Is housing market set to crash ?

[Moominsweetie]

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

Have you read and digested this article you posted? It does not support the carnage you suggest. It’s also interesting how it stress on slow down in price growth rather than the apocalypse you predict.

It’s a much more sensible analysis, which is consistent with what I and others have been saying.

10% fall? I am assuming prices going back to the last time mortgage rates were 6%+ and then falling more due to recession/cost of living inflation.

And read it from start to end to really get the analysis rather than pick a statement and run away with it, predicting your end of times.

'The decade long house price growth party is over. If we do indeed see rates anywhere near the 6% that the markets are pricing in, the only outcome is a housing market crash.'

Not sure that suggests anything other than a very sharp drop in prices, actually!

(In a particular, not unlikely, situation, that is.)

Last time interest rates were 6% was in February 2000. Wages have grown since then so house prices certainly won't fall to that level.

Can you remind us of the statement I picked, and the prediction I made, I seem to remember just posting a link?

Wages have grown very little really in many decades, they certainly have not grown enough in the bubble years to offset interest rate hikes AND cost of living increases AND keep house prices at silly levels, you are dreaming if you think that is going to happen.

Wages haven't grown at the same rate as house prices though. That's the problem here.

Better if you remind yourself especially given your crystal ball.

Says you who is also predicting the future, albeit a different future!

At least it’s based on sound economics and not nonsense apocalyptic imaginations

Obviously, one thread does not make a pattern, but I've just posted in a thread where the OP is desperately trying to sell a rental where the rent no longer covers the mortgage. They have an investment buyer who's made an offer under asking, and is now trying to negotiate the offer down because they're worried about the property value falling.

If interest rates do reach, say 5-6%, there will be others in this position, maybe not desperate to sell, but less keen to keep the property going as a rental if it can only break even, or is running overall at a loss. That increases supply, right? I sort of assume that cash investors would prefer an already tenanted property that will start earning income straight away? So then, they're not necessarily going to also buy a home being sold by a family as well- especially at a time when it may feel a bit risky to buy?

If some landlords decide to try and get vacant possession for a quicker sale, that increases the supply for everyone, too. And if the only people available for a quick sale are those making offers under asking, that brings prices down, right?

Average salary in 2000 was £18.8k in 2021 it was £31.2k. If you believe that they are going to drop to 2000 levels then you really don't understand economics.
If you read what I have said, I do expect them to fall. However I also expect them to remain at the same levels of being unaffordable to those without a significant deposit.

5-6% is quite significant, surely that is going to have an impact on house prices.

So average salaries haven't quite doubled in that time. What have house prices done in the same period? Way (way, way) more than doubled in many areas, that's what.

A downwards correction is inevitable. How far / fast will depend on interest rates / ability to borrow.

It will crash in the south west. We have enough housing just poorly allocated.

A lot of AirBnBs will be vacant for huge parts of the year - who can afford the fuel, food and weather risk. Lots of us will be holding back on long weekends and extra UK breaks particularly if you've been gauged by the post Covid pricing.

Second homes, ethically now getting a hammering, not quite so desirable. New legislation on its way re council tax, tax write offs, etc. The hassle of trying to insulate poor but cute housing stock from a distance when you have your primary residence to cope with as well.

It will be interesting to see if Wales, the lakes and other hot spots that rapidly increased over the last couple of years see a dramatic decline.

A neighbouring chocolate box cottage went on the market last month at a very optimistic, high price, too much for locals, too energy inefficient for BTL, too much to lock up and leave, only two curiosity viewings. Ideal for preppers, It would have certainly sold at peak pandemic.

Yes, and other pressure on affordability.
Ongoing inflation rate on essentials
Recession and job losses
Number of defaults and how much the banks show forbearance for these people.

@postcardpuffin has written some really sensible posts on here although I must admit that I am puzzled as to which area hasn't seen asset price inflation recently.

I don't disagree that house prices will inevitably fall.
I was specifically disagreeing that they would fall to the prices of 2000, as a PP suggested.

Average rate on a two year fixed deal is now 6%

We are talking about mortgage rates, try 2008 for that, and we all know what happened next.......

Apologies, yes you did say mortgage rates.
Average house prices fell 16%, and took 6 years to recover.
Wouldn't be surprised by a 16% fall this time, I would expect the recovery to be a little quicker, maybe 4 years.

Well I bought a house in 2006 and sold in 2010 for 15% more than I paid for it. There will not be a uniform decrease across the board. Too many variables.

Do you think they will cut rates to zero again this time?

No I don't. I think interest rates will rise next year, before being cut the following year. Difficult to guess what levels that may be.