But the house payments where high because of the the price of homes shot up in 8 years, add first time buyers and highest monthly living costs when have ever seen the first thing to go down is the price of buildings.
House prices..
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But the house payments where high because of the the price of homes shot up in 8 years, add first time buyers and highest monthly living costs when have ever seen the first thing to go down is the price of buildings.
In theory it would be a very good thing long term!
The reason we got in this mess is the banks started to lend silly multiples and percentages to people, so the credit was there and houses shifted and kept going up in price. Unfortunately, it all ended in tears when, low and behold, it transpired that lending people 110% mortgages at 5* their salary wasnt actually a great idea because people cant pay them back.
The average salary in the uk is £26,000.
The average house price is £161,000. (6 * salary)
Theres something wrong there (and yes, I realise that averages dont tell the whole story), so assuming that banks go back to the traditional 3.5 times salary, sellers have to take the decision to either stay where they are or drop their prices to within what buyers can afford.
Of course there are a lot of people that would be royally ****** as they would be unable to move house, stuck in negative equity, but at least in the furure average hard working families will be able to afford a house.
Firstly, an individual does not have an entitlement to a house, nor does a couple, but it's certainly reasonable that with a limited supply, those who can provide two incomes are in a better position to purchase than those who only provide one.
Secondly, and related to the first point, most banks did not go that far about the 3.5x, the difference was they started taking into account income, rather than salary, so a household with two incomes could borrow 3 or 3.5x joint, which is essentially the same as the traditional 3.5x income where there was a single earner...
Thirdly, the idea of 5x mortgages simply did not happen in the way you are claiming. The only bank that was routinely offering 5x salary/income was Abbey, and the offer was subject to strict criteria (including a deposit and a household income in excess of £60,000). A couple of other banks offered similar products briefly, but it was not ever routine.
http://www.iii.co.uk/articles/articledisplay.jsp?section=Mortgages&article_id=4836291
The mortgage providers in the UK (with the notable exception of B&B, who lent to the wrong people and bought the wrong mortgages from the US) are not suffering because of repossession or arrears rates on their mortgages, they are suffering because liquidity has dried up due to a lack of confidence in the securities market meaning virtually all mortgage bonds, whether good or bad, are worth very little and unwanted.
Put simply, the reasons you are citing for the cause of the problems have not caused it, and are being seriously overstated in that regard. The UK did not have a problem with excessively risky lending, nor did we mandate subprime lending (as they did in the US) as being compulsory.
Of course, I'm not saying that everything above is a good idea, some of it certainly isn't, and the continued issue of people borrowing more than they can sensibly afford is not going to go away, but it's not the problem at the moment.
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Of course price is relevent, what a bizarre statement to make! If, for example, houses cost say £35K to buy then most people could easily save that and buy without a mortgage.
The cost of housing in this country is VASTLY over-inflated. The answer is for house prices to reduce to sensible income multiples, NOT for finance to ease so people can carry on supporting the largest pyramid scheme in history!
And if people could easily afford to save and buy, demand would rise, and so would prices to the point where supply and demand meet. Your desired situation can only be sustained either by a massive building program, or a massive change that makes saving that sort of money very difficult...
House ownership has never been easy, nor should it be. Too many people are stuck in the mid 90's when house buying was suddenly easy as prices were low and credit availability high, meaning easy home ownership. This is not the historical norm, nor will it be because easy home ownership doesn't tie in with limited supply... House prices do not, on their own, determine ease of home ownership, and it's ease of ownership that determines how the market behaves, not the price itself.
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There is no limit of supply, there's over one million homes sat empty just in England alone right now.
Soldato
The house price figures are a bit difficult to read at the minute as well due to the incredibly low volume of transactions. It's not ideal to rely on figures for such a small sample.
Soldato
What would a person need to get themselves their first house these days?
Say i wanted a flat for 90k, Would i be needing about 30k deposit?
Say i wanted a flat for 90k, Would i be needing about 30k deposit?
Unless you start forcing people into houses they don't want, or start forcing people to ensure all their property is occupied, empty properties are somewhat meaningless...
And that's without mentioning that we're in a period of dropping accessibility, and therefore dropping demand, so you would expect some slack in the market to be causing it...
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I think you'll find those figures have been fairly consistent over the last few years, the current situation will have little impact. If a house is empty currently, it's likely to stay that way for the forseeable, if it's just for sale then it's not unoccuppied.
I would be interested to see the effect of the fall in sales volumes on estate agents, I read somewhere this week that up to 125 branches a week close throughout the country. Quite a shocking figure, we'll probably see harlequin Mini's on eBay next!
I'm continually flabbergasted by the obsesion of some people with the idea that house prices SHOULD be high, or that this boom should somehow be 'held up' ...
... The sooner we all admit to ourselves that this was an asset boom and nothing else .... we can all get on with our lives.
... The sooner we all admit to ourselves that this was an asset boom and nothing else .... we can all get on with our lives.
Soldato
This time last year you were saying a crash was virtually impossible. Call it what you will but most of the people who predicted a crash wouldn't happen have gone very quite. And it’s almost always external “events” that trigger change in the market, and enviably events always happen. In this case the crash was caused by over borrowing, which anyone with half a brain could see was unsustainable.
This "readjustment" will benefit first time buyers in the long run, and some a lot sooner. Some people like myself have been in a position to buy for a while but have been put off by high prices. A first time buyer in a stable job and some savings is in a very strong position at the moment.
Indeed, because they are properties that no-one wants, and even through the boom, no-one wanted, or alternatively properties not available for sale, in which case they are irrelevant.
I would be interested to see the effect of the fall in sales volumes on estate agents, I read somewhere this week that up to 125 branches a week close throughout the country. Quite a shocking figure, we'll probably see harlequin Mini's on eBay next!
As most estate agents are parasitic scum, this is fine by me
No, I never said that it was impossible, that is and always has been a fundamental misrepresentation of my views. What I've said all along is that the housing market would not crash in isolation, and that those rubbing their hands with glee at the idea were really just painting a target on their foot, because a dramatic price drop would be symptomatic of much deeper economic problems.
This is exactly what has happened, the market has not crashed because of over borrowing at all, but because of poorly packaged borrowing with incorrectly applied credit ratings because of government regulations, which caused a market failure between banks. The borrowing levels, on their own, were not the problem, apart from that fact that if the market had been allowed to function correctly, borrowing would not have reached such levels because the market would not have kept funding it if it has been assigned a correct risk profile.
So is anyone with a stable job and a decent amount of equity and capital, or anyone with a stable job with no need to sell their house...
Soldato
No it's not.
An increasingly rare species. And anyone with a large amount of capital in their home would have bought soon after the end of the last slump (pre 2000), as I hope to do after the end of this one.
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Overlending did happen on a huge scale, it was just done 'under the counter' with banks turning a blind eye, or at least not checking, applications put forward by Independent Mortgage Brokers.
And 3 * joint is just as bad as 5* sole income. How many young couples have managed to scrape a mortgage on that multiplier, then go on to have a baby and get into financial problems.
http://www.independent.co.uk/money/mortgages/house-repossessions-soar-to-12yearhigh-888726.html
The above is due mostly to unchecked over borrowing, and then and increase in rates which has tipped people who shouldn't have been given a mortgage in the first place over the edge.
As you say though, supply and demand will always dictate prices - at the moment theres loads of supply and very little demand. Mortgages are still around for those that want them and have a good credit rating and deposit - problem is people wise enough to be in that position are unlikely to be daft enough to buy whilst prices are dropping month after month. Eventually it will even out, and the market will be corrected.
Soldato
Makes me wish i never screwed up my credit rating with years of moronic spending 
Yes, it is. Allow me to go back over some of my previous posts.
Dec 2007
No mention of impossibility there
It seems extremely unlikely to everyone without a chip on their shoulder about house prices
Some people on this forum have been saying the same thing for years...
That one was in response to CLV's 30% over 2 years, certainly no mention of impossible, and the fact that's he'd been predicting this over and over for years and been repeatedly wrong tends to get overlooked. A broken clock tells the correct time twice a day remember.
A warning about the type of circumstances that could cause a crash.
Again, no claim of it being impossible for prices to fall. The economic issue in the US has picked up pace since this post, but still, nowhere near your representation of my position.
Certainly not a post that implies a crash is impossible.
I could go on if you wish, I will hold my hands up and say that the situation has progressed in a most undesirable fashion since then, as the true extent of the mess has become clearer, but that's still not anything approaching the position you are trying to paint me as holding.
I think a return to the idea of deposits showing a willingness and means to actually be able to afford the purchase of a house would be a good idea..
.... restricting loans is something i was initially in favour of, although there has to be some way that people can at least scrape together the funds for new businesses or cars etc etc... so im a bit unsure of that.
Deposits can be found from remortgaging and other 'swindles' ... but it might go some way in weeding out people who SHOULDNT be able to mortgage a house (people wanting to get 6-10x income with no deposit) and assist with inflating another bubble.
.... restricting loans is something i was initially in favour of, although there has to be some way that people can at least scrape together the funds for new businesses or cars etc etc... so im a bit unsure of that.
Deposits can be found from remortgaging and other 'swindles' ... but it might go some way in weeding out people who SHOULDNT be able to mortgage a house (people wanting to get 6-10x income with no deposit) and assist with inflating another bubble.
Soldato
All those posts predate the beginning of the downturn, which started about this time last year. Which is coincidently about the time you changed your tune by saying prices would only frop inline with a fall in the general economic outlook. Which you were right, they did. But the downtrun also had to happen some time soon.
You really should become a politician you know. You'd fit right in
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