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?

I agree that some sellers are very unrealistic
I think this is because we had low interest rates for such a long period and for most people low interest rates are fixed in their mind as the norm to which we will return.
Perhaps they are right🤷
However, there are other arguments that the normal interest rate /cost of money is around 5% and that that is the norm to which we will return

That's my experience, yes

@rainingsnoring well I know two people looking at the moment and they aren't finding it easy. The shite is sticking around, but anything decent goes within days. It's hard to even get a viewing.

The trouble is, if house prices do fall significantly, then the older generation won't downsize, which is going to make it harder for young families to move up the ladder.

In all honesty though, I think it's highly unlikely that there will be a significant drop. The data suggests that buyers are returning, mortgage approvals have started to increase again, and interest rates have peaked, and are predicted to fall.

Also wages are increasing. Not inline with inflation, but I'm not sure how much that matters. Mortgage calculator suggests that if I bought now, I could borrow significantly more than I could 3 years ago, even with the higher interest rates. More borrowing equals higher house prices.

I'm not a property speculator, so I don't really care either way, but I do think that people expecting a massive crash are a bit delusional. A 5% drop is perfectly possible though.

then the older generation won't downsize, which is going to make it harder for young families to move up the ladder
I agree, but if they don't downsize into suitable/age appropriate accommodation they are more likely to have to be taken into care/die early from a fall etc.
So the local authority or the beneficiaries of their will need to sell the house as quickly as possible.

@MidnightMeltdown I was referring to the article which is rubbish.

Of course it will be area dependent but your experience of 2 people in your area doesn't buck the national trend. There have been a lot of threads on here in the past couple of weeks from people who can't sell and are asking for advice about reductions. Again, anecdotal but there have been quite a few examples.

The older generation haven't been downsizing for years anyway so I don't think falling prices will necessarily make much difference. It is possible that all the rising prices may force some older people on lower/ fixed incomes to downsize. Who knows.

There may be a small Spring bounce (the figures are actually really poor if compared to previous years) but the trend is definitely downwards. Real wages have fallen as you say and that will lead to falls in asset prices. Ditto when the much higher interest rates filter through fully. Some buyer's purchasing power has reduced by 30%+. People simply can't afford the current prices with falling wages, rising interest rates and general cost of living. It all points downwards and prices have already fallen 10% in some areas but the land registry data take a year to get published.

@MidnightMeltdown I agree all the dross just sticks. And there is a LOT of dross.
Any fixer upper has already been passed over by the EA’s developer mates as being over priced/unprofitable, leaving the DIY crowd only as ‘normal’ people are now less likely to take them on as banging an extra 50-80k on the mortgage is suddenly ‘real money’.
Anyway, a great house has come on at 485k in my search area, I’ll watch with interest as most everything else in that range drops £50k before going SSTC (from my RM analysis).

According to Nationwide we’ve had a 6+ drop already…

They're not really dropping as such here on the South Coast but like others have said the ones overly priced are sticking around. There was one on offer in November for 625k and I put in an offer, admittedly quite cheeky, of 550k which I upped to 575k. They said no, fair enough, but it's still on the market and now reduced to 600k and eventually they will probably end up taking 575 as to me (looking around a lot and with a lot of experience) that is the correct price for it. I am glad they didn't accept my offer because as it happens I found one I much preferred, in my perfect area and of a similar size to the one that was rejected which came on the market for 600k and I got it for just a tiny bit under. 595 or something. OK it's not a massive discount but it was fairly priced and the agents and vendors and indeed me all knew that. What is happening here is:

-the chancers/not great condition ones are stagnating and not selling even when they have reduced the prices
-not much is coming on the market
-if it is correctly priced, which is not really even that much of a fall from this time last year, just not a rise, it is selling quickly.

@C4tastrophe, is it the case that EAs give associates preferential access to profitable properties to the exclusion of non-developer potential buyers?

Hard to imagine that they wouldn't mention an interesting upcoming property to a developer friend or family member first.

It's their job to sell it quickly so if they've already got a list of people interested in that type of property, they'll contact them ahead of listing surely.

Yes.

Seen a reduction on a house today - from £415k to 'offers over' £410k.

What's the point? Just to bump it up the Rightmove listings?

That is pointless.
They should have listed it as offers over 400k. Up to them how much over 400k they would actually accept but if they couldn’t get offers at 415k they will be lucky to get offers even at 400k. No chance at offers over 410k.

Very good point. The difference between nominal and real price change is determined by inflation and then taking into account wage inflation and any reductions in asking / selling prices. I've studied economics and worked in banking and mortgages.
https://data.oecd.org/price/housing-prices.htm

I think the impact of energy costs on neglected / non upgraded properties will make many people think about the running costs of the properties and the affordability in the future. Does that sound reasonable?

I disagree, the time isn't right because of interest rates - even if it's less debt and expensive houses become cheaper, it doesn't work out better for buyers. Absolutely stay put until interest rates drop/remortgage time comes on a fixed deal.

Interest rates won't be dropping - especially anytime soon. In fact they are still rising.

I was just about to type that I highly doubt they will fall to previous levels any time soon (years)

A house has a price at only one specific point in time - when it sells. In between sales the house doesn't have a price, it has an owner who may, or may not, be tempted to sell if offered a sum of money. In bad economic times, it may have an owner who really wants or needs to sell and there may, or may not, be prospective buyers who are solvent and can meet the owner's expectations. If that scenario results in a sale, then once again, the house will have a price.

Fluctuations of the 'best guess' of what a house might sell for are not characteristics of that house. They are the judgments of an observer.

The only price that really matters is the one an owner is prepared to accept, on a property you actually want to buy. Everything else is vapid, over-analysed guff.

Surely nobody would delay moving 'until interest rates come down'? They're still rising, with at least two more expected. No serious commentator is suggesting that they'll come down any time soon, and certainly not to the very low rates seen over the past 10 years. I do wonder whether younger people, who have only ever known very low rates, think that's normal and our current situation is a blip

It also has a price when / if the owner wants to remortgage and affects the interest rate offered due to LTV. Or if they can even remortgage at all if the price has dropped so much in comparison to what's owed, so no lender will lend what's needed.

"I think the impact of energy costs on neglected / non upgraded properties will make many people think about the running costs of the properties and the affordability in the future."

I am definitely paying close attention to the EPC. I know energy costs are easing down but highly doubt there won't be more energy shocks in my lifetime.

Of course they do, it's a double win for them ....the associate now owes them a favour and they make commission on the sale.
Don't the EAs all have side gigs as property developers anyway?

When people say they’ll wait, they aren’t waiting for the BoE rate to come down, they are waiting for the 2/3/5 year fixes to come down.

These have fallen since the beginning of the year, but have generally faltered and plateaued. If inflation eases as predicted, then these might fall further by the end of 2023, even if the BoE rate is 0.5% higher than it is today. If inflation doesn’t ease…then these rates will increase slightly as it means BoE rates will not be brought down as quickly as expected.

If someone has 3 years left on a fixed deal (I am in this position) then they certainly won't be rushing to sell now and buy a similarly priced property, or a more expensive one now with interest rates as they are. Nobody here has a crystal ball to predict 2-3 years ahead - and this is why many sellers in my position won't be selling now unless necessary, we'll wait a couple of years at least to reassess. So a number of potentially desirable properties won't be going on the market now, for sure.