Is housing market set to crash ?

[Moominsweetie]

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

The only ones it will really affect are those that offered way over the odds in the past two years I guess and they probably won't be moving.

I don't think there will be a massive crash but who knows for sure?

Unfortunately a crash AND massive hike in interest rates only benefits those with equity.

In the 90's you could make the big jump from a two bed terraced to a 4 bed detached because you had the deposit and credit history.

Truck is to buy just at the right time again which is a gamble

Negative Equity is an issue if you want to re-mortgage, in fact it is an all round ball-ache and PITA, most normal people don`t want to be in it, whatever nonsense you trot out. The first thing people will do as rates rise is stop bidding silly money for basic houses, because they fear NE more than they want an overpriced house.

But interest rates will be higher. So what would you gain by waiting?

They're already high. We'd already be looking at 6%. I'll happily go for 7% for a cheaper house.

"Unfortunately a crash AND massive hike in interest rates only benefits those with equity."

No, that means that the equity is flying out of the house like gas from a sinking airship, it benefits people with cash and people who want less of a debt load, they may even be paying LESS each month even with higher rates if house prices crash properly!

We may move and are cash buyers and it would definitely benefit us so we are hanging on for now

Wages will inevitably increase over the next couple of years which will allow people to get bigger mortgages.

Demand only outstrips supply because there are lots of people who already own at least one property competing with those who just want a home to live in. Landlords, people with air bnbs, second home owners etc.

If people in those groups (not all but some) stop buying for whatever reason, and maybe even some landlords start selling (those with mortgages can't charge rent that covers all their costs, for example), and there are less people in a position to buy as they can't get the mortgage they need, I do think that changes the equation quite a bit.

I know a few people in the position of trying to buy who have mortgage fixes that are about to expire, and are pushing their sellers to complete, because they know they can't get the same mortgage again. I think for people in that sort of position, if their sale falls through, they'll hold off for a bit before looking to buy again.

I know it's different to 2008, and there will be less repossessions for various reasons, but a lot of people's mortgage payments are so high that 5% interest rates become as unaffordable as double digit rates in previous decades. In some cases, they may not let things get as bad as potential repossession- because suddenly renting will be significantly cheaper than owning. I'm talking about young people here, who maybe also need to move for work. And there will be people who literally can't pay, so what happens then?

I'm not saying a crash will happen, but those who maintain it's impossible because "demand outstrips supply" do need to consider there are circumstances where this no longer applies.

I actually think if things got to a 10% fall in house prices, people would start panicking, and you would see things in free fall. I think the government would want to step in to help- but would they be able to?

People won`t want bigger mortgages if they see house prices dipping.

Also wages may go up, but if there's a recession a lot of people will unfortunately lose their jobs altogether.

Government couldnt step in to run a piss up in a brewery, if they try they will no doubt fumble it like they did with the economy last week and make it worse for mortgage debt owners, you are right it isnt 2008, it it far worse! Personal/mortgage debt has ballooned massively since then, excellent post though.

That should be a massive boost for high house prices?

Can I just check something. If you have a 300k mortgage on a property that's £500k then your ltv is 60/40. If the value drops to £400k then it's 75/25. So when you come to remortgage you're looking at a weaker ltv as well as higher interest rates generally?
I'm reading a lot about falling prices only being an issue if you want to sell, but unless you're mortgage free, it can still be an issue for future borrowing?
Just trying to wrap my head round it all.
Apologies if this has been covered, I'm on the app and there's a glitch with replies and quotes quite a lot right now. Thank you!

Yes - it will effect your LTV when you come to remortgage

Thank you, glad I've understood correctly.

Yes, you’re correct.

Don’t pay too much attention to some of the posters here, who are clearly living in some kind of Brexity La-La Land, reigned over forever by Queen Kirstie and King Phil! 😂

Thanks @postcardpuffin although I have three years left on a very low rate, realistically I'll need these three years to try and mitigate what comes next as much as possible.
Just trying to make sure I'm on top of everything!

That being said, with the way prices went berserk around here, even a 20% drop would still render much of the stock unreachable for lots of people. Unless we become more of an area people move out to. I know a few people that have come in priced out of other places.

@postcardpuffin
Not near me in the sunny south east, where the houses are pretty much exactly the same price they were in 2020

Where on earth are you in the south east that prices haven't changed in nearly three years, during a period of record low interest rates, which caused a house price boom almost everywhere.

The exception to this is where you remain with the same lender, without borrowing any extra, and is typically known as a product transfer or product switch. This is generally not considered to be new lending by most providers, and as such they do not re-assess income levels or property value.

Therefore, even if there is a significant fall in the value of your property causing a dramatic change in the LTV amount it is often possible to remain with your existing lender without the need for a fresh property valuation or to prove your income.

I’m in a property hotspot actually; limited houses coming on and stuff sells fast, yet prices are still stagnant and stuck at the same levels they’ve been for quite a while. New build area so easy to compare. The £1.25m houses coming into the market are the same ones that were £1.25m when they were built six years ago! Ditto the £700k ones, etc. etc. Flats have been static here at 400k for a 2-bed (high design) new build for several years now. My own house was around 400k when built ten years ago; identical houses were topping out at 525k in 2018 and are still coming on and selling for exactly that price now (they’re all identikit so no variation between them!) No real movement at all at what seems like a price ceiling.

@Mildura thank you that's helpful to know.

Jaywick 😀

@postcardpuffin
A property 'hotspot' in SE England, where everything sells really quickly, but prices haven't increased in the past few years despite nearly zero % mortgages, and prices increasing nearly everywhere else....?! 🤔

propertyindustryeye.com/the-decade-long-house-price-growth-party-is-over-as-buyer-demand-falls/

I'm assuming a 10% fall. If more than that hopefully will be temporary and recover a bit. But if people cant get a mortgage (especially at the lower end of the market) then prices have to fall up the way. Although areas popular with foreign buyers probably not so affected. That was what happened on central London after 2008. I'd guess prices stay lower for a couple of years and then rise slowly as wage increases gradually outweigh effect of interest rates