House Prices

[LGBirmingham]

House prices still seem to be rising? Does anyone else think this?

I'm no industry expert so I have to take the data I am given. This I find astounding and would love to hear other people's thoughts. Apparently Housing Starts are now at their highest level in decades and have been rising to that over many years. This is completely contrary to your view. Do you have stats that support your position or explain this graph?

https://tradingeconomics.com/united-kingdom/housing-starts

Yes, happy to disagree.
I do think that most people misunderstand what demand actually means. It means both wanting to buy something and being able to afford it. The latter is key and is influenced by the factors I mentioned above.

Understanding that it's a fool's errand to predict, here goes.

The Fed Funds rate is 5.5%. We should be 1% above that (we have to compete harder for funding). So, today, we should be at 6.5% in order to maintain our exchange rate.

Where does this go in future? An argument says that he US have tightened too high and for too long. We saw our independent member arguing the same. The amount of money sucked out of the economy in higher debt servicing will cause a recession and then a global bust. That will probably result in trillions of new stimulus around the world, and negative rates (yes negative). Within a few years of that, they'll be dealing with inflation up to 25% and interest rates of 15%. The debt becomes unserviceable and the global monetary system collapses. 2030 and beyond could be a real shit-show so prepare now. If it isn't then we'll all be rejoicing. I hope I'm wrong but it's hard to see a positive course.

Not that desperate if mortgage applications just fell 40%?

People who dont move dont buy the next house, meaning that seller will probably have to drop their price to sell if THEY want to move, the "lets all stand pat and the market wont crash" type thinking isnt real world, in the real world people panic and try to get out before others by dropping their price (this has happened in every previous crash, that is why the crash ends up being bigger!) This wasnt allowed to happen in 2008, but they cant repeat that trick again as everyone now knows. Transactions were falling long before rates started to spike up but super low rates and smaller transactions just skew the stats upwards on the thin margins, what we are starting to see now though is thin margins and much higher borrowing rates, that is why prices are starting to show falls on the published price stats.

I think we aren't going to persuade each other and that is fine. Housebuilding targets have been missed repeatedly its public knowledge. It looks like that graph charts building but not population growth. Demand for housing isn't just an economic concept its a physical need. Desparation for housing is shown in every review of the residential property lettings market and the undersupply there. Often those with an interest in property- I remember we aren't allowed to call them owners just because have a share in property which is extremely regulated and protected - could rent that property out as the occupation demand remains. They have a lot more flexibility and control. I realise people want the market to drop and they believe it will or that we will see the forced sales predicted. Stagnation of course but no huge overall price drops - waiting for those if you could secure a home is bonkers IMO. Maybe you haven't seem that many people evicted but it isn't nice. I think those with an interest in property that can will sit tight and are wise and a lot safer than is being suggested. All forecasting is generally incorrect on both sides, I think we will have to agree to disagree but genuinely hope you haven't pinned your chances of a home on a projected drop

"It looks like that graph charts building but not population growth."

It does chart building. I guess that you will want to retract your statement about "extremely reduced volumes of construction of new housing". That does not appear to be true.

I won't because they are extremely limited when population growth is taken into account

4 million more homes needed according to Crisis but what do they know. Meanwhile the government missing its own targets based on assessed need by c30% for years and years

Bloody hell, I've yet to see a more gloomy prediction than this. FWIW, the numbers guy who helps Charlie get the numbers bit of house trends across thinks there's likely to be a 'debt jubilee' in the future: where countries are in so much debt that they literally write off what one owes the other (to start with a 0 balance sheet, I guess).

The stats are not agreeing with you or Crisis, who obviously have an agenda to push or the managers don`t get paid?

https://tradingeconomics.com/united-kingdom/mortgage-approvals

You sound like a poster on MSE who used to say all the time "100,000 people a month getting on with their lives" then it was pointed out that at peak housing transactions it used to be 150,000 people, now it is less than 50,000 people, LOL, I don`t think that poster ever got it that their "supply and demand" arguments were just wrong.

You're welcome!

We can only hope that behind the scenes the leaders are working on how to address their debts and contain any contagion to the 100's of trillions of debt instruments. Are you hopeful?

LOL, am I hell as like.*

*I have been in full-on Major Cynical mode for a good two years solid now.

It does feel like there's going to be a point in time when their hands will be forced because everything's about to implode though.

This is a pretty likely direction of travel but predicting exact rates and timelines is impossible.
I expect things to start breaking before too long. Next year maybe.
At some point, I expect QE to restart and that would (potentially) lead to the consequences you describe. Again, timeframe totally uncertain.

Just a couple of things:
Rates are already negative and have been for some time.
There is a risk of higher rates even without QE stimulus if the £ is at risk.
The bond market has been troubled although has recovered somewhat with the Israel/ Palestine conflict.

Yep. Just to clarify for anyone, you're talking about base rates relative to inflation, i.e. inflation is higher than base rates.

I hate it when JP Morgan's boss rips me off!

https://www.bbc.co.uk/news/business-67104734

The scoundrel.

Ah well. It helps keep up my delusions of grandeur.

I do think that most people misunderstand what demand actually means. It means both wanting to buy something and being able to afford it. The latter is key

this!! people can't afford this over-priced houses.
and then there's people who don't want to buy them either.

As much as a crash would suit me and make it easier to upsize I agree with this. Just doesn't seem to be happening on the ground. Small reductions and houses hanging around for a while, but big reductions no. People clearly aren't that desperate to sell.

You dont need people to be desperate to sell. Unless we are going to convince ourselves that millions of people will just refuse to get on with their lives unless they get full price for their house we have to accept that house prices are not controlled by houses that dont sell! The world will just move on and the cheaper houses that do sell will dictate the new market price.

Houses in an area I have links to are selling now at asking prices a little higher than 2021 guide prices (but not quite as high as 2022 peak) I think popular areas look likely to hold their 2021 value.

Agents I've spoken to say houses aren't sticking around quite as long as this year's Q1/Q2 as long as they're in a good area and decent condition. More demand/interest from buyers wanting improvement properties too, which I found surprising. Demand from investors down though. It'll be an interesting 12 months.

Exactly, people could only get mortgages before because zero rates kept the monthly payment low enough.

Still rising (nationally) per ONS. Just at the top of the rollercoaster now.

https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/august2023