intervention hasn't worked:

www.ft.com/content/c7ed9668-e316-4672-99fb-2bffa841b7e8

I'm not sure if people understand that this is why the cost of mortgages has risen so much. The UK is seen as higher risk, much higher risk than it was. This makes the UK poorer and it makes borrowing costs higher. These things have consequences. As @Lightscribe says they have run out of road. As I have already said, I think the fall will be much more than 20%.

I wouldn't jump to the conclusion that no one will move if house prices fall. It's been well established on this thread that it's easier to upsize in a falling market.
While the "value" of your house may go down, the cost to upsize will be lower than if prices had risen or stayed the same. This alone will entice some people to move.

But there is another factor I haven't seen mentioned yet. Someone upthread said that fixer uppers are not as popular at the moment. I expect this to also apply to extensions, especially with the long delays and increasing costs. With homes being unaffordable for so long I am sure there are lot of people who have had to make compromises on the size of their home. There will also be people who have outgrown their current home but haven't been able to move because, as illustrated above, as prices go up the gap between their home and the next rung becomes wider.

In recent years it probably would have been cheaper to extend rather than to move. Or to buy a smaller house with the plan to extend in a few years. In a falling market we may reach a point where it is cheaper to move to a larger home than to extend, with the added bonus of not having to put up with building works. In that scenario I think there would be plenty of people willing to move rather than stay put in a house that doesn't meet their needs.

Either you are a desperate property developer, or you just really don`t have a clue about what has been going on for the last 14 years and what has changed now, either way it is pretty funny. In fact the general understanding of economics on this forum is pretty low IMO.

I am trying to move at the moment with the expectation that it will become cheaper to move by next year. I only put my flat on the market because i noticed the bigger flats were becoming cheaper (because i guess at that time, a lot of people were moving out of London). I am hoping that even if the price for my flat falls, as it is pretty 'entry level', it may not fall as much as for the larger flats which will allow me to move up. In the past, the view was to stretch yourself so that you wouldn't need to move in the future, saving on stamp duty and legal fees. So people wound up with bedrooms for unborn children etc. However, in this climate, I do expect people will be more conservative and buy for what they actually need

I think the market for flats is different tbh, flats have been less buoyant than houses for some time. We sold our flat last year for less than we bought it for in 2016.

but you were still able to move? did you buy a house?

We decided not to buy, we wanted to rent for a bit to scope out the area as we moved to a new city. We accepted selling at a loss, basically just got our deposit back. Glad we did now though or we'd have been royally fucked. But in the end we weren't any better off having bought, we might as well have spent those 5 years renting.

Neither.

I've said quite a few times on here that I think house prices will drop. I just don't think we'll have the scenario you're getting rock hard about, i.e. this 'absolutely epic' crash where house prices halve yet banks are still falling over themselves to lend to anyone with a 10% deposit.

Guess we'll just have to revisit this thread in... what, a year? Since you seem pretty sure it'll all be well underway by then.

Posting on House Price Crash Forum since 2007, sitting on the sidelines and renting, when you could of paid off your entire mortgage by now, doesn't show a great understanding of general economics either.

I’d suggest that before criticising another poster’s ‘general economic understanding’, which in this case doesn’t appear to be lacking, you master the basic rules of grammar.

@SilentHedges quite

@DeadHouseBounce I'm sure this has been explained to you many times already, but here we go:

Anyone with even a basic understanding of economics knows that a crash is actually a Bad Thing. Because crashes happen when hardly anybody can afford a house. In every single crash up until now, the only ones who benefited were cash buyers and those looking to move up the ladder (rather than simply get on it). Because interest rates.

I know you're going to come back with more questions which you seem to think prove your point ('What about the magic money fairy at the bottom of my (rented) garden, eh? Eh? Are you suggesting nobody has a magic money fairy? How can you know that, can you prove it? LOL you haven't replied, guess you don't know the answer...') But someone else can take over arguing with you now, I've done my bit.

DeadHouseBounce, I would certainly benefit from a crash as I sold my house six months ago and am renting while I find something I can downsize into. I come onto these threads because I'm interested in the housing market and the economy as a whole. But there really is something quite unpleasant about anyone who is positively gleeful about the financial suffering of other people.

I am sure it must be nice for jealous people to see homeowners brought down a peg or two, but for every smug, greedy homeowner (if there are any) there are young couples and individuals, families, who saved hard to buy a house and are very worried about negative equity, a low LTV that makes remortgaging difficult and expensive, and keeping their home while the cost of everything else rises too. And nobody saw a war in Europe or the quadrupling of energy prices, not even you.

You're absolutely right I used "could of" instead of "could have". Do pull me up again, I like to get things right.

Back to the subject of economic understanding. DeadHouseBounce and I broadly agree on most points. High house prices have strangled the economy, they have forced (or otherwise) record levels of unsustainable debt and killed social mobility, to name but a fraction of the negatives. HPI helps no one, apart from property spivs who want to make a quick killing out of what was originally designed to be basic shelter and is now an investment vehicle. Like many people I hard grafted at getting a deposit together for a house, while stuck in a crap rental, trying to time the market. Despite being a reasonable earner, I had to keep my lifestyle uncomfortably basic, so that I could save enough deposit to ensure that my mortgage debt would be manageable and paid off within my 5-year fixed term. I like to be prudent. I appreciate that a lot of people are not in that position and are stuck between eternally renting or taking on huge debt. It's a horrible situation to be in.

I welcome lower house prices. What I do not welcome is misery heaped upon those with mortgages. Having done a breakdown on another thread of ownership rates, the number of those in distress should be small, and the government, I'd imagine, will step in with their usual props (that got us into this mess) and put people on never never interest only, rather than repossess.

Where I feel DeadHouseBounce lacks economic understanding, is that how you believe the game should be played, isn't how the game works. They have, for 15 years, posted on House Price Crash Forum, predicting a crash every month and mocking the stupidity of those taking on mortgages while celebrating how personally clever they are in their rental. Sitting on their hands, waiting and waiting and waiting. They've managed to miss obvious buying times, because they don't even know when to catch that falling knife. Their mortgage could be paid off by now, instead they're trolling Mumsnet.

I welcome lower house prices. What I do not welcome is misery heaped upon those with mortgages. Having done a breakdown on another thread of ownership rates, the number of those in distress should be small, and the government, I'd imagine, will step in with their usual props (that got us into this mess) and put people on never never interest only, rather than repossess.

I agree with this sentiment. Honestly, I can’t see there not being some level of government intervention to shore up the market. The last time there was a comparable financial crisis several decades ago, there was much greater availability of social housing and less pressure on housing stock generally. Whilst the general anti-Tory rhetoric is that the Tories want to see all poor people starving and sleeping on the streets, the reality is that there’s actually no appetite for this (as much as anything, who wants to have to step over hordes of rough sleepers on their way home from the opera?) and if hundreds of thousands of people are at risk of defaulting on their mortgages and facing repossession, the government is aware there’s no capacity in either the social or private rented sectors to pick up the pieces.

Like @SilentHedges , I would welcome lower prices as they are too high, but I don't want millions of people to get into financial difficulties.

I bought after 2008, 10% mortgages weren't available and the minimum was 25% so even though prices had dropped, it was only possible to buy with a large deposit which made it hard for FTBs. There was a huge tightening on credit, just before this it was common to get 100% mortgages or even 120% Northern Rock Together mortgages... this was a 100% mortgage and a loan, not a great idea in hindsight. Banks don't like to take risks if they think the market may fall further.

The fall in prices did help, I couldn't have afforded to buy if they had kept going up. It was not as helpful as you would expect it to be as credit became less available.

Interest rates are also important for mortgage affordability
£100,000 over 25 years at 8% is £771 per month
£200,000 over 25 years at 2% is £847 per month

These will obviously fluctuate, it just illustrates the difference in affordability at different rates. There isn't a huge amount of difference between £100k and £200k if the interest rates are high at a time of cheaper prices or low at a time of more expensive house prices.

£200,000 over 25 years at 8% is a shocking £1543 per month, it would be hard to afford that kind of rise in a mortgage, especially alongside other cost of living rises in energy and food.

As much as anything, who wants to have to step over hordes of rough sleepers on their way home from the opera?

Didn't work out well for Batman's parents, I know that much.

mortgagors overwhelmingly vote for Tories. At least they used to before Truss. I am sure they don't want people on 100k losing their homes and having to move back in with parents. the tory party is dead if that happens.

"But there really is something quite unpleasant about anyone who is positively gleeful about the financial suffering of other people."

Like bankers and people who bought in the 1980s expecting the young and FTBers to borrow 10 times their income for a Sky Box in London, that sort of unpleasantness you mean?

CHEAP PROPERTY IS GOOD FOR HARD WORKING ORDINARY PEOPLE, WHY WOULDN`T IT BE?

Don`t you grasp this yet??

We understand that cheaper property is good, but you don't seem to understand that if interest rates continue to rise and if houses fall by 50% (as you have stated, I don't think it will be that high), it is going to be incredibly painful for a lot of people. I do think they will fall, but it won't neccessarily be more affordable with high interest rates as property has going up for so long, even a 20%/30% fall won't make as much difference as it would have done. I don't know the answer, the prices do need to be lower but how do you support people so they don't lose their homes in the economic fallout? Unfortunately, house price crashes tend to come with grim economic circumstances.

Newsflash; Millions of people are already in financial difficulties, mainly due to their own stupidity in overborrowing, that gate is open they can`t be saved now, the time to save yourself was by being prudent BEFORE rates started to go up.

"There isn't a huge amount of difference between £100k and £200k if the interest rates are high at a time of cheaper prices or low at a time of more expensive house prices."

Except that if the initial debt is 100k you have more chance of paying it off earlier, and the monthly payment is still cheaper! That IS a huge difference. Large debt loads keep you in servitude longer than small debt loads, basic economics!

"I can’t see there not being some level of government intervention to shore up the market."

Really? Everything they have done so far seems designed to break the housing market....it couldn`t be deliberate could it, they are not that smart?

CHEAP PROPERTY IS GOOD FOR HARD WORKING ORDINARY PEOPLE, WHY WOULDN`T IT BE?

Wrong

FTB do not benefit from falling house prices when interest rates go up - unless they have a huge amount of cash. Whatever they are not spending on the house, they will instead be giving to the bank in interest payment, and it will be MUCH harder to get a mortgage.

If ordinary working people couldn't get on the ladder before, then they certainly won't during a market crash.

Only the cash rich benefit from a crash