Awol Posted April 8, 2008 Share Posted April 8, 2008 Grings, Just assuming hypothetically for a sec' that prices fall by 20% over two years as you suggest. The knock on effects for the rest of the economy will be...? I'm guessing rising unemployment, currency devaluation etc but can you put any flesh on the bones? Link to comment Share on other sites More sharing options...
Gringo Posted April 8, 2008 Author Share Posted April 8, 2008 Short term - I see house price falls more of a product of increasing job instability, rather than a cause. If house prices continue to slide, rates will come down, and currency weakens. The problems arising from the crash are more in the medium term. Negative equity stops people moving, and deflates the confidence in the market. You have to wait for another generation of people to come along to get swept up in the homes under the hammer frenzy. So while the market stagnates, there is no scope for the equity drawdowns on the scale we have seen over the past 10 years. This reduces consumption and weakens all sectors - from leisure to manufacturing (what little there is). Retail financial services will be hit, whilst the corporate banking will be safer as it will pick up on the back of whichever flush economies start trading first. So the economy will become even more unbalanced, even more dependant of the banking sector and foreign cash flows and even more susceptible to economic problems blowing in from foreign shores. Link to comment Share on other sites More sharing options...
Jon Posted April 8, 2008 Share Posted April 8, 2008 Grings, Just assuming hypothetically for a sec' that prices fall by 20% over two years as you suggest. The knock on effects for the rest of the economy will be...? I'm guessing rising unemployment, currency devaluation etc but can you put any flesh on the bones? economic meltdown. We all lose our jobs the B of E closes. all our homes are repossessed. we all take to living in cardboard boxes on the streets. Existing tramps are not happy - grumble about overcrowding on the streets. Green Dave comes in and saves us all. Link to comment Share on other sites More sharing options...
Awol Posted April 8, 2008 Share Posted April 8, 2008 Grings, Just assuming hypothetically for a sec' that prices fall by 20% over two years as you suggest. The knock on effects for the rest of the economy will be...? I'm guessing rising unemployment, currency devaluation etc but can you put any flesh on the bones? economic meltdown. We all lose our jobs the B of E closes. all our homes are repossessed. we all take to living in cardboard boxes on the streets. Existing tramps are not happy - grumble about overcrowding on the streets. Green Dave comes in and saves us all. Jon, why are you not in government? Link to comment Share on other sites More sharing options...
claret+blue_watch Posted April 8, 2008 Share Posted April 8, 2008 Saw Mr Brown being interviewed earlier, didn't pay much attention to what he had to say on today's news of falling house prices, but I'm sure in the usual spin he and Darling churn out "Strong fundamentals, low unemployment et al, he mentioned low debt?? Either he is insane or just plain thick. As for Ms Flint on Breakfast news desperatly trying to coax FTB's into a tanking market that is desperation personified. Credit is drying up all the time, personal and collective debt is at an all time high, and sentiment has definatly swung amongst those with no vested interests. Tommorow's Daily Express headline? Either Diana/Maddie/House prices still rising (YoY from 1993). Link to comment Share on other sites More sharing options...
claret+blue_watch Posted April 8, 2008 Share Posted April 8, 2008 Telegraph:UK Housing Bubble Bursting And It's Serious UK housing bubble is bursting and it's serious By Karen Ward, an economist at HSBC Last Updated: 12:42pm BST 08/04/2008 Prior to the events of last summer, the UK had undergone the biggest investment boom since the late nineties. This was not the promise of new technology that will revolutionise business and increase profitability, like the dotcom bubble. Instead, the latest craze was something you could paint magnolia and turn over at a 15pc profit - housing. The boom time past is over But the issue goes well beyond house prices. In the scramble to accumulate housing, the UK economic landscape has altered significantly. Households have taken on substantial amounts of debt at ever increasing multiples of income. Their spending has outpaced take-home pay, lowering the savings rate to unprecedented levels. And the UK's current account position has deteriorated to a position not seen for the past two decades. House prices: Steepest fall since 1992, says Halifax Bryony Gordon: Home owning's overrated anyway It could be argued that there is no need to fret about such developments. The resilience of house prices and consumer spending may be telling us that UK households are confident about their future earnings and rightly so. In that case, increased borrowing will be easily repaid when future gains are reaped. Or perhaps due to a chronic lack of supply, households have no choice but devote an ever increasing part of their salaries to housing. If gains are a result of a demand-supply imbalance, current house prices may be perfectly sustainable. But there are rather less benign interpretations. Income expectations, particularly accounting for ever higher inflation, may have been overly optimistic. And house price gains may have been built on the shakiest of foundations - speculation based on expectations of unrealistic returns and overly loose credit conditions. advertisementWe believe that house prices started rising for perfectly valid reasons as the UK outlook improved following central bank independence. But these house price gains were then extrapolated into the future. Buoyed by overly loose lending conditions, the UK property market has exhibited classic bubble features in the past couple of years. We often hear that these problems are caused by the sub-prime crisis in the US. But it's worth remembering that whilst overly loose lending practices in the US pushed house prices to six-times the average salary, in the UK house prices are now nine-times the average salary. As lending standards at banks now recoil the correction is likely to be marked. In our view, it will have serious consequences - depressing consumer spending and leading to the sharpest downturn in more than a decade. As the problems in the credit markets intensify, the Bank of England will have to cut interest rates more aggressively. But the bad news is this is unlikely to translate into lower mortgage rates, and so unlikely to revive either the economy or the housing market in the near-term. In our view house prices have moved significantly away from 'fundamentals'. Price declines in the region of 10pc this year cannot be ruled out. Link to comment Share on other sites More sharing options...
drat01 Posted April 8, 2008 Share Posted April 8, 2008 But house prices are still higher this year than last year, are still massively higher than they were 10 years ago - explain please. Link to comment Share on other sites More sharing options...
The_Lions_Roar Posted April 8, 2008 Share Posted April 8, 2008 This is doing my head in. We agreed a mortgage with RBS aorund 6 weeks ago, now they are reveiwing their rates or something and we've been waiting for 2 weeks for them to get back to us. I wish they'd hurry the hell up as the other people in the chain have everything sorted. Link to comment Share on other sites More sharing options...
claret+blue_watch Posted April 8, 2008 Share Posted April 8, 2008 But house prices are still higher this year than last year, are still massively higher than they were 10 years ago - explain please. Correct, apologies for my ignorance but explain what, how they can still be higher? YoY will turn negative with Halifax and or Nationwide probably next month.As for 10 years ago approx 180% higher.That is not good for most people or the economy but this has not happened accidently, it has been at the core of this Government's economic policies. Do you think the massive HPI we have seen over the last 10 years is good for the country, if so why? Link to comment Share on other sites More sharing options...
drat01 Posted April 8, 2008 Share Posted April 8, 2008 So C&BW is this a natural rebalance of true value, like what happens on the stock market over a period of time? When you say it is not good for most people, why is that? Are you talking about people who are looking at house prices rising as some sort of lottery win? Or as a viable and realistic investment? You say it has been the core of the economic policies, in what way? Surely a return to a realistic housing market or a move to one that is more in keeping with the world economy of today is acceptable to all? or again are people just seeing this as free money to but the villa in Spain? Is the HPI good for the country, probably not and with kids of an age where they are near the bottom of the housing ladder I can see the difficulties it is causing, hence my reluctance to start really taking in the headline catching phrases that paint the picture of houses becoming worthless Link to comment Share on other sites More sharing options...
snowychap Posted April 8, 2008 Share Posted April 8, 2008 As for 10 years ago approx 180% higher.That is not good for most people or the economy but this has not happened accidently, it has been at the core of this Government's economic policies. I don't think that the government is at fault for the nation's obsession with home ownership or for the obsession with making a quick buck on house trading. I would say that the policy has its roots further back. As far as the overall downturn which is starting to cause this slowing in the housing market, the government are as responsible for it as they were for the good times in the economy over the last 10 years, i.e. hardly. As the adage goes: You can't direct the wind, but you can adjust your sails. And that is all governments can really do - adjust the sails. Whether the sail adjusting has been good, bad or indifferent can be argued but the direction of the wind is absolutely not in the control of either 10 or 11 Downing Street. Link to comment Share on other sites More sharing options...
drat01 Posted April 9, 2008 Share Posted April 9, 2008 Very interesting reading that sort of dispels the myth put around by some that this is a UK based issue http://tinyurl.com/5casw9 Link to comment Share on other sites More sharing options...
Gringo Posted April 9, 2008 Author Share Posted April 9, 2008 Very interesting reading that sort of dispels the myth put around by some that this is a UK based issue http://tinyurl.com/5casw9 Sort of dispels the myth put around by some that other people keep saying that this is solely a UK based issue So in conclusion, there are global problems that will cause weak and over extended markets to collapse. Link to comment Share on other sites More sharing options...
trekka Posted April 9, 2008 VT Supporter Share Posted April 9, 2008 As a person looking to (possibly not quite just yet but sooner rather than later) get on the property ladder via a HomeShare shared-equity scheme, I find this really interesting. At the moment for me (only due to the credit cards that I'm whittling down), the finances just don't stack up. Even if I go in for a 25% share in a property, I would still be considerably worse off due to the level of rent as well as the mortgage. Yet, it would be my only option as I couldn't possibly buy outright. But then, do I take the original blow of being worse off with the knowledge that as my wages increase over time things will improve or do I continue to pay rent on this flat which is effectively "lost" money? Link to comment Share on other sites More sharing options...
dundeevilla Posted April 9, 2008 Share Posted April 9, 2008 We just got approved for a mortgage this week without any fuss at all. We are just an average couple, so it's maybe not as difficult to get a loan as the media are making out. Link to comment Share on other sites More sharing options...
drat01 Posted April 9, 2008 Share Posted April 9, 2008 We just got approved for a mortgage this week without any fuss at all. We are just an average couple, so it's maybe not as difficult to get a loan as the media are making out.Shhhh of course it is, don't you know the country is bankrupt, while all of the other places in the world are flush with money. Its because we are the only place in the world that has any immigration and and it would all be solved overnight if we elected Lord Snooty the marketing guru as PM and stuff the oiks. Note to self, when offered Daily Mail on plane refuse politely and order another V&T Link to comment Share on other sites More sharing options...
snowychap Posted April 9, 2008 Share Posted April 9, 2008 ...do I continue to pay rent on this flat which is effectively "lost" money? It is not 'lost' money, though. If you are talking about a home for the duration of your life (whether that be the exact same one or one that changes according to your needs), then what relevance does its market value (at any time) have? Link to comment Share on other sites More sharing options...
Gringo Posted April 9, 2008 Author Share Posted April 9, 2008 We just got approved for a mortgage this week without any fuss at all. We are just an average couple, so it's maybe not as difficult to get a loan as the media are making out.It will vary on your credit history and size of deposit / LTV requirements. The fact that HSBC are also offering to pick up fixed rate deals for those whose bank won't give them a new deal shows that some banks are still happy to lend to safe risks. The reduction in mortgages on offer tends to impact those without deposits or with shaky credit records. Also the reduction in the number of companies offering mortgages, and the reduced number of packages on offer will lead to a weakness in competition in the market and therefore an increase in the rates / decrease in the multiples on offer . Link to comment Share on other sites More sharing options...
drat01 Posted April 9, 2008 Share Posted April 9, 2008 So Gringo, would you say that banks are now acting more responsibly in terms of lending or acting more vindictively against those that don't have money? Link to comment Share on other sites More sharing options...
trekka Posted April 9, 2008 VT Supporter Share Posted April 9, 2008 ...do I continue to pay rent on this flat which is effectively "lost" money? It is not 'lost' money, though. If you are talking about a home for the duration of your life (whether that be the exact same one or one that changes according to your needs), then what relevance does its market value (at any time) have? Think you have the wrong end of the stick there snowy. I currently (privately) rent which eats up a helluva lot of my wages. So from my personal point of view, paying rent on a property that I have no ownership is exactly that, lost money. Whereas, paying money out on a property that I will have some ownership on at least means I'm getting something for my money. Might be the wrong point of view to have but that's where it stands. Link to comment Share on other sites More sharing options...
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