House prices

[Twiglets1]

Hi Guys, we got to the end of the last thread so need another one on this controversial topic!

And to respond to @CrashyTime I don't say "demand is strong" over and over again. In fact, I rarely comment on demand at all. My posts are more focussed on house prices and interest rates/mortgage rates.

And I don't deny economic "reality", I just don't exaggerate how bad the house price correction is likely to be. I have a running bet with @XVGN that property prices generally will fall about 5% in 2023 and another 5% in 2024 so I do believe prices are falling in most areas. Just nothing like the 30-35% crash predicted by some!

Fair enough, Im not doing in depth research either, it is all over the media how much sales and mortgage applications have dropped, but local areas are sometimes separate mini-markets I suppose so your anecdotal evidence is just as valid as anyone elses viewpoint at the moment.

I wish my area wasn't doing well though as I want to buy a bigger house in it!

Give it time. Think super-tankers - not crashes.

Talking about super-tankers. We've been operating in a broken housing market for the last 15 years. It's almost as if what you see today is just a fantasy of what the real market should be like. Have a look at the difference in mortgage transactions a long way before and after the 2008 GFC.

And then this is an interesting article from 2010 explaining the 50% crash in transactions. Can you imagine what they would have thought if you told them that nothing would have changed in transaction volumes in the following 10+ years.

https://www.mortgagestrategy.co.uk/news/mortgage-approvals-plummet-50-since-2007/

@XVGN presumably that is because the cost of houses spiralled during that time and wages stagnated so less people can afford to get a mortgaged house or upsize from a house they already own?

I wish I could tell. It would be really fascinating to find a peer-reviewed thesis on the UK housing market.

The article suggests that it was lack of credit after the GFC. And that means that the impacts of the GFC still haven't been resolved and could yet be resolved in some unimaginable way.

It's just crazy that in spite of more population, more houses and stupidly low mortgage rates, that transaction volume never recovered. Part of that will be out-of-control house price growth and wage stagnation as you state.

My forecast of 10% drops in each of 2023 and 2024 really doesn't feel whacky when viewed against that colossal issue.

@XVGN presumably the huge growth in buy to let as well. Those homes were getting re-let not resold in that period.

@Twiglets1 Sellers are still being really stubborn in my area. New listings show elevated prices, as if they want to bury their heads in the sand and pretend it's 2020 - 2022.

In a very long-deprived, rough, inconveniently located town in my area, I saw houses going from 70k in one year, to 150k a year or two later in 2021 & 2022. Some of them hardly had any work done on them, and some of them none at all.

In that same town, houses are now starting to pile up because no one is buying them. Some have been on the market since April/May, but the sellers have only dropped 15k from their inflated asking price, but it's not enough to entice first time buyers to take a risk in particular. They'd be wise not to, otherwise they might not be able to sell up for years with out losing their deposit or going into negative equity.

I'm not sure where the issue is coming from - the estate agents who are painting unrealistic pictures in order to get business, or sellers who are unwilling to face the market as it currently it, as opposed to how they wish it to be.

"I'm not sure where the issue is coming from - the estate agents who are painting unrealistic pictures in order to get business, or sellers who are unwilling to face the market as it currently it, as opposed to how they wish it to be."

Bit of both I think, EAs are surviving on rentals in many cases probably but want sellers on their books so they can drop the price later to get commission and many sellers have never really sat down and thought about WHY their basic house went up so much in value (clue; It wasnt "supply and demand") Most EAs working now wont have seen rate rises ( last rate rises at this pace were early 80s) and most will never have seen a proper recession, they wont have a clue how to sell houses in this environment because during the bubble years houses were selling themselves as the mania for property and property debt took over.

Sounds as if mortgage rates might drop next year

House prices have ended the year 1.8% lower, according to Nationwide which forecasts no growth or a further fall in 2024.
The lender said the average house price across the UK was £257,443 in December.This was flat compared to November but down compared to December last year.

Nationwide said consumer confidence "remains weak", despite some mortgage rates starting to fall in anticipation the Bank of England could cut borrowing costs in the coming months. The number of housing transactions has been running at around 10% below pre-Covid levels, the lender said.
The drop was more pronounced for those buying a house using a mortgage - down 20% compared to before the pandemic. However, the volume of cash deals continues to run above the levels recorded before Covid hit.

Only Northern Ireland and Scotland recorded house price growth for the last three months of this year. In Northern Ireland, the average house price rose by 4.5% to £184,593 between October and December. In Scotland it edged up 0.5% to £179,208. Wales saw a 1.9% decline to £201,730, while across England overall, prices were down 2.9% compared last year to £296,231, with East Anglia the worst performing area due to a 5.2% drop, bringing the average house price to £270,903.

Nationwide bases its survey data on its own mortgage lending and therefore does not include those who purchase homes with cash or buy-to-let deals.
But it looks at other sources of data to track wider market trends including cash buyers such as people who sell one home to buy another, without taking out a mortgage and those who buy with a prior sale, using cash.

https://www.bbc.co.uk/news/business-67839202

Have you still not sorted out your font problem?

UK savers urged to act quickly for highest-paying fixed-rate accounts
Bank of England forecast to make as many as four interest rate cuts in 2024, which will slash returns

https://www.theguardian.com/money/2023/dec/29/uk-savers-highest-paying-fixed-rate-accounts

With the money markets convinced that interest rates are heading on a downward trajectory, the smart savings cash is heading for a fixed-rate bond – while rates above 5% are still available.

And 1.8% down for houses seems barely anything.

I know. It's nothing given they probably went up about 20% the year or two previously

True. House prices proving to be resilient so far. Think Crashy may have to change his username again 🙁

So many cash buyers. Can’t compete.

No worries. Let them burn themselves out. They'll probably wished they had waited.

I don’t think most people ‘wish they’d waited’ even when buying in a stagnant/flattening/slightly dropping market. Moving house is a life decision often prompted by the need for a practical shift and also one that is seen as being suited to longer term thinking. Yes, we could all maybe get the house we wanted in a year’s time, for 5-10% less. But I want to move now, and frankly it’s neither here nor there in the grand scheme of things if I’m thinking of staying there for 10+ years.

We're talking specifically about cash buyers - not your run on the mill mortgage payers

I’m aware of that - the same logic stands. My buyers are cash buyers and like most other people have decided to move now, here, because this is what’s necessary for their life, not because it represents a purely rational financial decision. Cash buyers who are buying a property so they can live in it are going to behave exactly like those buying with a mortgage. It’s only those investing in property who will be mostly motivated by maximising the financial gain from the transaction.

Read an interesting article suggesting that 2024 is likely to be "a year of two halves" with "modest price falls of around 3% in the first half of the year, and little if any movement in pricing in the second half of the year, with transactions broadly on par with this year and similarly weighted to equity-rich buyers"

"Thereafter progressive cuts in base rate should gradually bring more buyers into the wider market and increase their purchasing power, giving capacity for price growth of around 18 per cent over the next five years"

https://www.ftadviser.com/mortgages/2023/12/20/will-the-housing-market-be-out-of-the-woods-in-2024/?page=1.  

What's going to happen to property prices in 2024?

6 property experts (or "experts") go head to head

Predictions range from plus 2% from Paula Higgins (HomeOwners Alliance) to minus 5% from two guys called Stuart Cheetham and Charlie Lamdin.

What's going to happen to house prices in 2024? Six property experts go head to head (msn.com)

You and Charlie in the same place. I'm sure that's a paradox that leads to the end of the world. Happy New Year to you.

Happy New Year 😂