O/T: Housing Boom/Bust

[nickjonesuk]

Hello,

Sorry, slightly o/t but I would like to hear some peoples opinions regarding the housing market. I'm tired of reading and hearing on the news that we'll be out of recession and house prices will happily stay around about the current level for years to come. Am I the only one who thinks we still have a long way to go and we're being force fed this rubbish?

From what I can gather, the current surge in house buyers/prices is a backlog of first time buyers cashing in on "low prices" that they couldn't dream of for the last 6 years. People panic buying before the prices go up again. Plus the cash rich and low mortgage rates have helped lower what would be terrible repayments rates if the base rate went up.

Am I wrong to NOT buy now?

Thanks for your input.

 

[crossdaz]

Am I wrong to NOT buy now?

It's hard to say because house prices don't follow much logic?
In some areas it's not such an issue but in most parts of the UK people are simply priced out of the market.

The sad fact is that there is a severe lack of housing in this country and this means there will always be a demand. It's the lack of easy finance which is stopping anything moving. When banks start to do 100% plus mortgages (and they will) you will see an upsurge, I will bet on that.

 

[nickjonesuk]

I can see lenders bringing back 95% 100% eventually,

Do you think we will ever return to the treasured 3.5x earnings?

 

[A Charles]

I don't think lenders have as much appetite to bring back 95%+ loan-to-value mortgages any time soon. I've talked to a lot of brokers, mortgage companies and looked at some of the stuff coming out of government. There is an emphasis on risk and high LTV's are generally seen a more risky - also applies for BTL mortgages.

Mortgage companies are still running scared and surveyors are down valuing property in certain areas.

I think we'll see some steady rises; there will be one or two months of falls. We're definitely bottoming out (if we're not there already).

If you have the money then definitely buy.

In short do not overestimate the banks appetite to do business. They are still wounded and nobody wants' to be the first one to take the first brave step, because should it go wrong again it's going to be there name in the headlines.

 

[Deleted member 54079]

I purchased a repossession property four months ago for cash and have been working on it since ready to let or resell. If I cannot do either I will just sit on it for a while as I still reckon it is a better prospect financially than leaving money in the bank with interest rates being so low.

 

[nickjonesuk]

I'm worried about a dead cat's bounce at the moment, I don't think housing is affordable still, especially with all this unemployment?

Perhaps the banks are not completely stupid p), keeping ltv's around 75% as they fear a further drop and don't want more neg equity buyers

The theory that we're at the bottom doesn't sit right when looking at the last recessions.

 

[Wild Goose]

We in the UK run a year to 18 months behind the USA, and they still haven't bottomed in spite of heavy government incentives: in 2008, the US government gave interest free long term loans to first-timers (to cover their deposits); that didn't sell so well, so this current year they GIFT a large lump sum to first time buyers. In spite of which, their house prices are still falling.

Ours aren't rising either. It's all very well saying that average house prices have risen from £150k to £153k, but that doesn't mean the price of the so-called average house has gone up. All it means is that the average price of houses sold in a given month are higher. For example:

suppose that in July only two houses were sold in this country, both semis and priced @ £100k and £ 200k, so their average price is £150k. Now suppose that in August another two houses were sold, only that month they are both detached houses in upmarket suburbs priced @ £400k and £500k, so average price £450k. The Daily Express headline will then read "House prices treble from £150k to £450k". See the con? UK house prices are still falling due to market forces, but inferring the price of each individual house has risen when in reality all that has changed is the mix of houses sold (so that in August many more expensive detached houses are sold) is misleading.

I repeat, if the average price of houses sold have increased over the last few months that is because the starter home end of the market has dried up, and only the expensive end is still fluent enough to generate sales. JUst remember that at the start of this slump, in February 2008, the Daily Express was still publishing irresponsible front page headlines telling us house prices had increased for the third consecutive month. A case of deja vu.

People struggling to sit on or rent out two or three properties are unable to offload them due to negative equity - that's the reality of the housing "shortage".

 

[4little1s]

The lack of mortgages (unless its almost a sure bet for the banks - ie large deposit) is fuelling price increase in my opinion.

.....Where we are, the last month or so, there are more sold signs than forsale signs

 

[mr. mischief]

No reason to rush m8. I escaped intact - just - from the 1990 crash in property. There were plenty of so-called "dead cat" bounces until the final bottom in 94.

The problem is that lots of people have a vested interest in talking the market up - builders, estate agents, solicitors, daytime TV presenters, banks. So the slightest sign of life is taken as the bottom of the market.

The reality is that unless you believe this is a "below average" property crash, then we've got another 2 years or so to go - based on the performance of the past 150 years or so.

If you are currenlty out of the market the decision is clear - wait. Let someone else benefit from the first 10% gain if the market really has turned. If it hasn't turned then the risk is much higher than 10%.

This is not the stockmarket where prices can shoot up 30% almost before you can click "buy" with your mouse. House prices are much stickier for lots of reasons, of which a key one is unrealistic offer prices made by owners during downturns.

The spring and summer is usually a time of seasonally rising prices. If the green shoots are still shooting up in January I'll be whole lot more convinced - right now, the marginal buyer requiring mortgage finance is further away from being able to buy his or her first place than any time in the past 10 years. Prices have dropped, but the banks have moved the goalposts a lot further than the price drop.

 

[Wild Goose]

One big difference from the '90s crash is that back then people who were unable to pay their mortgages due to unemployment had their mortgage interest paid by the DSS. Most people now would not qualify for such an instant cushion (only those with pre-1995 mortgages, I believe, although that might have changed).

So I guess we're going to get a steady stream of repossessed houses on the market over the next year or two. For me, the price they sell for at open market auction is the true index of property prices - not the inflated asking prices or the sales-mix-dependant average selling prices. I know a few who have bought at auction recently at ridiculously low prices, and it seems to me it's only a matter of time before Joe Public realises he too is invited to that ball. There's a gap for any enterprising agent/surveyor to put together a hand-holding service for people wanting to buy at auction, both cash buyers and large deposit payers (essentially, a lightning quick buildings survey and search facility, with quick loan or bridging arranged). Then we'll see house prices tumble.

For me, the people with the biggest vested interest in talking up house prices are our stupid government. They haven't learnt a thing: basing your entire economy on continued consumer demand, with that consumer demand financed by inflated property prices, failed badly in America and has failed here too.

 

[nickjonesuk]

It's good to hear some mixed opinions.

I too believe we still have some way to go, and the only people interesting in talking the market up is estate agents, developers etc etc.

Houses are for living, lets hope this doesn't happen again in our lifetime (too this scale atleast)

 

[mr. mischief]

I am afraid there is a very good chance we'll all go through this again within the next 15 to 20 years.

Governments worldwide missed a golden opportunity in 2008. With only a few exceptions all the major banks came to them with the begging bowl out. This was a once in a lifetime opportunity to stamp out the fatally flawed system which Western banking had become. They totally fluffed it and just threw money at the problem.

What was needed was:

1. Much tighter regulation over lending.

2. Reform of the regulators to act counter cyclically. So if at the low of the business cycle they require 7% of assets to be held in short term liquid funds, when it is clear that a boom is under way they should be asking for 10% or more - the last 20 years it has been a shutting the stable door policy of asking them for better ratios just at the point that they can least afford it when the busts have arrived.

3. For any bank which has had state funding, bonuses should be tightly controlled in the same way as other state employees. Any banker who does not like this can always try to find a job elsewhere if they can.