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.

I think demand for housing still outstrips supply, certainly "starter" style homes. I guess the ones that may hang around more are the larger homes that sellers still need to sell for a high price. But in my small estate, in a growing city houses are coming on the market and selling within days and these are pricier houses than average.

I'm hlglad we have a 10yr fix, it's more expensive than it was but just a couple of hundred. If anything worries me it would be job security, but DH is high ranking police so pretty secure and my job is always mad busy and we need more staff (and, not to brag I am the best performing staff member) so again, pretty secure I hope.

Sorry to hear that! If it's any consolation this seems to be widespread and getting worse. By mid summer that 15% cld well be 20, then 25%. So they may be grateful for having sold just 15 under.

It takes several months for current sales prices to be released, so that lag hides how bad it is right now. The headline grabbing 'Asking Price' data we see from the likes of RM have no bearing on what the final transaction price is; plus their data excludes reductions and re-listings and is an average rather than the median, which means a few high priced properties can greatly skew their average upwards.

It lies in the arsenal of sales and not to be trusted!

And once rates do start to reduces around 2025 there's this whammy
Thanks for the link@ddc70 , not the first time I've seen discussion of the possible effects of a glut of larger properties coming onto the market due to 'baby boomer' probate sales.
Mind you I think they're a bit unfair in characterizing that group of people as reluctant to downsize, surely the reluctance is driven by a lack of suitable properties into which they can downsize. And that is an issue cause by the government's failure to properly regulate and manage the housing market.

Ah ok 😀

Rentals do indeed entering sales. However, we're entering a credit crunch - banks are removing deals bc rates and inflation are massively hitting affordability. People who can't afford to rent are sadly finding themselves equally excluded from the mortgage market.

Even Jeremy Hunt has resigned himself to rates rising more and the inevitable recession. Inflation has beaten them, but it's their own fault, along with the BoE for allowing endless QE and free money to leave us vulnerable to black swans, such as covid and the war. Last decade has been built on debt and that house of cards is now falling

Nobody can predict what is going to happen with house prices.
What we do know though is that the middle classes (majority of home buyers currently) are being squeezed more and more and in time, the middle class will be smaller than it currently is. We also know the rich are getting richer and are buying more assets every year, this includes housing stock. We also know the biggest home buyers in this country and in the US are corporate companies eg banks. Just look at the % of homes that Blackstone now own since the pandemic. We also know that we have the most owner occupiers without a mortgage than ever before in the UK. They surpass the number of owner occupiers with a mortgage.
The ones who are purchasing most homes are not affected by mortgage interest rates. Only a small % of home buyers are. This tells me everything I need to know about affordability and why the only way is up. There may be small blips, nothing goes up in a straight line, but the long term line is up

I didn't say MinnieMountain was an EA, did i?

I said that EAs use social media like the rest of us. Demand has evaporated, so when they're filling that time on their phones commenting on social media do you think they're offering unbiased opinion on the state of the housing market?

If that was directed at me @electriclight or @ddc70 , I’m a residential property solicitor with 15 years experience. I have no need to talk up the market as I do a specialist role which is safe.
People asked for experience/ opinions, so I’ve given mine.
And thank you @Mildura .

Indeed, the media love a panto villain and in that case they've chosen to frame baby boomers that way. Imo it reeks of jealousy and bitterness. However, moralisations and blame aside it's a fact of the property landscape that's just over the hill and heading our way.

Another Rightmove addict here. For my area, the market is slower, however properties do enter and disappear from the market. Here, we were not crazily affected by 2022 boom, prices were up from the year before but maybe by only 10-20K (I live in the area with most properties sitting in between 200K-450K, you can get a reasonably nice detached 3 bed around 350K mark).
Earlier this year, and still, an influx of victorian terraces, presumably landlords selling up EPC challenging properties. Most of them went, a few (really bad looking ones) are still sitting.
Nice looking houses usually disappear within a couple of weeks, maybe a month top. Maybe they go under asking, no idea. Ugly doer-uppers sit...
Work colleague put her 2 up 2 down for sale based on last year valuation. watching with interest..
Our house was valued at the bottom of Zoopla estimate for remortgage. I m not sure it would sell for this, tho. We are not planning on selling it for at least 5 years now, and my gut feeling tells me sit still and this is what I would advise any friend to do.

I didn't say MinnieMountain was an EA, did i?

No, but you dismissed their contribution as either a complete outlier or lies.

you think they're offering unbiased opinion on the state of the housing market

I don't think anyone does. Everyone has an objective, when they post such definitive opinions about what the future holds, just as you do.

The Telegraph journalist you linked to knows that sensationalist stories about house prices generate lots of clicks and therefore ad-revenue.

Someone posting with such conviction that falls of 25% in a month or two are just as bad as someone who thinks property only goes up.

Nobody knows, and most importantly there isn't just one housing market, but hundreds across the country, that will all respond differently depending on property type, specific location, local economic factors, scarcity of alternative options.

Probably the most likely outcome is a fairly lengthy period of price stagnation.

@ddc70

I don't see how an article on down valuations is evidence of a crash. As I said before, we are more likely to end up with a frozen market. FTB will either end up with a smaller property, or no property at all.

And where do you think all the baby boomer money is going? Most of it will be into the hands of millennials and GenZ.

It is of course possible that there will be a crash, but I haven't seen any credible experts predicting that. You are just providing links to tabloid speculation.

Stealth boast without the stealth 🤣🤣

As i said, that was a reply to someone else, whom themselves was not replying to anyone. I applaud their decision to do their own research rather than taking others word for it. Do you disagree with that?

If you thought my comment about being mindful that vested interest users will contribute to forums with comments designed to talk prices up was directed at you, then can i ask why you thought that?

Interesting that you said 'crash'. I didn't say that! Freudian slip, perhaps?
😉

'You are just providing tabloid speculation.'

Er, no, they're opinions from trade derived from official stats. Disagree with the opinions if you want, but the stats speak for themselves. How about HMRC?

https://www.housingtoday.co.uk/news/hmrc-figures-show-residential-transactions-down-29-month-on-month/5123447.article#.ZHdNigMLcKg.twitter

@oiltrader "Demand correlates with availability of credit. nothing more, nothing less x"

That's clearly just over simplistic nonsense and is factually incorrect.
I'm also not sure why you are posting a kiss at the end of your comments about the housing market.

For example, everyone wants a Ferrari, but not everyone can as the availability of credit is the issue. x

I think they use a kiss or weird grammar so their friends from that stupid House crash website recognise them.

No, I certainly didn't think the comments were directed at me, for I have made no real claims that I have any particular idea as to where the market is going, or how quickly, unlike some others.... 😉

These threads always die when the estate agents, property developers & house price crash users start arguing 😆

No I don't think I've directed any comments at you.

Very wise

I totally agree, that seems to be a complete vested interest fabrication. But I guess they could work in a more buoyant region.
https://uk.finance.yahoo.com/news/uk-property-transactions-slump-as-mortgage-costs-rise-102514706.html

I see figures just released show that home sales suffered the worst April in a decade :(