House Prices

[BradNaylor]

Builder chappy bought the 3-bed house across the road from us in early 2007 for a 'knockdown' £165k

He spent a year gutting the place, and building an extension which almost doubled the floor space and gave 5 bedrooms - 3 en-suite. He spent around £60k plus his own time. He showed me round and he's done a lovely job.

He put it up for sale in late 2007 for £299k despite my advice that the market was crashing and that the very most that any house in the neighouring area had sold for was £230k. I sugested he settle for £250k but was met with derision.

Yesterday he told SWMBO that he has finally sold it - for £205k. He is also delighted, as he expects the market to fall by another 25% over the next year or so.

I think he's right.

The difference a couple of years makes...

Brad

 

[RogerS]

Maybe..maybe not. It depends on type of property, location and availability. I know of at least a couple of people where they were selling and ended up going to sealed bid. There are some sectors of the market that are bouyant.

Roger

 

[MIGNAL]

It was always going to happen. It used to baffle me how folk could afford to buy houses at £180K when the very same houses were £100K a few years previous. That's in a poor part of town as well. Of course the real reasons became apparent to me just after the Bank fiasco.
Now there's mutterings of a house price recovery. I simply don't believe it. or it's very temporary. Unemployment ireally is on the rise. Economic figures much worse than expected. It just doesn't tie in with house prices going back up again, in fact it suggests further falls and quite possibly large ones. Classic bear trap.
Don't know if the builder chap is right stating another 25%. That would make it over 40% off peak. Then again it would hardly surprise me if that did happen. I also get the impression that a lot of people are still in denial regarding the value of their homes.

 

[MIGNAL]

Oh I forgot. How much effect is the money that was pumped in having? More importantly, how long will that effect last? There's almost certainly going to be some fairly hefty public sector cut backs. It all suggests to me that there will be downward pressure, even if it is a fraction of a percent per month.

 

[RogerS]

....How much effect is the money that was pumped in having? .....

Precious little. Even when the LIBOR rate went down to an all-time low, very little feed through into the housing market. Which is one reason why the Bank of China is now entering the mortgage market.

But then are you surprised? When DuffGov bailed the banks out, they (DuffGov) adopted the same hands-off light-touch attitude that they did in setting up the Tripartite regulatory framework ie no control, no monitoring, nothing.

And now the children are taking over.

 

[BradNaylor]

Now there's mutterings of a house price recovery. I simply don't believe it. or it's very temporary. Unemployment ireally is on the rise. Economic figures much worse than expected. It just doesn't tie in with house prices going back up again, in fact it suggests further falls and quite possibly large ones. Classic bear trap.
Don't know if the builder chap is right stating another 25%. That would make it over 40% off peak. Then again it would hardly surprise me if that did happen. I also get the impression that a lot of people are still in denial regarding the value of their homes.

I think you'll find it's a bull trap.

That is, a brief rally in a falling market that encourages 'bulls' to pile back in. The lack of fundemental strength in the market however, soon causes the floor to give way and the real crash to get under way.

This is the point I believe we are currently at.

The bubble in house prices was a direct result of the bubble in credit fuelling demand out of all proportion to its natural level. Now that the days of such levels of credit are gone for the forseeable future - probably our lifetimes - it is inconceivable that house prices in general can go back up again until they have fallen below the long term average.

Long term average house price is around 3.5 times average earnings.

3.5 x £25,000 = £87,500

Yet the current average house is valued at £150,000!

House prices have got an awful long way to fall yet.

Of course, there are always going to exceptions, and if someone falls in love with a restored country cottage with unique features and has the money available, there is every chance that they will buy it even at a high price.

For 3 and 4 bedroomed semis in suburbia like most of us live in though, the market is only going one way - down.

Cheers
Brad

 

[Ironballs]

I've never got the see your house as an asset to be used mentality, to me house is where you live and you get the best you can in the area you want so that you can enjoy it. These folks who have been re-mortgaging and taking out the "profit" from inflated values and then spending it on crap are idiots.

I'm one of the world's worst savers but then I'm also fairly good at keeping my debt to a minimum, my aim is to get that mortgage paid off ASAP whilst still spending enough cash to enjoy life as you pass through.

 

[devonwoody]

I've never got the see your house as an asset to be used mentality, to me house is where you live and you get the best you can in the area you want so that you can enjoy it. These folks who have been re-mortgaging and taking out the "profit" from inflated values and then spending it on crap are idiots.

I'm one of the world's worst savers but then I'm also fairly good at keeping my debt to a minimum, my aim is to get that mortgage paid off ASAP whilst still spending enough cash to enjoy life as you pass through.

One way (I did) to clear off the mortgage is to keep buying and selling with a good mark up each time and then downsize at the right time. You can then buy without a mortgage. Those were the days !!!!!

As regards government and banking, there would have been huge outcries if there had been government interferance with running of the banks before the crash, the government would have been told that business knows best.

Its a no win situation.

 

[RogerS]

.....
As regards government and banking, there would have been huge outcries if there had been government interferance with running of the banks before the crash, the government would have been told that business knows best.

Its a no win situation.

So are you advocating no regulation at all? Mind you, we might as well had no regulation given the fact that the FSA were too busy squabbling internally to do what they were supposed to do.

 

[devonwoody]

~Regulation after the event or regulation before the event?

Discuss that without politics? :wink:

 

[RogerS]

~Regulation after the event or regulation before the event?

Discuss that without politics? :wink:

Politics doesn't really come into it other than the simple statement that it was DuffGov who set up the Tri-partite Regulatory Framework but without any clear lines of responsibility. Any fool knows that that is a recipe for disaster ...as proved to be the case.

 

[devonwoody]

Yes Roger but every country of the G8 has had to rescue its own banks?

At least I have not lost a penny saved.

 

[devonwoody]

Brad, house prices will come into balance again when inflation clicks in.

That is what happened in the past and no doubt the future.

My SIL the bugger, sold again two years ago and has been renting, he's got nerves of steel. (the second time he's done it. )

Its timing

 

[ste_5150]

I'm a first time buyer, and without descending into too much moaning, it really is frustrating.

You'd think it was great because of the house price drops, but it doesn't work that way. I'm earning a bit above the (reported) national average wage but unless I have an absolutely massive deposit I can't even buy the 'average' 3 bed semi in an 'average' area. Plus, mortgages have tightened up that much that I can't get a mortgage without scraping a bare minimum of a 10% deposit. Plus, with 90% loan-to-value mortgages, they know they've got you by the b*lls so they're charging a minimum of 7% interest, or 2.5k fees. And when they're offering those deals, they're also locking you in on 5 years at that fixed rate. It really is daylight robbery, but there's nothing I can do about it because I can't keep renting (costing me £100 a month than the mortgage anyway) because we can't keep moving around - we need to settle the little one into school and keep her there if we can, so we really need the stability of owning a home (for ourselves too - I'm sick of moving house!).

I agree with some of the comments about timing allowing you to make a lot of money from it, but unfortunately sometimes you just don't have that option. It really does make you despair...

Anyway, that's my offloading done for the day! :lol:

 

[devonwoody]

don't despair, I would look at repossessions, make some enquiries whats about, its what is called capitalism.


Secondly get on the property ladder, don't be too choosy, they will go up again, 52 years ago I can recall that my property surely cannot rise again. (1st one was under £1K)

 

[ste_5150]

don't despair, I would look at repossessions, make some enquiries whats about, its what is called capitalism.


Secondly get on the property ladder, don't be too choosy, they will go up again, 52 years ago I can recall that my property surely cannot rise again. (1st one was under £1K)

Yeah, that's what we've done. We got an offer accepted a few weeks ago - not a repo but an absolute steal. It's a 2 bed semi but very spacious and well built. Refurbed as well, but the owner needed out so it want for a bit less than current market value. The only trouble is, I'll have nowhere for woodwork, or for a music room/studio (I'm a musician too), so it's a bit frustrating, but we'll persevere and try and find a way around it...

 

[mpooley]

I like this chart - Makes me laugh
it seems to be pretty accurate in my opinion looking back on the 3 bubbles i've been through.

and I'm certain we are in the "return to normal" Phase, now. :x

 

[ste_5150]

I agree with that, though the drop after "return to normal" seems a bit out of scale! I'd guess at another 5-10% drop coming over the next year, then a stagnant market for a few years. I think it's a real shame to have to buy at this point, but circumstances dictate sometimes... At last there's a pretty major upside to making that decision!

 

[Night Train]

Looking at that graph it would be a good time to get some cash together and wait for the dispair stage to start buying up buy to lets.

 

[ste_5150]

To be honest, I think the sweet spot is just before Media Attention. It's the time where the prices haven't gone crazy, but the mortgage market is free enough to give you what you need.