The House Price Crash Thread

[cheltenham_villa]

has anyone else seen the offers going with Barrett homes this weekend. Received an email to say that Sunday is a one off reduction, first come first served. Phoned up to check the details and the prices are reduced by 43%. This deal is joined to another housing developer but i forget which. Not sure if this is a sign of a panic or just a reflection on the ridiculous margins they make on these houses

[Gringo]

First they told us prices were stabilising.

Then they told us that the falsl were stabilising.

Today's beauty was

"This may suggest the beginning of some stabilisation in the pace of house price falls."

The Nationwide has announced its biggest ever recorded drop in property values of 12.4%, as one of Britain's best-known builders is slashing nearly half off the asking price of new homes.

[leviramsey]

has anyone else seen the offers going with Barrett homes this weekend. Received an email to say that Sunday is a one off reduction, first come first served. Phoned up to check the details and the prices are reduced by 43%. This deal is joined to another housing developer but i forget which. Not sure if this is a sign of a panic or just a reflection on the ridiculous margins they make on these houses

I'll take both for the limit, Alex.

[snowychap]

House sales hit new 30-year low

The slump in the property market is becoming even worse, according to a survey from the Royal Institution of Chartered Surveyors (Rics).

Estate agents sold on average under one property per week each in September.

The number of properties being sold across the UK was the lowest since the Rics survey started in 1978 and was 52% lower than in September last year.

London was the region with fewest sales per estate agent, at an average of just eight in the previous three months.

And nationwide 91% of estate agents saw prices fall over the preceding three months.

"As it stands, only those with significant finances are in a position to access the market," said Rics spokesman Jeremy Leaf.

"The housing market continues to hold its breath and unless mortgage liquidity improves, the market is likely to remain a dormant beast for some time to come."

Lenders such as the Halifax and the Nationwide have reported that prices have fallen by 12% in the past year.

...more on link

[Gringo]

With the "new deal" the drought of mortgage funding should abate.

However, people aren't going to be buying in a falling market. So still another 12 months of price falls to come.

[Jon]

With the "new deal" the drought of mortgage funding should abate.

However, people aren't going to be buying in a falling market. So still another 12 months of price falls to come.

depends, surely Grings.

people may feel that the market has already reached it's trough, and that a stabilised financial sector will see that market pick back up again, slowly?

If i were a FTB, i'd be looking to buy soon-ish.

[ianrobo1]

markets eh , great things ...

[Richard]

With the "new deal" the drought of mortgage funding should abate.

However, people aren't going to be buying in a falling market. So still another 12 months of price falls to come.

People will not be buying houses will there is uncertainty over jobs so it'll be a while yet

[Gringo]

people may feel that the market has already reached it's trough, and that a stabilised financial sector will see that market pick back up again, slowly?

If i were a FTB, i'd be looking to buy soon-ish.

It takes a long time to turn sentiment around. The confidence of the market has evaporated. Last time it took five years of positive GDP before house prices started moving ahead again. With recession to be confirmed, job security at a low and the outlook not exactly perky, people will be biding their time.

Plus the input of funds into the market isn't quite what it seems. I spoke to a mortgage product manager back in May who said they had as many funds available as they had 12 months earlier, but now you need 10% (or 25% for BTL) deposit to get access to them. If this doesn't change, then the FTB'ers still have a couple of years saving before they get on the housing treadmill.

[ianrobo1]

With the "new deal" the drought of mortgage funding should abate.

However, people aren't going to be buying in a falling market. So still another 12 months of price falls to come.

depends, surely Grings.

people may feel that the market has already reached it's trough, and that a stabilised financial sector will see that market pick back up again, slowly?

If i were a FTB, i'd be looking to buy soon-ish.

within 12 months for sure, another 10-15% drop will be great for them ...

though lessons have to be learnt and hope we never see 110% mortgages, multiples of more than 4 times income, not checking wages etc.

that will all depress prices for good

and then someone has to take a stance and state the housing market should not be a fundamental part of our economy ...

[HongKongVillan]

Spoke to a friend who works in the City a week ago, apparently the City (if you still believe in them?)is predicting a further 2 years fall in house price, and the main reason being that properties in the UK in general are still massively over priced! And mind you she got it right when she told me last year that the City had already predicted a sharp fall in 2008.

Aplogies if this sounds like one of those ITK on the Villa transfer front from a spuds fan.

[tinker]

IMO An average house price should be 3 1/2 times the average wage, which would make it about £110,000. At the moment its £170,000.......

[Awol]

Negative equity ‘to reach 2 million’

Collapsing house prices are plunging 60,000 homeowners a month into negative equity, which means the country is on course for a worse crisis than the 1990s crash.

At current trends, 2m households will enter negative equity by 2010, outstripping the 1.8m affected at the bottom of the last housing slump.

New research from Standard & Poor’s, the ratings agency, coincides with evidence that banks are aggressively seizing homes whose owners have slipped just a few hundred pounds behind on their mortgage payments.

It is a further signal that the financial crisis is now infecting the real economy as hundreds of thousands of families face the prospect of being unable to move house because their home is worth less than the value of their mortgage.

Many more homeowners will now be afraid that the bank may suddenly repossess their property. Repossessions have soared to 19,000 in the first half of the year, up 40% on the previous six months. That figure is expected to rise to 26,000 in the second half of 2008.

Economists believe house prices will fall by up to 35% from their peak by 2010. This compares with a drop of only 20% in the early 1990s.

Last night opposition politicians blamed Labour for encouraging a “culture of indebtedness” that now threatens to cause an implosion in the housing market. Philip Hammond, the shadow Treasury chief secretary, said: “We are now paying the price for a decade of debt-fuelled boom, with hundreds of thousands of people unable to sell their property, after being encouraged by the government to overstretch themselves to get on the property ladder.”

Vince Cable, the Liberal Democrat finance spokesman, urged Gordon Brown to do more to prevent unnecessary repossessions. “It genuinely must be a lender’s last resort, which right now it certainly is not,” he said.

With official figures out this week expected to show Britain has fallen into recession, Brown is planning a 1930s-style programme of public works, spending billions on new schools, homes and transport projects. He has urged senior colleagues to increase expenditure on big capital projects – despite forecasts that tax revenues are about to collapse.

Brown’s ambitious plan is modelled on Franklin Roosevelt’s New Deal, which helped drag America out of the Great Depression. A Whitehall source said: “We cannot afford to risk the complete collapse of our construction industry. We have to make sure that the skills have not been lost when we finally pull out of the downturn.”

Standard & Poor’s has calculated that by the end of the month 335,000 homes will be worth less than their mortgages. The figure represents a rise of 260,000 in four months.

Capital Economics, the City consultancy, expects up to 2m properties will be in negative equity by 2010 — more than in the recession of the early 1990s.

Northern Rock, the bank nationalised this year, is said to be behind a wave of aggressive repossessions. In the nine months to the end of September, the state-owned lender made more than 2,000 seizures.

Esther Spick, from Surrey, is three months in arrears on her Northern Rock mortgage. The lender has launched repossession proceedings, even though she owes just £1,200. In one case reported to The Sunday Times by a housing charity, the bank is trying to seize a home where the owner is just £800 in arrears, even though he has about £40,000 of equity in the £180,000 property.

Chris Tapp, director of Credit Action, a debt charity, said: “What makes these negative equity statistics so worrying is that they come at a time when banks are behaving so unreasonably over repossessions.

“We are particularly dismayed with the inflexibility of Northern Rock. ”

Adam Sampson, chief executive of Shelter, the housing charity, said: “Northern Rock is behaving very aggressively on repossessions, but it is not the only lender acting like that.”

The Council of Mortgage Lenders said there were no industry guidelines for how deeply in arrears a lender had to be for a home loan provider to be entitled to launch repossession proceedings.

The government said last night it would bring forward laws forcing lenders to offer alternative payment schemes before they were allowed to take back possession of the property.

Northern Rock denied that it was overly aggressive. “Repossession proceedings are only launched as a last resort,” it said.

The details of the prime minister’s extra spending on public works is expected to be unveiled in the pre-budget report next month. Brown has already tasked his new “enforcer”, the Cabinet Office minister, Liam Byrne, with compiling a list of major construction projects at risk from the credit crunch that would benefit from extra government support.

Brown’s handling of the financial crisis has failed to improve Labour’s electoral prospects. Despite most voters saying he had performed well over the past few weeks, only 13% said they were now more likely to vote Labour, an ICM survey for the News of the World found.

Interesting that Government are making noises about pressuring banks not to reposses homes when Northern Rock are doing so at twice the rate of public sector banks? Could that be because the quality of their loan book is so poor - more sub prime type mortgages than other banks? It's a nice thought but how could it work in reality without actually preventing a recovery in the financial system?

The other interesting thing from this article is that Darling/Brown plan to spend our way back to prosperity which inevitably means massive tax rises further down the road. I reckon Labour won't put tax up before an election in the hope of leaving the whole thing for the Tories to sort out. 'Slash and burn' springs to mind.

[snowychap]

House sales slump 53% across UK

The number of property sales in the UK has fallen by 53% in the past year, according to the latest figures from HM Revenue & Customs (HMRC).

In September, 59,000 homes were sold, down from 126,000 sales in the same month last year.

That was also a 62% fall from the recent peak in sales, of 154,000, seen in December 2006.

This year, the credit crunch has driven the housing market into its sharpest slowdown for many years.

Nose-dive

Despite a recent cut in interest rates, attempts by the government to refloat the banking system, and a cut in the burden of stamp duty, there is no sign yet of the property market coming out of its steep nose-dive.

Lenders such as the Halifax and Nationwide have reported that prices are still falling fast and are down by about 12% on their levels of a year ago.

A recent survey by the Royal Institution of Chartered Surveyors found that estate agents were struggling to sell even one property per week each on average.

In addition, the best leading indicator of future activity - the number of new mortgages approved for house purchase but not yet lent - is down by 70% on a year ago, suggesting that sales and prices have further to fall.

On Monday, mortgage lenders warned that lending this year would turn out to be just 37% of last year's level and that prices would probably continue falling in the next few months.

Howard Archer of Global Insight described the HMRC figures as "dismal".

"Faster rising unemployment, heightened concerns over the economic outlook and widespread expectations that house prices will continue to fall markedly seem well set to depress housing market activity and prices for some considerable time to come," he said.

Shortage of funds

The key factor in the sales slump has been the lack of funds in the past year available to banks and building societies to lend to borrowers, especially first-time buyers.

With house prices falling, lenders have been demanding that borrowers put down deposits that are much larger than normal, to protect themselves if someone becomes unemployed and the home is subsequently repossessed and sold at auction.

At the start of the year, mortgages worth 100% or even more of a property's value disappeared. Now even the traditional 95% mortgage is in danger of disappearing.

Many lenders now ask borrowers to put down at least 10% of the purchase price of a new home. The most favourable deals, at the lowest interest rates, are generally available only to those who can put down 25%, or sometimes even 40%, of their purchase price.

"There are some signals that housing market activity could be close to hitting a floor but there is a danger that a sharp rise in unemployment could precipitate a further round of fear on the part of buyers," said Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (Rics).

[OutByEaster?]

I've just come back from looking at a house. If I decide to buy, what percentage of the asking price should I bid?

[snowychap]

Though it might sound a bit of an unhelpful answer, I'd say only what you can comfortably afford.

I also suppose it will depend very much on how overpriced the house is.

Just looking in the local rag, some estate agents appear to overprice a lot more than others (whether that means they build in an expectation of people offering x % under the asking price, I don't know).

It might be worth looking at the houseprices website to see if anything similar in the road has sold recently and maybe go to the local library and compare those sale prices with the asking price that was advertised.

It never goes amiss to do research.

Sorry, I couldn't be more helpful (and acknowledge that the advice comes from someone who has never bought a house and has no intention of ever buying a house :winkold: ).

[ender4]

I've just come back from looking at a house. If I decide to buy, what percentage of the asking price should I bid?

thats a good question. i am also debating what offer to put in for a house.

its on the market at £400k, and i believe it is overpriced. I am debating whether to offer £350k, £340k or to go even lower. The house has been for sale for 6 months now which is why i think £50k less (12.5% lower) is the maximum i would pay.

[PaulMcgrathsknees]

How much do you want it?

How much do they want to sell?

[Gringo]

BTL RIP

There are virtually zero 85% LTV mortgages out there now for BTL'ers. This means many who bought in 2006 with a 2/3 year fix expiring in the next 6 months will either have to pay his bank's standard variable rate or accept repossession.

Worked Example

If they bought a 100k flat with a 85% mortgage / 15% deposit - the property is now worth 95k, and so a 75% LTV mortgage will only release 71k, meaning the landlord having to find the additional 14k to get a new mortgage. Alternatvely switching to the banks SVR will add 100-150 quid a month to their costs making the property unprofitable and up for repo.

So lots of cheap properties will be appearing between now and easter, further deflating the overall property market.

[Gringo]

But hey, it's not all bad news out there

House prices 'to recover by 2013'

House prices will not get back to the levels they peaked at in 2007 until 2013, the Centre for Economics and Business Research (CEBR) has predicted.

The group also forecast that prices would fall in value by 25% from their peak to a trough at the end of 2009.

It would mean an estimated 2.5 million homeowners could face negative equity.

Not quite the full story - the are talking in actual terms. In real terms (discounting for the effect of inflation), house prices won't be back at 2007 levels til 2015.