Will The Housing Crash Be More Devastating Than The Early 90s?

[TonyTeacake]

It looks like mortgages approvals have falling off a cliff from last summer.

Morgage Approvals
Aug 22 = 74443
Sep 22 = 66785
Oct 22 = 58018
Nov 22 = 46112
Dec 22 = 35612

You can see from the interest rate chart the rise in interest rates for mortgages has hampered affordability for most people.

The pendulum has now swung from a sellers to buyer's market. With 8% of the market being cash buyers this won't be enough to stop property prices from going down further as there isn't enough demand due to mortgage approvals falling substantially and there is so much more stock coming on the market with not enough buyers. Lower affordability means one thing house prices have to come down much further. Supply is now outstripping demand.
You can see this chart by RICS Chart: New Buyer Enquiries & New Vendor Instructions.

Also if we look at average wages they are not keeping up with inflation which you can see in the chart below.

To sum it up with inflation proving to be sticky we can expect more interest rate hikes this year which is only going to affect the affordability of people buying houses even more. It looks like this crash has already started and I expect YOY average drops for 2023 to be around 10-15% with further drops going into 2024.

Please share your thoughts.

And there’s no tomatoes because people can’t afford to pay the proper price of production, nor their energy bills!
There is no slack in the economy, and people were potless at near zero rates.

No one has ever explained why a drop in average selling prices is 'devastating'. There are a couple of presumptions that underpin this, both of which are wrong. First, that a buyer could have bought a different house for less money, and therefore has buyer's remorse. Except they couldn't have bought a different house for less money. There's no counterfactual. The only houses they could have bought at the time they actually did were the ones for sale at that time, and for which the owners had an idea about what price they would want to achieve to make it worth selling. The 'remorse' element of being devastated is entirely illusory.
Second, that there is a risk of either negative equity when selling and/or unfavourable terms when re-mortgaging. Except, people don't buy/sell houses and mortgages every month, like they do with groceries. The average tenure for an owner is over a decade. The numbers who buy at peak AND sell in the subsequent trough are tiny. (Not tiny enough for these boards to be exempt the 'look at me' posts who did just that ... but tiny enough to be statistically irrelevant in terms of describing the behaviour of most people). For the vast majority of people, their actual tenure and the dates of buying/selling straddle most troughs and they still end up net positive (albeit with a lower increase than the theoretical maximum had they timed the market just right).
But 'devastating' is totally the wrong word.

I’m willing to bet money that Tony here is from the house price crash forum where they plop over here every so often to laugh at us silly mummies.

5-8% drop in 2023 by many accounts, 10% decline over the next two years, which would take house prices back to where they were in mid-2021.

And also this debt bubble we are now in with zero rates wasn't just for mortgages. Just look at all the new cars on the road. According to the records credit card borrowing is at its highest since records began in the early 90s.

I'd normally have suggested that if prices drop, buy-to-let landlords will swoop in to buy housing at deflated prices, boosting the market back up again.
But I think being a landlord has been made much less desirable - particularly here in Wales- so I cant anticipate how this will play out.

It’s not that simplistic op. The dip was following the truss mini budget in sept. Actually gross lending was only down 7 percent in December. Which means bigger mortgages but fewer of them. So the small mortgage folks coming out

critically reapprovals also dropped in dec, to the lowest levels since 2013. It was just the uncertainty in December following the mini budget.

it will bounce back as it becomes more certain.

What are the mortgage numbers for other years?

A FTB buyer wants to purchase a property valued at £250,00 with a 10% deposit.
25 year mortgage on a 5 year fixed

Taking out a mortgage now
Mortgage 1: Monthly repayment
£1,322
Mortgage 1: Cost over 5 years
(This includes the cost of any fees)
£79,299
Mortgage 1: Cost over full term
(This includes the cost of any fees)
£396,493

Taking out a mortgage 18 months ago
Mortgage 2: Monthly repayment
£958
Mortgage 2: Cost over 5 years
(This includes the cost of any fees)
£57,485
Mortgage 2: Cost over full term
(This includes the cost of any fees)
£287,422

Also, they probably might not qualify for a £225,000 mortgage due to the state of the economy and their personal circumstances. I do believe falls in house prices will potentially be higher than your 10%.

With 8% of the market being cash buyers this won't be enough to stop property prices from going down further as there isn't enough demand due to mortgage approvals falling substantially and there is so much more stock coming on the market with not enough buyers

you are making a base assumption here that’s not right. Due to uncertainty no one was moving, not even remortgaging, this means pent up demand.

its much more certain now, so I’d expect to see by march bumbers latest it bouncing back significantly .

all the numbers show is everyone held due to the uncertainty

Ah it's @C4tastrophe I see. So I"d be inclined to ignore this thread it's just a couple of blokes from the housecrashsaddos.com forum desperately trying to talk down house prices because they regret missing their chance to get on the housing ladder

I’m reading it as someone trying to convince themselves a crash is coming and using limited data from a very short uncertain economic period , where you’d expect to see this decline, and project it forward to a wish or need for a crash.

in reality it’s what would have been expected due to uncertainty leading ro pent up demand and it will bounce back fast.

The people who can no longer afford mortgages aren't going to be getting the same house for a lower price. They're going to be looking for the cheaper houses that they can afford.

You are right I am on there. Don't you think house prices should be more affordable for most people instead of being an investment for some people to get very rich from? Everyone should have a right to have a roof over their heads that is affordable.

I am not here to laugh at anyone as I think we should be very concerned about this bubble we have been in which has been manufactured by governments, banks and investors.

I’m sorry you aren’t able to buy. But willing a crash won’t make it happen for you .

Well it’s true I will buy at some point, but I sold my mortgage free house in @ 2005, and have been abroad since then (Switzerland), and when I return I’ll be a cash buyer, regardless.
So lower prices will benefit me. They’ll also benefit any first time buyers, anyone trading up, the economy on the whole will have more disposable income sloshing around being taxed, and will harm the IO Borrow to Let crowd.

I really do not see any advantages of high house prices, though I’ll be happy if someone could explain them to me.

Ah, the house price crash trolls have returned to play

It's a very emotive subject. Many people were in denial in 2008.

The only thing you can do is look around and conclude for yourself.

I've never understood the 'housing should be affordable for all, not an investment for some people to get rich from' argument.

What prevented anyone from buying back when some did and they didn't? Their own unwillingness to gamble on buying a house, that's what. There was no discrimination against anyone ... banks were literally falling over themselves offering cheap debt to everyone.

Getting huffy that those who believed housing would turn out to be a decent investment turned out to be right all along is pointless. Bit like getting huffy at the person in the casino who went all in on red and won.

Sorry matey but my bungalow is paid for and I have a very successful business. And before you start saying I don't know what is going on in the economy I am seeing it firsthand with many businesses whom I deal with who are suffering due to higher running costs which is having a big effect on turnover and profits, unfortunately, this is leading to people losing their jobs. It is the younger generations I feel for whom many are having to live at home or rent because houses have become out of reach for many.

You underestimate sentiment on this forum. Most people are fully aware that a drop in prices is beneficial when you want to trade up. People have kids that they want to be able to leave home and start their own families. It's only a small percentage of people who are property spivs, worried landlords or who simply "don't get it" on here. I'm absolutely fine with prices dropping. However, as the last few decades have taught us, what you want to happen and what is morally right, isn't what actually happens.

I bought a house during the 90s crash and did well out of it, repossessions were rife and drove the crash. Now, the government will do anything to keep people in their houses, even at interest only never never mortgages. When I've got time I'll dig out the actual stats of home owners, vs those mortgaged, vs those that might be in the shit. Its a small number.

Listen, women aren’t confined to this one corner of the internet. We can also read your forum where you lot regularly take the piss out of silly fluffy women on here.

I don’t know what point you are trying to make here. You aren’t interested in listening to what anyone has to say, just making some spurious points with random statistics.

Sorry matey but my bungalow is paid for

That isn’t the flex you think it is.

Breaking: @TonyTeacake has a paid for Bungalow. It's in awe people 🤣

This.

One of our friends has his own agency, we were chatting on Friday and he said his year on year sales are only slightly down on the comparable month last year. He said that whilst there isn't the absolute madness of 50 people wanting to view a house on day one, they are still processing basically the same amount of sales each month.