Deep Singh

I've been doing the maths on this and I'm a little confused.

I bought my house late 2003. I had it valued at the peak of the market before the credit crisis just when interest rates were beginning to rise due to inflation.

Now, if we say prices are down 25% from peak that would put my house at about 10% more than I paid for it in 2003. Thing is I bought the property in poor condition and spent quite a large amount of money on it.

So when I take into account purchase price and refurb cost todays value would be 5% below what its cost me.

This doesn't bother me at all, especially if it means if I wanted to trade up the next house would be 25% down aswell.

But, and this is my point, you just don't see my kind of house on sale for my peak valuation -25%. If I put it up for sale at that price, it would sell in 24 hours I'm sure, and I'm not just saying that.

A colleague of bought a much better house than mine at the peak n ot far away. Again you do not see these houses for sale at peak -25%. Tbh, if you did I'd sell my house at peak -25% in a heart beat and buy one of these nicer houses at peak -25%.

So, though I don't dispute the stats, and I'm not trying to imply for a second that where I live is somehow immune because its not, something doesn't quite add up.

People defo can't just ask for fanciful prices, and stupidly priced new build 2bed flats have had it.

Its a strange market, because at the moment not many people are forced to sell (this may change of course) due to low irs and therefore desirable properties are not coming on the market at peak -25% as far as I can see

SunnySideUp

You would put your house on at -5% from peak, but would be offered 20% Off your asking ...... if you were serious about selling, there is your 25%.

In short, properties are coming on at Peak -5% or thereabouts and accepting 20% off that.

Anything coming on at Peak -25% does, indeed sell within a few days ..... I have seen it happen more than a few times.

Deep Singh

Yes but I don't see things selling at peak -25%. I'm registered on one of those websites where all actual sale prices in my area are emailed to me every month. People just aren't selling because they still have their properties on the market at near peak prices and aren't taking silly offers. I'm talking about family homes btw not flats where I think the market dynamics are different.

Its very interesting, though its easy to judge todays recession by those of the past, things are a bit different this time. Interest rates are low, and forced sales remain low so far in many areas

rossyboy

iTrader: (8)

Depending on what part of the country you live.

Ours sold in 24 hours at peak -10%. Could maybe have sold for more as there was a lot of interest, but we took the bird in the hand.

SunnySideUp

Of course you won't see selling prices at peak -25% ...... because, as you have stated, people are not selling.

They are not selling because they refuse to accept reality ..... if you were selling your car at an asking price of £10,000 and you received 25 offers at between £5,000 and £7,500 then that tells you, simply, that you are asking too much.

You have two choices, sell or keep .... houses are no different.

fatherpierre

Bit more doom if you bought at the peak and want/need to move.

BBC NEWS | Business | Home values 'down 28% from peak'

Deep Singh

Not doom at all if you are moving up the ladder I suppose as the next property has fallen by a greater amount. But as I've said, if there are no/few forced sellers in that segment of the market it doesn't really work.
On the other hand it may lend to some stability of prices in that segment of the market as people just won't sell at the lower price. This will change if there is mass unemployment amongst white collar workers of course

fatherpierre

It's doom if you bought at the peak and only put a minimal or 0% deposit down and don't have the cash to fund your loss and put a deposit on your next place!

john banks

Deep, I'm seeing the same. Very low volumes. Sellers not forced to sell at this point. Me not interested in buying at these prices. Deadlock.

Deep Singh

Sure, but there are certain kinds of property (especially family homes) that aren't usually bought by people with 0 % deposit and 7 times income. They are bought by a different kind of person at a different stage in life and on real fundamentals ie good transport links, good schools, low crime rate etc.
I'm beginning to think these kind of properties may fare better than others

Deep Singh

Exactly. Low interest rates have made this property recession different to the others I remember. The only thing to force sales and therefore allow prices to really fall further is unemployment. Thing is I don't think that unemployment at 3 million is enough to cause big further falls, it wasn't enough last time around, it was the painfully high irs that really caused the damage.

I live in an area where many 'City boys' live, and despite layoffs and reduced bonuses there are still virtually no forced sellers.

So, as irs will not rise for the foreseeable future we will need unemployment to rise to a lot more than the 3 mill predicted or some other kind of shock to the system. If not we may just see stagnation for quite some time.

SunnySideUp

Deep ..... it is the FEAR of unemployment which will keep prices on their downward trend - how many people fear for their jobs? 10million? 20million? this number will increase as the actual jobless count increases.

I have been looking for another property since last summer - I'm not selling - the properties I am looking at are Bungalows on the South Coast. The thing which is driving these elderly people to want to move is the fact that they wish to move nearer their families ..... it is not just the usual things which turn people into forced sellers - sometimes it is self inflicted.

Deep Singh

I'm playing devils advocate here a little but how would FEAR of unemployment drive down prices? Fear of job loss makes people frugal and cut back on spending, it doesn't make them sell their houses at a lower price. I can see how this will lead to less consumption and hence more job losses, but not more big price drops unless unemployment really rockets.

I understand some people have to sell ie death, divorce, family etc. These people may get screwed and will present the buying opportunities that you are looking for. But by your own experience it doesn't seem to be throwing up loads of buying opportunities for you

fatherpierre

Yeah, that's what I'm seeing.

So many houses are coming on the market at 07 prices, sitting there with maybe a 5% reduction and then withdrawn.

I don't think it's sunk in yet for many sellers that aren't going to get near asking price offers unless they have adjusted to the market level and are being realistic.

SunnySideUp

Sorry, you miss my point ...... if people are in fear of losing their job they will not look to buy big ticket items, cars, TV's and, yes, a House.

Result? Reduced number of buyers .... the available property must drop in price to attract a buyer, any buyer.

Quite simply a matter of supply and demand.

Gear Head

iTrader: (2)

How come Halifax value our property at just 8% less than it's peak? I thought you all said that it will have lost 20-25%?

This isn't the same as previous recessions, so all you predicting the same as the 1980's/90's need to take a step back.

SunnySideUp

Halifax the Bank or Halifax the Estate Agents?

SunnySideUp

I see that Scotland is now feeling the cold wind of crashing House Prices!

House sales in Scotland down by nearly 60% in last year - Scotsman.com News

Further fall in house prices - Airdrie & Coatbridge Advertiser

Scots House Prices Fall 9 In 3 Months (from Evening Times)

Deep Singh

I'm probably sounding like a stuck record now but that's my point. They are being withdrawn, not drastically reduced. People who just want to trade up, and perhaps even trade down, are delaying their move until there is some kind of recovery. Therefore we may not see big further decreases in prices, as we do not have drivers like high irs or mass unemployment to force them to sell.

So, we could just see stagnation for years, with a very illiquid property market. Discuss!

Gear Head

iTrader: (2)

The bank, you know, the one that works out how much equity you have in your property! Wouldn't trust estate agents as far as could throw them.

Gear Head

iTrader: (2)

Until banks start lending the same sort of amounts that they were at the high point, yes, your observation is most likely correct.

fatherpierre

What were they valuing it for? Insurance purposes?

It's irrelevant for a sale price as it is worth what the market will pay, if you come to sell. And that wouldn't be 8% under the peak unless you were very lucky

stevebt

iTrader: (8)

I have said before that most people aren't desperate to sell so they won't take the loss, also just because they are prepared to drop say 20% on thier sale it does not mean the people they would be trading up to will! Unless people are really really forced to sell no one will move.
No matter what happens you always need somewhere to live

SunnySideUp

It is NOT a loss, in most cases .... it is simply less than they 'may' have achieved in 2006/2007!!

We need to get out of the cycle of fast rising prices followed by steep falls ..... one last steep fall and we should stabilise.

But, yes, stagnation looks the favoured winner - I am not about to pay someone more than the 2004 value of their property - they may not want to accept less than the 2006 level.

BUT, I have money - and that can be used for anything ...... they have a pile of bricks with gaps in which is worthless until exchanged for money.

Hence, currently, the buyer will win out and prices will still need an adjustment downwards.

Deep Singh

Spanner in the works for your theory though. You may have the money but you have limited options. Your returns in the bank are a couple of % and then you pay 40% tax on it. Equities? You need to be brave or really know what you are doing, also you are not leveraged so return potentially small. Pensions? LOL!

So though cash is king, its not producing much at the moment as you well know. Your money may well be able to be used for anything, but what is there for it to be used on?

SunnySideUp

"Accountancy and insolvency firm Moore Blatch has forecast that repossessions and distressed sales could be far worse than those in the crash of the 1990s.

It says this is mainly because the real picture is skewed because of activities by the sale-and-rent-back industry, which buys homes at significantly under-market value to rent back to their former owners.

The sector barely existed in the 90s, but has so far been responsible for over 50,000 distressed sales, according to the OFT.

Paul Walshe, head of lending services at Moore Blatch, said: “Comparing repossessions with the 90s and the current day is like comparing apples with pears. We should be looking at the totality of distressed sales, and by doing so we will see the position is much worse this time around.”

The sale-and-rent-back sector – widely seen as a cowboy industry – is due to be regulated this July"

Source:- News Story - Estate Agent Today

Henrik

iTrader: (5)

Halifax house price index -1.7 month on month for april (Forex Calendar @ Forex Factory)

Mitchy260

Interesting, 2009 drops so far then...

Nationwide

Dec 08...£153,048
Apr 09...£151,861

4 Month reduction of 0.78%

Halifax

Dec 08 £160,861
Apr 09 £154,716

4 Month reduction of 3.82%

I would suspect a lot better than this time last year, so perhaps the housing market falls are slowing down?

Henrik

iTrader: (5)

year on year they accelerated from last month (-17.5% vs -17.7%), so I'd say we're not out of the woods yet.

Also, the Halifax quarterly figures do not look as rosy as the four month -3.8%, more like -5.8% (February -2.3%, March -1.9%, April -1.7%). Source: Lloyds Banking Group plc - Halifax House Price index

Perhaps house price falls are accelerating

njkmrs

Maybr the banks are finally helping out people in difficulty .
Co Op Bank has only repossessed 8 homes in the last 6 months !!! A tiny 0.015% of its total mortgage lending .

Maybe the mass of Distressed sales wont happen ?????