Real or Nominal. How will the HPC manifest?

[Formerly]

My instinct is telling me to expect ~50% drops in house prices. Although the indices are still showing real YoY growth, they are also now showing real terms YoY falls when you take into account our double digit inflation.

You can see in the graph above that the house price crashes in the 70's and early 90's barely show up in this nominal plot. High inflation did most of the work (I know there will be plenty of examples of nominal price falls too).

Here's a similar plot (different axes - particularly the x-axis) showing real-terms prices.

"It's different this time" is true this time. We are massively indebted. The huge public sector, at least those in employment, are getting significant real-terms wage cuts. Interest rates are 3500% of what they were 18 months ago. House price to wage multiples are very high.

How do you expect prices to change? Say you expect 50% falls, is half the job done by inflation? Or do you really expect 50% nominal falls, which, with inflation, will be nearer 80% real terms?

[Formerly]

Another "it's different this time" factor. A much larger proportion of houses are not the owners' homes, but rather business BTL properties. Will this accelerate or even deepen falls? Or will it really mean that as soon as prices dip, they'll all jump in and "snap them up" There's not much evidence of that happening apart from in @Stuey fantasies.

[King Penda]

No idea but they will try and prop them up I’m going to forecast 10/15% in stoke on 3 bed semis maybe 15/20% on terraces but only because more are btl.new builds 15/25% aready overpriced. I’m not going to guess the south east that market defies logic

[Bus Stop Boxer]

2 hours ago, King Penda said:

No idea but they will try and prop them up I’m going to forecast 10/15% in stoke on 3 bed semis maybe 15/20% on terraces but only because more are btl.new builds 15/25% aready overpriced. I’m not going to guess the south east that market defies logic

My bit of Dorset has already ground to  halt, supply is up, and prices are falling, some notable drops.

I think if i want my house away id need to drop it £50-£60k from what i was arxing a year back.

[One percent]

4 minutes ago, Bus Stop Boxer said:

My bit of Dorset has already ground to  halt, supply is up, and prices are falling, some notable drops.

I think if i want my house away id need to drop it £50-£60k from what i was arxing a year back.

Round here is now full of blow-ins, either retired or moved coz work from home. Prices went up massively. At one point, estate agents were saying, ‘name your price’.  However, there are many downsides to living here that these people won’t have been aware of:

• it’s cold. Despite global warming
• it’s isolated. Moors to cross to get out
• it has no decent shops. For anything. Unless you like charity shops, jet shops and fish and chips 
• there is no work, other than seasonal minimum wage stuff
• its rammed in the summer. No parking and no getting around

they will soon all be leaving. There is no work to support the crazy house prices and the prices will crash much quicker than they went up n

[Chewing Grass]

So in 20 years interest rates went from 7% to 1% and back to 3.5%

House prices tripled

Household debt went up 25% in relation to gdp yet gdp  measured in purchasing power globally only went up 12%.

It will manifest itself (HPC) in the form of reduced expectations, reluctance to take on debt and extreme difficulty selling overdeveloped lifestyle properties on mid-level estates, the top end will continue but prices will rapidly fall.

£300,000 semi's will be £240,000 to sell.

£120,000 terraces will probably stay within 10% of that.

London is fucked on multiple fronts.

Interest Rate

Average House Price

Inflation

Household debt % gdp

GDP Purchasing Power Parity

 

[AlfredTheLittle]

Hopefully very soon going back down to pre pandemic prices nominal. Add in 20% inflation since then, and that's your fall. 40% from peak, 20% from pre pandemic, half nominal falls, half inflation adjusted.

[Wight Flight]

54 minutes ago, One percent said:

Round here is now full of blow-ins, either retired or moved coz work from home. Prices went up massively. At one point, estate agents were saying, ‘name your price’.  However, there are many downsides to living here that these people won’t have been aware of:

• it’s cold. Despite global warming
• it’s isolated. Moors to cross to get out
• it has no decent shops. For anything. Unless you like charity shops, jet shops and fish and chips 
• there is no work, other than seasonal minimum wage stuff
• its rammed in the summer. No parking and no getting around

they will soon all be leaving. There is no work to support the crazy house prices and the prices will crash much quicker than they went up n

Rather sadly we don't have any of those downsides. I think ours are here to stay.

[One percent]

3 minutes ago, Wight Flight said:

Rather sadly we don't have any of those downsides. I think ours are here to stay.

Whitby is a strange place. I think it’s the isolation, as amongst the locals, they are all related. Not saying that they are inbred but….  Then, they hate, with a vengeance, the white settlers as they call incomers. Great in summer. Depressing as hell in winter. 

[Axeman123]

30 minutes ago, AlfredTheLittle said:

Hopefully very soon going back down to pre pandemic prices nominal. Add in 20% inflation since then, and that's your fall. 40% from peak, 20% from pre pandemic, half nominal falls, half inflation adjusted.

I would want a lot more than that! The pandemic took base rate from 50bps to 10, and that plus WFH gave us the pandemic rise. There is a lot more than that being unwound in the economy, and I would expect a lot more movement in prices as result.

[King Penda]

Well I know you should not trust zoopla but I saw a 500 in theory drop for the last 2 months (250 each month)then this month bang it recovered the 500 and an additional 1500 pounds added .now the question is are london btl magnets up here buying terraces .I do know there was a London woman in the street looking around a house you don’t see teslas in my street i reconised the estate agent has well.

[reformed nice guy]

32 minutes ago, King Penda said:

I do know there was a London woman in the street looking around a house you don’t see teslas in my street

 

Did you show her a charging point she can get topped up with?

[King Penda]

7 minutes ago, reformed nice guy said:

Did you show her a charging point she can get topped up with?

No I was stunned to hear a real slone ranger type accent in stoke I’ve not heard that accent live since 1990ish.now I thought fuck has I hear a few London accents now ie black Londoners in my street my initial thought was fuck even the posh cunts are moving here . Then I reconised the estate agent you can’t miss him he does the videos for a local estate agent  so his face and voice are all over Rightmove 

[King Penda]

13 minutes ago, reformed nice guy said:

Did you show her a charging point she can get topped up with?

It’s about 700 yards away

[spygirl]

12 hours ago, One percent said:

Round here is now full of blow-ins, either retired or moved coz work from home. Prices went up massively. At one point, estate agents were saying, ‘name your price’.  However, there are many downsides to living here that these people won’t have been aware of:

• it’s cold. Despite global warming
• it’s isolated. Moors to cross to get out
• it has no decent shops. For anything. Unless you like charity shops, jet shops and fish and chips 
• there is no work, other than seasonal minimum wage stuff
• its rammed in the summer. No parking and no getting around

they will soon all be leaving. There is no work to support the crazy house prices and the prices will crash much quicker than they went up n

Whitby - 50% nominal drop from 2022 summer power.

UK holidays do terrible in slowdowns. Theres a lot of leveraged FHL in Whitby.

Scabby - 30% nominal drop

London/Se - 50% nominal drop.

Although in the North inc Scabby, I think the problem is getting a buyer rather than a price.

I reckon theres only a handful of people getting new/FTB mortgages in Whitby n Scabby. Without the new buyers the rest of the  chain is stuck.

 

 

 

[One percent]

1 minute ago, spygirl said:

Whitby - 50% nominal drop from 2022 summer power.

UK holidays do terrible in slowdowns. Theres a lot of leveraged FHL in Whitby.

Scabby - 30% nominal drop

London/Se - 50% nominal drop.

Although in the North inc Scabby, I think the problem is getting a buyer rather than a price.

I reckon theres only a handful of people getting new/FTB mortgages in Whitby n Scabby. Without the new buyers the rest of the  chain is stuck.

 

 

 

Agree. The youngsters have had to move to villages to the north to be able to afford housing. The whole market has been driven by incomer money, either moving here or getting a second home/fhl. 

[spygirl]

2 minutes ago, One percent said:

Agree. The youngsters have had to move to villages to the north to be able to afford housing. The whole market has been driven by incomer money, either moving here or getting a second home/fhl. 

The return to normal-ish LTE is baked in by rising IRs.

This happens in *all* housing cycles - under 3 LTE cheap; over 6 LTE pricey.

However there is a new dynamic at play - loss of 20 years of FTB/housing equity due to IO BTL.

Todays 40yo buyer for a a 3br house for growing family has been forced into an expensive BTL for the last 20 years.

There no equity in the buying chains for the under 50s.

This is going to create a massive undershoot in the return to normal.

The last 20y of HPI is just not availabe to buyers n sellers of houses today.

 

 

[haroldshand]

19 hours ago, Formerly said:

Another "it's different this time" factor. A much larger proportion of houses are not the owners' homes, but rather business BTL properties. Will this accelerate or even deepen falls? Or will it really mean that as soon as prices dip, they'll all jump in and "snap them up" There's not much evidence of that happening apart from in @Stuey fantasies.

I was certain that the November house price data was at last going to give us the negative numbers that many were looking for at last and they came up trumps a few weeks ago. Nothing scientific but I have a strong suspicion that December data out in about 10 to 12 days is really going to be front page negative stuff to start the New Year off, really would not surprise me if we get something well over -2% or even -3% MOM as I am starting to detect the early days of the rush to the exit.

[King Penda]

18 minutes ago, haroldshand said:

I was certain that the November house price data was at last going to give us the negative numbers that many were looking for at last and they came up trumps a few weeks ago. Nothing scientific but I have a strong suspicion that December data out in about 10 to 12 days is really going to be front page negative stuff to start the New Year off, really would not surprise me if we get something well over -2% or even -3% MOM as I am starting to detect the early days of the rush to the exit.

They need to take interest rates to 10% ie stop tickling inflation 

[Democorruptcy]

14 hours ago, One percent said:

Round here is now full of blow-ins, either retired or moved coz work from home. Prices went up massively. At one point, estate agents were saying, ‘name your price’.  However, there are many downsides to living here that these people won’t have been aware of:

• it’s cold. Despite global warming
• it’s isolated. Moors to cross to get out
• it has no decent shops. For anything. Unless you like charity shops, jet shops and fish and chips 
• there is no work, other than seasonal minimum wage stuff
• its rammed in the summer. No parking and no getting around

they will soon all be leaving. There is no work to support the crazy house prices and the prices will crash much quicker than they went up n

Why do you live there?

[King Penda]

1 hour ago, Democorruptcy said:

Why do you live there?

Loves the goth weekend and tourists

[One percent]

1 hour ago, Democorruptcy said:

Why do you live there?

I was born and brought up here, I know what the pitfalls are. Those moving in have only normally experienced it as a holiday maker. Completely different to living here permanently 

[Stuey]

46 minutes ago, One percent said:

I was born and brought up here, I know what the pitfalls are. 

But I thought you liked fish n chip's?

 

[One percent]

4 minutes ago, Stuey said:

But I thought you liked fish n chip's?

 

That is just the most disgusting thing ever. You must be the only person to put gravy on fish.  
 

edit to add, i was going to get fish and chips this week.   Until i saw the price 

https://menus.preoday.com/The-Fish-Cottage#/main/venue/menu
12.50 for a portion. No, just fuck no.  

[onlyme]

3 hours ago, haroldshand said:

I was certain that the November house price data was at last going to give us the negative numbers that many were looking for at last and they came up trumps a few weeks ago. Nothing scientific but I have a strong suspicion that December data out in about 10 to 12 days is really going to be front page negative stuff to start the New Year off, really would not surprise me if we get something well over -2% or even -3% MOM as I am starting to detect the early days of the rush to the exit.

Early falls are masked by what is actually selling, the price has already shifted if the stock that is selling is all the good nick, nice location properties and not representative of the condition.location mix that was selling in the same price bands that was catching a bid across the board on the way up.