House prices to crash

[Uncle C]

and prediction of Uncle C may come true.

Morning US. I read your post before hearing any news today and thought your were having a laugh.

But its true. In September, a month which Estate Agents generally reckon to be one of their busiest of the year, the monthly fall is the largest ever recorded by the Halifax.

Houses became 3.6% more affordable.

Wonder if this will encourage the Bank of England to reawaken Quantitative Easing?

 

[Gully]

The average UK home is now valued at £162,096, the survey found.

I have always thought this was a bit of a misnomer, what is an average and how has it been calculated, it always seems a bit like a figure plucked from the air.

Is consideration given to parts of the north where you can buy a street for about £3.50 and places like Sandbanks on Poole Harbour where there would be little change from £5m...where is the average house? I am sure that there are vast rafts of the country where you would struggle to find anything at all average for £162k, what would that figure get you in Brighton?

 

[Bevendean Hillbilly]

As U.S has pointed out the Halifax today predict the beginning of a "sustained fall" of the housing market value.

So it HAS begun, wherever you are.

 

[Hatterlovesbrighton]

Here is the full text of an article from the FT

House prices in September fell by a record 3.6 per cent month-on-month according to a closely watched index, although economists cautioned against reading too much into what can be a volatile measure, particularly when turnover is low.

According to the Halifax House Price Index, September’s fall should be seen against a smoother backdrop of quarterly movements. Third quarter house prices, on the Halifax measure, were 0.9 per cent lower than in the second quarter of 2010.

EDITOR’S CHOICE
Why some housing bubbles remain - Oct-03Builders face squeeze as HomeBuy ends - Oct-01In depth: UK house prices - Jul-13FT Alphaville: House price fall is ‘off the scale’ - Oct-07House prices show signs of stagnating - Sep-30“It is far too early to conclude that September’s monthly 3.6 per cent fall is the beginning of a sustained period of declining house prices,” said Martin Ellis, chief economist at Halifax.

Mr Ellis noted that prices last year may have been distorted by the small number of properties on the market and said it was reasonable to see prices soften now that far more were available. He added that low transaction volumes “underline the difficulty of getting a clear reading on the current state of the housing market.”

Howard Archer, economist at IHS Global Insight, noted that the quarterly move in house prices on the Halifax measure was in line with that of another closely watched index compiled by Nationwide. For September Nationwide reported a 0.1 per cent rise – basically indicating that house prices were flat.

“While the September house price drop of 3.6 per cent highly likely overstates the weakness of the housing market, there seems little doubt that the housing market is now in reverse,” Mr Archer said.

Simon Hayes, economist at Barclays Capital, noted that no other measure of house prices was showing the same level of volatility as the Halifax and, therefore, it would be “unwise to draw conclusions. “

“Precisely because these series tend to be volatile from month to month, the Monetary Policy Committee [which meets on Thursday to vote on interest rates] prefers to use the average of the three-month on three-month average from the Nationwide and Halifax indices as its preferred house price measure.,” Mr Hayes said.

“We do not believe this outturn will carry material weight in the MPC’s deliberations today, and still expect monetary policy to be left unchanged.”

 

[sten_super]

As U.S has pointed out the Halifax today predict the beginning of a "sustained fall" of the housing market value.

So it HAS begun, wherever you are.

Er no, he has pointed out the opposite.

Lloyds Banking Group plc - Halifax House Price index

Commenting, Martin Ellis, housing economist, said:

"Looking at quarterly figures - a better measure of the underlying trend, house prices in the third quarter of 2010 were 0.9% lower than in the second quarter of 2010. This rate of decline is significantly slower than the quarterly changes of between -5% and -6% that were seen in the second half of 2008. It is therefore far too early to conclude that September's monthly 3.6% fall is the beginning of a sustained period of declining house prices.
“A shortage of properties for sale contributed to an imbalance between supply and demand and was a key factor driving up house prices last year. An increase in the number of properties available for sale in recent months has reduced the imbalance. At the same time, renewed uncertainty about the economy and jobs has caused consumer confidence to falter recently, dampening the demand for home purchase. Together, these factors have been exerting some downward pressure on prices in recent months. In addition, volatility of the month on month measure has increased due to the low transaction levels across the market; this underlines the difficulty of getting a clear reading on the current state of the housing market.
“Prospects for the housing market remain uncertain. Earnings growth is expected to be very modest over the next year, tax rises are on the way and more people are putting their homes on the market. These will all be constraints on the market, dampening house prices. On the positive side, we expect interest rates to remain very low for some time, which will underpin the improved affordability position for homeowners."

Also, the Nationwide figures for September are radically different; an increase in prices of 0.1%, making the annual change for the proceeding 12 months 3.1%.
http://www.nationwide.co.uk/hpi/historical/Sep_2010.pdf

 

[seagullsovergrimsby]

Realisticaly though house prices have to crash 50% before they become affordable.

 

[Uncle C]

I am loving watching Estate Agents squirming to explain away the news, as if it was nothing.

 

[sten_super]

I am loving watching Estate Agents squirming to explain away the news, as if it was nothing.

?? Is that aimed at the people like me that are disagreeing with you? What makes the Halifax numbers any more or less reliable than the Nationwide numbers, which read wildly differently? Are you really trying to present one months worth of figures from one source as some kind of smoking gun?

 

[Uncle C]

?? Is that aimed at the people like me that are disagreeing with you? What makes the Halifax numbers any more or less reliable than the Nationwide numbers, which read wildly differently? Are you really trying to present one months worth of figures from one source as some kind of smoking gun?

If you're an Estate Agent, then yes its aimed at you as well.

If you think this is the only bit of eveidence that house prices are due a decline, could I respectfully suggest you read through this thread.

 

[sten_super]

If you're an Estate Agent, then yes its aimed at you as well.

If you think this is the only bit of eveidence that house prices are due a decline, could I respectfully suggest you read through this thread.

Nope not an estate agent but you seemed to be suggesting that anyone denying your theory that we're on some kind of precipice is like a Flat-Earther or 9/11 conspiracy believer!

Of course the UK housing market is over-valued, and a correction is bound to come. The entire question though is about how and when. Yes there could be a sudden collapse in values, or alternatively we could see a shallow decline or even a flattening out of prices (which would therefore be eroded through inflation).

My personal view is that there are likely to be a couple of minor shocks still to come (such as when the FSA mortgage measures are finalised) which will put downwards pressure on house prices. However, in the grand scheme of things, it's as hard to borrow money now as it's been in recent memory, and there hasn't been a particularly massive correction; certainly, we've not seen a return to prices of 3x earnings or anything even close, and I'm therefore skeptical that there will be an abyss round the corner for us to fall into.

 

[Uncle C]

Nope not an estate agent but you seemed to be suggesting that anyone denying your theory that we're on some kind of precipice is like a Flat-Earther or 9/11 conspiracy believer!

Of course the UK housing market is over-valued, and a correction is bound to come. The entire question though is about how and when. Yes there could be a sudden collapse in values, or alternatively we could see a shallow decline or even a flattening out of prices (which would therefore be eroded through inflation).

My personal view is that there are likely to be a couple of minor shocks still to come (such as when the FSA mortgage measures are finalised) which will put downwards pressure on house prices. However, in the grand scheme of things, it's as hard to borrow money now as it's been in recent memory, and there hasn't been a particularly massive correction; certainly, we've not seen a return to prices of 3x earnings or anything even close, and I'm therefore skeptical that there will be an abyss round the corner for us to fall into.

You are of course entitle to your own opinion. Only time will tell, and as I said before please feel free to bounce this thread in the future and call me a twat if I got it wrong.

BTW I thought we had left the denial phase behind.

 

[beardy gull]

Housing market crash feared after average house prices take record plunge | Business | The Guardian

 

[Uncle C]

Its a nasty trait of human nature but, like in all falling markets, Gazundering is back.

http://www.thisismoney.co.uk/mortgages-and-homes/article.html?in_article_id=516215

 

[Uncle C]

Interesting little article.

"We are now turning down properties if the seller is not prepared to price at a sellable price. We could take on as many as 30 houses a week if we wanted to but what is the point in spending money on advertising houses that are priced too high?”.

http://www.economicvoice.com/the-house-price-crash-is-here/50013676#ixzz12oYA2HxE

 

[Uncle C]

Nationwide house prices down another 0.7%.

Thats down 1.5% this Quarter following a decline of 1% last Quarter.

Year on year gains now stand at just 1.4%. Next big landmark is when that goes negative.

http://www.telegraph.co.uk/finance/economics/houseprices/8092028/House-prices-are-still-falling-says-Nationwide.html

 

[Westdene Seagull]

Nationwide house prices down another 0.7%.

Thats down 1.5% this Quarter following a decline of 1% last Quarter.

Year on year gains now stand at just 1.4%. Next big landmark is when that goes negative.

http://www.telegraph.co.uk/finance/economics/houseprices/8092028/House-prices-are-still-falling-says-Nationwide.html

Hardly crashing though are they ? Rather a gradual decline.

 

[Uncle C]

Hardly crashing though are they ? Rather a gradual decline.

The momentum is building.

 

[Bold Seagull]

Assuming the graph is a cycle, where does 'return to the mean' meet 'take off' and does 'Stealth Phase' directly follow 'Blow Off Phase'?

I assume we have just passed the 'return to normal' at present, and are heading toward 'fear'.

Oh well, life goes on...

 

[Uncle C]

Assuming the graph is a cycle, where does 'return to the mean' meet 'take off' and does 'Stealth Phase' directly follow 'Blow Off Phase'?

I assume we have just passed the 'return to normal' at present, and are heading toward 'fear'.

Oh well, life goes on...

I am no expert, just an observer, but I would guess that 'normality' represents a return to sensible lending, which was always based on multiples of earnings. That was before banks encouraged liar loans, 120% mortgages etcs.

I did the calcs a while ago, and this revealed a drop of 25% in the market from here would get us back to this situation. In places like the USA and Ireland where they are going through the process earlier than us there was considerable undershoot (despair) as shown in the graph.

 

[Uncle C]

Assuming the graph is a cycle, does 'Stealth Phase' directly follow 'Blow Off Phase'?

I'm sure 'stealth phase' will follow 'blow off phase', but the time span for this could be long. The stealth phase will probably comprise cash rich investors and Buy To let, together with first time buyers who have played the waiting game and saved up a good deposit.