Jump to content

UK House prices: News & Views


Recommended Posts

  • Replies 5.3k
  • Created
  • Last Reply

Top Posters In This Topic

Top Posters In This Topic

Posted Images

US site but talks sense

 

US Housing crash to continue

 

 

US Housing Crash Continues

It's Still A Terrible Time To Buy

 

By Patrick Killelea

 

1. Prices are still falling. Prices will keep falling because they are still too high compared to fundamentals like incomes and rents. A safe mortgage is a maximum of 3 times the buyer's yearly income, yet mortgages have been 5 to 10 times incomes in the last few years. A landlords' rule of thumb is that a house price should be a maximum of 15 times the annual rent for that place, yet in coastal areas, houses are still selling for 30 times annual rent, even after recent price declines. So prices will keep falling for a long time. Anyone who buys now will suffer losses immediately, and for the next several years at least, as prices fall into line with tighter lending and stagnant salaries.

 

2. It's a terrible time to buy when interest rates are low, like now. Realtors just lie outright about this fundamental fact. Prices fall as interest rates rise. Since interest rates have nowhere to go but up, you can be certain that prices will fall more. The way to win the game is to have cash on hand to buy outright at a low price when others cannot afford to pay very much because of high interest rates. To buy at a time of very low interest rates is financial suicide.

 

3. It's a terrible time to buy when prices are too high, like now. Realtors just ignore this fundamental fact because they don't make a commission unless you make the bad decision to buy now. Affordability means low prices, not low interest rates. To buy at a time of historically high prices is again financial suicide.

 

4. It's still much cheaper to rent than to own the same thing. On the coasts, yearly rents are less than 3% of purchase price and mortgage rates are 6%, so it costs twice as much to borrow money to buy a house than it does to rent the same kind of house. Worse, total owner costs including taxes, maintenance, and insurance are about 9%, which is three times the cost of renting. Buying a house is still a very bad deal for the buyer on the coasts, but it may make sense to buy in Michigan and some other places where prices have fallen into line with salaries. Check whether you should rent or buy in your own area with this NY Times calculator.

 

The bottom will be here when buying a house to rent out clearly makes money. At that point it's justified to buy because the rent covers the mortgage and all expenses.

 

5. Prices disconnected from Gross Domestic Product. The value of housing in the US depends a lot on the value of what the US actually produces.

 

6. Buyers borrowed too much money and cannot pay the interest. Now there are mass foreclosures, and Congress is taking $700B of your money to pay the mortgage investment losses for banker friends of Henry Paulson. The plan is to overpay the banks for bad mortgages, claiming that this will support the housing market. It will not work, since Wall Street profits have nothing to do with housing prices.

 

Now we also have legal contracts being modified to stop even well-justified foreclosures. No one was forced to borrow money. Grownups should be responsible for their own actions. To prevent a justified foreclosure is also to prevent a deserving family from buying that house at a low price, not to mention what this does to faith in contract law.

 

Should taxes and inflation be used to pay the debts of irresponsible borrowers, no matter how much they over-borrowed or overpaid for a house? Should savers be forced to pay the debts of people who cannot afford "their homes" no matter what price they paid or how far it is beyond their actual financial means? If so, go buy the most expensive house you can right now! Borrow as much as you possibly can and don't pay it back, knowing that Congress and Bush will force the real repayment obligation onto others, onto people who are living within their means.

 

Banks happily loaned whatever amount borrowers wanted as long as the banks could then sell the loan, pushing the default risk onto Fannie Mae (taxpayers) or onto buyers of mortgage-backed bonds. Now that it has become clear that a trillion dollars in foolish mortgage loans will not be repaid, Fannie Mae is under pressure not to buy risky loans and investors do not want mortgage-backed bonds. This means that the money available for mortgages is falling, and house prices will keep falling, probably for 5 years or more. This is not just a subprime problem. All mortgages will be harder to get.

 

A return to traditional lending standards means a return to traditional prices, which are far below current prices.

 

7. Interest rates increases. When rates go from 5% to 7%, that's a 40% increase in the amount of interest a buyer has to pay. House prices must drop proportionately to compensate. The housing bust still has a very long way to go.

 

For example, if interest rates are 5%, then $1000 per month ($12,000 per year) pays for an interest-only loan of $240,000. If interest rates rise to 7%, then that same $1000 per month pays for an interest-only loan of only $171,428.

 

Recent lower Fed inter-bank lending rates do not directly affect mortgages rates, nor do extra Fannie or FHA guarantees. The 30-year fixed mortgage rate actually went up after the Fed's rate cut, because rate cuts cause higher inflation.

 

8. Extreme use of leverage. Leverage means using debt to amplify gain. Most people forget that losses get amplified as well. If a buyer puts 10% down and the house goes down 10%, he has lost 100% of his money on paper. If he has to sell due to job loss or an interest rate hike, he's bankrupt in the real world.

 

It's worse than that. House prices do not even have to fall to cause big losses. The cost of selling a house is 6%. On a $300,000 house, that's $18,000 lost even if prices just stay flat. So a 4% decline in housing prices bankrupts all those with 10% equity or less.

 

9. Shortage of first-time buyers. High house prices have been very unfair to new families, especially those with children. It is literally impossible for them to buy at current prices, yet government leaders never talk about how lower house prices are good for pretty much everyone, instead preferring to sacrifice American families to make sure bankers have plenty of debt to earn interest on. If you own a house and ever want to upgrade, you benefit from falling prices because you'll save more on your next house than you'll lose in selling your current house. Every "affordability" program drives prices higher by pushing buyers deeper into debt. To really help Americans, Fannie Mae and Freddie Mac should be completely eliminated, along with the mortgage interest deduction. Canada has no mortgage-interest deduction at all, and has a more affordable and stable housing market because of that.

 

The government keeps house prices unaffordable through programs that increase buyer debt, and then pretends to be interested in affordable housing. No one in government except Ron Paul ever talks about the obvious solution: less debt and lower house prices. The real result of every "affordability" program is to keep you in debt for the rest of your life so that you have to keep working. Lower house prices would liberate millions of people from decades of labor each.

 

10. Surplus of speculators. Nationally, 25% of houses bought the last few years were pure speculation, not houses to live in, and the speculators are going into foreclosure in large numbers now. Even the National Association of House Builders admits that "Investor-driven price appreciation looms over some housing markets."

 

11. Fraud. It has become common for speculators take out a loan for up to 50% more than the price of the house he intends to buy. The appraiser goes along with the inflated price, or he does not ever get called back to do another appraisal. The speculator then pays the seller his asking price (much less than the loan amount), and uses the extra money to make mortgage payments on the unreasonably large mortgage until he can find a buyer to take the house off his hands for more than he paid. Worked great during the boom. Now it doesn't work at all, unless the speculator simply skips town with the extra money.

 

12. Baby boomers retiring. There are 77 million Americans born between 1946-1964. One-third have zero retirement savings. The oldest are 62. The only money they have is equity in a house, so they must sell.

 

13. Huge glut of empty housing. Builders are being forced to drop prices even faster than owners. Builders have huge excess inventory that they cannot sell, and more houses are completed each day, making the housing slump worse.

 

14. The best summary explanation, from Business Week: "Today's housing prices are predicated on an impossible combination: the strong growth in income and asset values of a strong economy, plus the ultra-low interest rates of a weak economy. Either the economy's long-term prospects will get worse or rates will rise. In either scenario, housing will weaken."

Link to comment
Share on other sites

another one says 50% fall

 

When it comes to UK housing — “We’ve only just begun…”

Posted by Neil Hume on Jan 15 13:04.

 

… sang Karen Carpenter in the early 70’s chart-topper. And it could make a comeback as an unlikely signature tune for the UK housebuilding sector.

 

That’s the view of Alastair Stewart, anyway.

 

The Dresdner Kleinwort analyst – and housing uber-bear — published his predictions for 2009 on Thursday and in the words (almost) of another number one single: Things can only get better bleaker.

 

So bleak in fact that:

 

Housing starts will hit their lowest peacetime level since 1920.

Peak to trough house price fall will be 50%.

Several private and quoted housebuilders will face administration.

 

Here are some selected highlights from the note, starting with that Carpenter reference.

 

Housing in general and over-geared housebuilders in particular will lurch from crisis to catastrophe during 2009 and possibly well beyond, in our view. Housing transactions are crashing to post-war lows and we believe new starts will hit the lowest peacetime level since 1920. Some brave souls are predicting a recovery this year. We concur with the late Karen Carpenter: “We’ve only just begun”.

 

The most bearish forecasts for house prices is a peak to trough fall of about a third but the futures market appears to be pricing in them halving. We veer to the latter view. But volumes (or lack of them) rather than falling prices will be the real body blow for distressed housebuilders in our view. Most volume housebuilders have moved over to “more appropriate” cash flow covenants. The problem is … to generate cash you need to sell homes (not merely to stop buying land).

 

Housing starts will fall below 60,000 this year, we believe - the worst since the 29,700 completions in 1920. The most cash strapped developers, we understand, are fighting to sell stock and work in progress at almost any price. On consented land selling prices often barely cover build costs, suggesting residual values are at negative land values. Our industry sources suggest many developers are also doing anything in their power to scupper planning consents, which can trigger payment demands.

 

We do not buy into the much voiced hope that volumes will return when inter-bank lending increases. The market has gone too far for that, in our view. Buyers can get real bargains now, we are told. The only problem is: they generally assume they can get greater bargains the longer they stay out of the market. Those that do want to buy - and can get a mortgage - are increasingly finding surveyors are providing valuations so low that they scupper not only their purchase but several in each buyer chain. The impact of down-valuations can be seen in the latest Home Builders Federation survey below.

Link to comment
Share on other sites

  • 2 weeks later...

Don't you have to love the spin Nationwide is allowed to spout out?

 

http://www.nationwide.co.uk/hpi/historical/Jan_2009.pdf

The price of a typical house fell by a further 1.3% in January,

...

The 3-month on 3-month rate of change, a smoother indicator of the short-term trend in prices, improved for the fourth consecutive month from -4.2% in December to -4.0% in January.

:lol:

Link to comment
Share on other sites

http://www.bloomberg.com/apps/news?pid=206...&refer=home

Jan. 31 (Bloomberg) -- London luxury-home prices had the second-biggest decline on record in January as would-be buyers struggled to secure mortgages from banks hurt by the global financial crisis.

 

The average value of homes costing more than 1 million pounds ($1.4 million) in London’s most expensive neighborhoods fell 3.7 percent from a month earlier, Knight Frank LLP said in an e-mailed statement today. In the past 12 months, prices have slumped 21 percent, the biggest annualized drop recorded by Knight Frank.

Link to comment
Share on other sites

London Luxury-Homes Prices Have Second-Biggest Drop on Record

 

The average value of homes costing more than 1 million pounds ($1.4 million) in London’s most expensive neighborhoods fell 3.7 percent from a month earlier, Knight Frank LLP said in an e-mailed statement today. In the past 12 months, prices have slumped 21 percent, the biggest annualized drop recorded by Knight Frank.

 

“The sudden restriction of mortgage finance” was the main cause of the market’s decline last year, Liam Bailey, head of residential research at London-based Knight Frank, said in the statement. “This factor is continuing to cause problems for the housing market and the wider economy.”

 

==

 

He should say:

"The sudden return of mortgage lenders to sanity..." was the main cause of the market’s decline last year

 

======

 

Meantime...

 

COMPLACENCY RULES OKAY on the SP (SanityPoor) website:

 

Two new surveys have indicated that house prices are still dropping. The latest Nationwide figures out a couple of days ago have revealed a price fall of 1.3 per cent from December to January, taking the average price to £150,501. Over the last year the decline has been 16.6 per cent

 

An investor could consider buying at the bottom of the market. In my humble opinion as a stock trader, that’s a mistake. No one knows when the bottom is, so stock traders and many property experts that I know simply adopt the following strategy:

 

Buy on the way down and the way up. You will catch the bottom anyway and some bargains along the way. If you try and time the bottom, you (and me) will get it wrong.

 

I went to see Vanish Patel speak at the Berkshire Property meet and he has been investing since 2001. He made his property work when prices were going up (year on year), now he is still buying. Vanish is going to be a very rich man.

 

Mark I'Anson Property

UNQUOTE

 

What a great name: Vanish Patel.

I reckon that rather than getting rich, Mr.Patel's wealth is bound to vanish

Link to comment
Share on other sites

another 35% down from here - seems about right to me (if zero inflation that is)

 

More Sensible lending returning

30 Jan 2009

Breaking News

BoS and BM pull out of self-cert

 

Bank of Scotland (BoS) and BM Solutions have pulled their entire range of new business self-certification products.

 

BM will also no longer offer near-prime lending.

 

In addition, the loan-to-value for mainstream new build properties will be reduced from 90% to 80%, whilst the LTV for new build buy-to-let properties will be reduced from 75% to 65% in Halifax, BoS, BM and Intelligent Finance.

 

Nigel Stockton, managing director of intermediary business within the Lloyds Banking Group, said: "Over the last 12 months, there has been a real reduction in the number of active players in the specialist sector. We have no option than to respond to ensure we continue to lend in a prudent and proportionate manner."

If you have any comments you would like to add to this story or would like to speak to Mortgage Solutions about a similar subject, please email John Fitzsimons, or Jamie Obertelli

 

Link to comment
Share on other sites

That's how we get to 50oz per house in no time. :)

 

http://www.guardian.co.uk/money/2009/feb/01/banks-mortgages

The problem has deepened over recent weeks because of the growing economic crisis. Some mortgage providers will not lend on a recently constructed place, full stop. Those that do, ask for up to a 50% deposit. Buyers may therefore need a mammoth £100,000 down-payment on a £200,000 home.

EDIT: So why is it that suddenly everyone knows that new builts are cr@p quality and will be worth very little in 10 years time?

Link to comment
Share on other sites

http://www.telegraph.co.uk/finance/finance...cy-Service.html

Record 200 people a day declared bankrupt, says Insolvency Service

Louise Brittain, a partner at Baker Tilly Restructuring and Recovery, said: "Despite interest rate falls, the individual consumer is feeling the pinch more than ever before – today's figures prove this.

 

"The number of personal bankruptcies indicates that people who stretched their finances to the limit in the boom time are now facing a financial wipe out as the recession bites."

Link to comment
Share on other sites

http://www.telegraph.co.uk/finance/comment...alls-apart.html

Meanwhile, Eastern Europe is imploding. Industrial output fell 27pc in Ukraine and 10pc in Russia in December. Latvia's GDP contracted at a 29pc annual rate in the fourth quarter. Polish homeowners have had the shock from Hell. Some 60pc of mortgages are in Swiss francs. The zloty has halved against the franc since July.

As foreseen by some quite some time ago.

Link to comment
Share on other sites

That's how we get to 50oz per house in no time. :)

 

http://www.guardian.co.uk/money/2009/feb/01/banks-mortgages

 

EDIT: So why is it that suddenly everyone knows that new builts are cr@p quality and will be worth very little in 10 years time?

During the recent cold snap, maybe people noticed how quickly they lost their roof snow

Link to comment
Share on other sites

BBC news clip from june 08.

 

http://news.bbc.co.uk/1/hi/england/7469961.stm

 

Pair victim of 'cheap houses'

 

A couple say that they have been forced out of the housing market because prices are getting lower.

 

Yes you read it right, looking back at this moment in time, these could well have been the dumbest people on the face of the planet.

Link to comment
Share on other sites

BBC news clip from june 08.

 

http://news.bbc.co.uk/1/hi/england/7469961.stm

 

Pair victim of 'cheap houses'

 

A couple say that they have been forced out of the housing market because prices are getting lower.

 

Yes you read it right, looking back at this moment in time, these could well have been the dumbest people on the face of the planet.

 

cryinglaugh.gifcryinglaugh.gifcryinglaugh.gif

 

That's the funniest thing I've seen in ages rofl.gif

 

Link to comment
Share on other sites

oh dear

 

http://www.dailymail.co.uk/news/article-11...-goes-bust.html

 

Location, Location host Phil Spencer's property firm goes bust

 

By Daily Mail Reporter

Last updated at 11:35 AM on 17th February 2009

 

* Comments (0)

* Add to My Stories

 

Phil Spencer

 

Phil Spencer's property company is the latest victim of the housing slump

 

Property expert Phil Spencer's homefinding business has finally gone bust.

 

The presenter of Channel 4's Location, Location, Location had put his own money into Garrington Home Finders in a bid to save it.

 

But all ten members of staff at the Chelsea-based company have now been laid off and the firm has gone into administration.

 

The property slump forced the guru to scale down his business empire last year and less than 12 months after its glitzy launch, Garrington closed its Cheshire office in November.

 

But more cuts were forecast by the London-based business, a firm used by stars such as Kylie Minogue and Keira Knightley.

 

Two weeks ago a worker lost his job and was told to claim state redundancy and the presenter admitted he had been personally paying staff for the past six months.

 

It was believed that Garrington, of which Spencer, 39, is founder and director, was in talks with accountants Menzies Corporate Restructuring, which handled the collapse of MFI.

 

A buyer was being sought, but no one was found and Garrington is now going under.

 

Spencer and his wife Fiona, 40, founded the firm in 1996 and are its sole directors.

location

 

Spencer co-presented Channel 4's Location, Location with Kirstie Allsopp

 

The company helps clients find a new home and assists them with the buying process, as Spencer and co-presenter Kirstie Allsopp do on their Channel 4 show.

 

Mr Spencer admitted the crunch had hit Garrington like any other property company.

 

He said: 'The correction in the housing market continues to unfold with unprecedented speed.

 

'Nobody can know how long this is all going to take to turn around and we should be highly speculative of anyone who claims to be able to do so.'

Link to comment
Share on other sites

Kristy is* his employee!!!

 

* was :lol::lol: :lol:

 

Really? Wow - she was always so rude to him....almost like he worked for her!

 

Does anyone on here still really give a s**t about houseprices and hpc? hpc was a sideshow, the main event is unfolding right now in front of our eyes....

 

Change....We can hope in.... :P

Link to comment
Share on other sites

Really? Wow - she was always so rude to him....almost like he worked for her!

 

Does anyone on here still really give a s**t about houseprices and hpc? hpc was a sideshow, the main event is unfolding right now in front of our eyes....

 

Change....We can hope in.... :P

 

I keep an eye on it, but I agree, it's not the main issue.

 

Link to comment
Share on other sites

 

"[Phil Spencer] said: 'The correction in the housing market continues to unfold with unprecedented speed. Nobody can know how long this is all going to take to turn around and we should be highly speculative of anyone who claims to be able to do so.'"

 

Highly speculative? What does that mean? How can you be highly speculative of someone? :blink:

Link to comment
Share on other sites

"[Phil Spencer] said: 'The correction in the housing market continues to unfold with unprecedented speed. Nobody can know how long this is all going to take to turn around and we should be highly speculative of anyone who claims to be able to do so.'"

 

Highly speculative? What does that mean? How can you be highly speculative of someone? :blink:

 

He means ‘sceptical’ but I’m sure you knew that already!

I have some sympathy for Phil.

I know I know, he was part of the ramping circus but I do think he’s a decent guy as evidenced by the fact he was paying his staff out of his own pocket.

 

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×
×
  • Create New...