House prices are starting to fall

[Greenfairydust]

In the news this morning: house prices are falling. Property prices fell 1.1 per cent in February, the largest decline in a decade and this is expected to continue for the next few months.

www.ft.com/content/c09efd19-9920-4f4c-876b-d1e1a0235852

How will this affect the market I wonder and buyers/sellers behaviour?

As a buyer viewing houses at the moment, It won't put me off buying but it means that I am giving myself a strict budget and expect sellers to be reasonable and price their house accordingly.

What do other people think?

Except that's not a price - it's a lender's risk evaluation. That evaluation also factors in the occupation and age of the borrower(s), credit scores, age number of children and a host of other factors.

And the LTV bands are so broad that the number of cases where the LTV changes because of a change in a house price index is tiny - it's almost laughable that the HPC crowd have convinced themselves that this is going to be a factor driving forced sales. All those mortgagees have already got mortgages, that were stress-tested against the standard variable rate. Those mortgage holders aren't going to lose their homes. (Their holidays, cars and kitchen extensions, maybe ... but not their homes).

House prices are a function of what people can borrow, nothing more or less. 2008 "credit crunch" i.e. no credit, prices come down. Interest rate rises, prices come down. Historically low interest rates (i.e. last 10 years), prices go up. If you wait for interest rates to come down (unlikely, they've been artificially low for too long), then house prices will simply go up again as peoples borrowing power is higher. It's a Yo Yo effect. You are far better off borrowing less capital at higher interest rates, it's far easier to pay off with help from inflation.

What you don't want to do is over pay on a house at high interest rates, which people are realising.

Except that's not a price - it's a lender's risk evaluation. That evaluation also factors in the occupation and age of the borrower(s), credit scores, age number of children and a host of other factors.

They're affordability factors. The value placed on the bricks and mortar won't be influenced by affordability factors, and it's the value vs what's owed which determines the LTV.

Affordability is separate to value of said property. Whether to lend / how much the specific borrower can borrow depend on affordability. The value the mortgage company put on the property wouldn't change depending on the individual wanting to mortgage that property.

https://chrome.google.com/webstore/detail/property-log/jccihedpilhidcbkconacnalppdeecno?hl=en-GB

this is the extension to track house price reductions on right move

I have been using this Chrome extension for around a month, and I've seen lots of properties in my area reduce, the average is about £25k but I've seen ones drop by £60k (this is around the £500k mark) so 10% is achievable (based on asking price > reduced price...not looked in each property's area to make judgement on whether that asking price was realistic in the first place!).
I even saw a house drop by £100k but that was a million pound property haha!

Not sure what to do, we have a house to sell which I'm happy to sell at a reduction if the house I'm buying is also reducing, but as we will be taking on more debt I am wondering if we should just stay put in case they come down much further.

this is an example of a house in my local area so 75k / 10% is a lot !

i would go with the idea of selling at reduction if the one you're buying is also a reduction.

generally just try haggling on the prices in general, don't want to get stuck with a bloated mortgage if no needed.

This is not correct 🙄 source please? Anyone who’s remotely versed in the economy can see they are forecast to start coming down from the start of next year. The current forecast suggests they may go up another 0.25% but will then stabilise and start to come down, granted to nowhere near previous levels!

Interesting article here https://amp.theguardian.com/business/2023/apr/06/house-prices-rise-unexpectedly-third-month-in-a-row-halifax

A mixed bag between Halifax and nationwide but generally pointing towards a more optimistic outlook than previously feared.

I think everyone should beware of these threads, there’s an awful lot of people speculating on things they know nothing about.

Just managed to download that app; bit confused as hardly anything has been reduced where I live. At either end of the market. Even a couple of houses that went on in September/October still not sold and not reduced. What does it all mean?!

Well it could mean that the interest rate rises so far aren’t having the desired effect and will need to go higher, especially while wage demands are so high. But I’m speculating on something I know nothing about - it does feel like 1988 to me.

It's because it's localised and depends on value as well. The only things refucing in my area are overpriced houses which need lots of work. Mine went over asking so did others around as I understand. But 600k houses in nicer postcode are sittong there and getting reduced.

I do think this might have something to do with rates tbh. Just a quick look but with 10% deposit and over 25 years 4.7% vs 2.5% difference.
Like on 140k house it's 714 instead of 565 monthly.
On 600k house it's 3369 instead of 2664

That's massive difference on the 600k one! No wonder they are affected. £150 is manageable, but difference of £700 a month moves you to completely different affordability situation even on high wages

When would you expect activity after a drop?
Mine was on at 230k dropped yesterday to 220K.

Interest rates will most likely drop in the latter half of the year, not due to the economic recovery, but because of recessionary headwinds and reduced demand (Even though the Guardian will say otherwise) and the fact that the US banking crisis has caused a flock towards the safety of US treasuries (which drops yields, which in turn drops swap rates).

Core inflation factors (like oil/energy) will be fixed by OPEC and the deterioration of relations between the BRICS and the west. That and the fact that interest rates were not raised over the rate of CPI inflation (unable to - debt/GDP otherwise governments default) means inflation hasn’t gone away.

It increasingly looks as though we will experience a second inflationary wave beginning next year at the supply end which will ultimately result in stagflation. Basically this is a repeat of the 70’s. That means interest rates will have to rise once more.

Now bearing this in mind, there is also the chance that the central banks may not reduce rates at all to counter this happening.

And to answer your link there, (Nationwide down, Halifax up)

Thats on the back of the lowest transaction rates for a decade.

https://www.ftadviser.com/mortgages/2023/02/21/property-transactions-get-off-to-slowest-start-in-a-decade/

Lower number of properties shifting, means more distorted figures (which is why the two reports differ so much). Land registry is much more accurate but lags months behind.

I believe Halifax and Nationwide use slightly different data. They both use only their own lending of course (each about 12% of market share), exclude cash purchases that can distort data and make a seasonal adjustment. But Halifax include BTL mortgages whilst Nationwide does not.

Sounds like they all massage the figures into the shape that they like best....👀

@YaWeeFurryBastard I don't think there is much certainty about anything in the financial economy at present.
It is certainly possible that rates may come down at the end of 2024 but nothing is certain at present. They are very negative at present (-6%). As @Lightscribe, the concern is recession and 'things breaking' rather than anything positive. Recession isn't likely to have a positive affect on salaries even if interest rates fall a percent or so. I think we will see big breakages before that point anyway and a significant tightening of lending. Even highly experienced analysts differ in their views of what is likely to happen in the next 2 or 3 years. Overall, the chances that inflation magically retreats to 2% and we avoid a recession and that growth magically starts again are zero so no 'positive' news for those who want the housing market and other assets to keep rocketing up.

I agree (and like I have stated on here for years) the longer term direction of interest rates is up. Recession will do far more damage to house price affordability even if rates drop slightly a percent or so.

As I’ve stated before the direction of house prices from here is a steep correction (real drop not nominal - some areas more than others) in the UK, just as it’s doing elsewhere in the world (regardless of things like Brexit which will seem like a drop in the ocean).

https://www.ft.com/content/f2fc2f88-b14b-49d9-8f4b-b546d2f15356

I’ll believe it when I see it.

5-10% is just a minor correction - barely even eats into the post-covid gains. And that’s all that will happen, probably way less in some areas.

People will ride it out at the end of their fixes.

Unless of course it became an even playing field:
-housebuilders build to targets
-no foreign investors
-1 property per person
-no dormant properties (6-month+), huge penalties with money ring fenced for social housing.

Apologies for terrible English and mistakes in previous post. I wish MN would allow editing!

@Lightscribe 'Recession will do far more damage to house price affordability even if rates drop slightly a percent or so.'

I agree. Rising unemployment and falling wages will have negative effects and rates can't stay several percentage points negative for long.

This article might be interesting. Non mainstream very clever American writer.
https://www.oftwominds.com/blogapr23/global-risk4-23.html

@ThankmelaterOkay your list would definitely be good things for the government to consider which means that they won't! Your argument that prices won't fall more than 5-10% because 'you don't believe it' is unconvincing.

Prices on the estate I live on have started to drop. Last year the average price was £135k for a 3 bed ex council townhouse, now most are going on at £125k. Ex in laws house will soon be going on the market, I will be interested to see what price it will go on at.