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.

My thoughts too as soon as I saw the thread title.

There was a huge spike in mortgage rates around the Liz Truss budget beyond what was actually happening with the base rate. A lot of lenders also pulled loads of products.

I was quoted 6.3% for a 3 year fix (60% LTV) in November, we actually settled on 4.9% in January and rates may have reduced more since then.

I would expect mortgages confirmed to pick up again in the Jan and Feb stats. What’s coming seems much more like a correction against some of the lunacy of the last 2-3 years than a crash that’s going to take things back much below 2019 prices.

Is the valuation a zoopla one or based on an agent who has seen the work you've had done?

No, I don't think so. I understand why some people are desperate for a massive drop in house prices, but I don't see it happening.

Tony isn’t desperate. He owns a bungalow, outright.

Me too.

The 2008/2009 property crash wasn't a big issue in comparison. I just waited it out and prices came back up. Land is a finite resource.

It's only an issue if you have over extended or if you want to move in the middle of it. Sit tight and wait for it to right itself.

I don’t think a big house price crash will happen. Too much demand and something like 36 per cent of all household homes (around 25 million in total) are owned outright anyway.

I am more worried about rents being unaffordable for many and the rise of homeless people and government being forced to purchase more social housing.

When we remortgaged the rate was under 1%. If we did that now it would be 3.9%.

Are bank rates going back to below 1%? It would take inflation to drop a lot I think. Everyone I know is getting pay rises which feeds into it.

I suppose as long as there are lots of people with the money to pay 4% rates on 2022 peak prices there won’t be a crash.

Houses around me are taking much longer to sell, for sure. Lots still on from Sept last year with no reductions. Sellers can afford to wait.

4-5 per cent interest rate is normal.

What was abnormal was the low interest rates we had for the last 10 years. Many people used those to overpay their mortgages and now own their homes outright.

So he tells us.

Exactly

And many people are still on long, low, fixes

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

The sexy beast. A bungalow? Let me at him.

I think we can only speculate. I try not to listen to anyone with a vested interest - housebuilders, estate agencies, homeowners. Banks seem to all be in agreement that prices have fallen 3% since last summer and have another 7-15% to go, depending on who you listen to. Shares in home-related industries have fallen. Recession still expected. I think stabilisation by the spring is wishful thinking personally but we will find out soon enough.

A BUNGALOW!!??
Well.
That's given me the proper fanny gallops...

Tony isn’t desperate. He owns a bungalow, outright.

But seriously, I work with people in their 20s who are genuinely desperate for a massive house price crash, and they believe it's going to happen... it's only when you've been through a few cycles that you realise when prices fall buying becomes impossible, and as soon as buying becomes possible prices shoot away from you...

I live just outside Manchester, went to view a house this morning, estate agent said they haven’t noticed any price, it’s the opposite, most houses in my area are going over asking. We certainly expect ours to go over asking when we put it on the market in the next few weeks.

There is a massive shortage of housing stock in my local area.

Any price drop

I BET he irons his teatowels, though....

Tony doesn’t. Shirley does that.

I think it is a good thing when prices fall (even though we lost a lot of money in the 1990s property crash) as I never plan to trade down and cheaper prices make it easier for my children to buy and I have never regarded a home as an investment - just a place to live.

However 10% inflation is predicted to fall quite a bit so I don't thikn we are going up to the rates of 17% mortgage rate I paid in the past. Also lending criteria have been quite strict, almost as strict as in the early 80s when I first bought when you almost had to have a 10 year relationship with your bank manager, all your savings there and be male to borrow......

Hi @RedToothBrush thanks for replying - that's the agent's valuation. Zoopla is actually saying very similar though and quite a few houses on our road have sold lately so I guess they've got decent data to benchmark from.

Not even close

Ok I stand corrected. A bungalow you say! Wow.

ultra low interest rates are gone, I don't see anything more than a 20% drop in prices. Think there will be years of stagnation. Tbh it's not a good thing to have increasing prices & wage stagnation.