Property crash, just maybe it really is different this time (Part 2)

[Frank Hovis]

1 hour ago, belfastchild said:

I was in that house when it cost 100kish. I was thinking at the time, 100k for a semi? fuck sake, you are mad.

 

Yes, I look at my house and typical local wages and think it should be at most £150k, 5x £30k which is a decent wage round here. It would be in the territory of a second purchase rather than a FTBer place which should be £80k - £100k.

Though all that relating prices to local wages does is to see what would be a realistic floor for local prices.

[belfastchild]

41 minutes ago, Frank Hovis said:

 

Yes, I look at my house and typical local wages and think it should be at most £150k, 5x £30k which is a decent wage round here. It would be in the territory of a second purchase rather than a FTBer place which should be £80k - £100k.

Though all that relating prices to local wages does is to see what would be a realistic floor for local prices.

Even that house in the late 90s was around 105-120k.
Average NI wage at the time was around 14-16k , so in and around 8 times the average wage. Median wage now is about 24-25k. so 8 times that... ...isnt half a mill.

[JoeDavola]

3 hours ago, belfastchild said:

I was in that house when it cost 100kish. I was thinking at the time, 100k for a semi? fuck sake, you are mad.

Yep I remember when £100K got you one of those nice detached houses in Ravenhill Avenue near the rugby ground.

[sancho panza]

https://propertyindustryeye.com/uk-house-prices-face-double-digit-fall-with-little-prospect-of-rebound/

UK house prices face double-digit fall with ‘little prospect’ of rebound

July 21, 2023 | Marc da Silva

 

UK house prices will not rebound after the slump because interest rates will still be higher than they have been for the last decade, economists have warned.

The average value of a UK home will fall by 12% from peak-to-trough by the end of 2024, according to S&P Global Ratings.

It warned that there was “little prospect” of a strong recovery as mortgage holders and buyers will continue to face higher real costs of borrowing “for the foreseeable future”.

It predicts that UK house prices will fall by 6.6% in 2023, and then by a further 4.9% next year. After that, S&P expects the market will stagnate, with growth of just 1.4% and 3% across 2025 and 2026 respectively.

The worst of the pain of rate rises is still to come, with higher interest rates continuing to flow into the mortgage market, hitting homeowners coming to the end of fixed rate deals, S&P warned the pressure “will intensify further”.

“There is still some time to go before mortgage pain reaches its peak,” it said.

Boris Glass, senior economist at SP Global, said homeowners were unlikely to get any relief even if interest rates began to fall after 2024.

“Even when central banks ease again, mortgage holders and potential buyers will continue to face higher real costs of borrowing that will take a larger share out of their budget and moderate demand for the foreseeable future,” he said.

Moody’s also forecasts that UK house prices will fall, although they have put the figure at 10% until the end of 2024 as mortgage rates soar and squeeze housing affordability.

Moody’s said that the UK’s booming housing market would experience a 4% drop this year and a 6% fall in 2024, making the UK property sector the worst among big developed economies.

[Sugarlips]

As far as I can make out this is legit. New rate 8.4%

He did go on to correct his current payment down to £425 and admit he’s paying interest only but that’s kinda besides the point.

 

 

[Sugarlips]

3 hours ago, JoeDavola said:

Yep I remember when £100K got you one of those nice detached houses in Ravenhill Avenue near the rugby ground.

I considered a decent 3 bed semi in a good bit of Bournemouth in 2000 for £75000. Now circa £475000..

[Axeman123]

4 minutes ago, Sugarlips said:

As far as I can make out this is legit. New rate 8.4%

He did go on to correct his current payment down to £425 and admit he’s paying interest only but that’s kinda besides the point.

I would argue that his being on IO, and hence has nowhere to go on lowering his monthly is the real point here. He also has no hope of remortgaging elsewhere IMO.

Either he has £1600 a month he can free up, or he will be selling soon.

[Sugarlips]

Just now, Axeman123 said:

I would argue that his being on IO, and hence has nowhere to go on lowering his monthly is the real point here. He also has no hope of remortgaging elsewhere IMO.

Either he has £1600 a month he can free up, or he will be selling soon.

Assuming he can. But people are aware Sunak wants the banks to extend and pretend so I assume the standoff continues?

[JoeDavola]

8 minutes ago, Sugarlips said:

I considered a decent 3 bed semi in a good bit of Bournemouth in 2000 for £75000. Now circa £475000..

Surely when things get bad the young just leave the area en masse?

What's the point of living there if a modest family home is completely out of reach?

[Sugarlips]

Just now, JoeDavola said:

Surely when things get bad the young just leave the area en masse?

What's the point of living there if a modest family home is completely out of reach?

Well funnily enough that’s what I did, and prospered ever since. All my school mates just piled on in on the gravy train as they thought that’s just what you have to do. we’ll see how many of them are now swimming naked soon enough,

[JoeDavola]

Just now, Sugarlips said:

Well funnily enough that’s what I did, and prospered ever since. All my school mates just piled on in on the gravy train as they thought that’s just what you have to do. we’ll see how many of them are now swimming naked soon enough,

Its the way I feel about Belfast, and a 3 bed semi like the one I grew up in 'only' £250-£300K, vs £80K in the late 90's.

I'm just not paying it. I'll move out somewhere a bit cheaper, and/or just settle with a smaller place.

[Wight Flight]

10 minutes ago, Sugarlips said:

Well funnily enough that’s what I did, and prospered ever since. All my school mates just piled on in on the gravy train as they thought that’s just what you have to do. we’ll see how many of them are now swimming naked soon enough,

That's exactly why i tried to break the link with Surrey for my two.

I might have gone a bit extreme, but i didn't want them to financially kill themselves not realising there are other options.

[Bobthebuilder]

47 minutes ago, Sugarlips said:

I considered a decent 3 bed semi in a good bit of Bournemouth in 2000 for £75000. Now circa £475000..

I bought a 3 bed semi in Bournemouth in 1998 for £64k, sold it in 2000 for £89k, and I thought I had done well.

[Chewing Grass]

Just remembered to check as its Friday so I did.

The line of listings marches ever upwards to another historic high.

The 10 new listings are mostly 3-bed Semis, not the spunked up McMansions, if this is a continued trend it will be signs of financial distress amongst the young with kids.

Edited July 21, 2023 by Chewing Grass

[sancho panza]

I hadnt thought of this but given something @spygirl has psoted elsewhere about banks not allowing/restriciting porting of mortgages.

Liquidity looks to be headed south

https://wolfstreet.com/2023/07/21/entire-housing-market-buyers-and-sellers-may-have-shrunk-by-20-25-because-of-the-3-mortgages/

Entire Housing Market, Buyers and Sellers, May Have Shrunk by 20% to 25% because of the 3% Mortgages

by Wolf Richter • Jul 21, 2023 • 23 Comments

They’re not listing their homes because they’re not moving out because they’re not buying a home to move into because they don’t want to give up their 3% gift from God.

By Wolf Richter for WOLF STREET.

The exact numbers are hard to nail down, but we can guesstimate from the figures we have that the entire housing market, both buyers and sellers, has shrunk this year by about 20% to 25% compared to pre-pandemic years.

Meaning 20% to 25% less demand and sales and 20% to 25% less inventory and new listings, with prices down a tad year-over-year, showing that the market is roughly balanced at this smaller size because buyers and sellers have vanished in equal number.

And we know who they are: the homeowners in 3%-mortgage jail that now cannot buy, and therefore cannot sell.

The 3% mortgages that a lot of homeowners now have after the huge refinancing boom during the pandemic prevent those people from buying a new home because they might have to finance it at about 7%, which would increase the monthly payment on the same size mortgage by 50% or more.

 

So these people aren’t buying. They aren’t even looking. They have left the market as buyers, and so there may be 20% to 25% fewer buyers.

At the same time, and in equal number, these people, who cannot buy a new home, therefore cannot sell their current home because they continue to live in it, and so they’re not putting their home on the market, and inventory shrinks by the same number as buyers have left. Less inventory and fewer buyers in equal amount.

These homeowners with 3% mortgages don’t want to, or cannot, upsize or downsize, or move to a different location, move closer to the kids or parents, or whatever – unless they want to give up their sacred 3% mortgage that now increasingly looks like a gift from God.

And for Realtors, the 3% mortgage – as much as they loved it at the time – has now turned into a gift from hell, because the real estate industry is making commissions coming and going: One, when these homeowners sell their old home, and two, when they buy a new home.

Each household that is now prevented from changing homes because they’re locked in by this 3% gift from God subtracts two transactions from the market – one when they buy a new home, and the other when they sell their old home. And Realtors are losing both of those deals.

The fact that Realtors are losing both of those deals is why the industry is so upset about these homeowners that refuse to sell – and it consistently blames them for the low inventory.

But the industry fails to state the other half of this reality, though they all know it: That these homeowners who refuse to sell have also vanished as buyers, and therefore this portion of demand has dropped in equal measure with inventories.

This is happening with a fairly large group of homeowners: They have left the market as both sellers and buyers at the same time and in equal number.

Which explains in part why sales volume has plunged so far because those potential buyers with 3% mortgages have left the market. And it explains in part why inventories have dropped because the same people that cannot buy aren’t putting their homes on the market.

That’s the big reason why we have this strange combination of plunging sales along with a national median price that has dropped year-over-year for the first time since the Housing Bust, with homes spending an increasing number of days on the market, amid growing but still tight inventory (all data here from the National Association of Realtors).

To set the scene: The national median price has been down slightly year-over-year for the fifth month in a row, a sign that the market is at a deadlock because mortgage-jailed potential buyers and potential sellers are the same people, and they’re not buying and they’re not selling.

Seasonally, the median prices released by the National Association of Realtors generally increase in the first half of the year, peak in June, and decline in the second half of the year (though part of the seasonality was upended during the pandemic). That’s just the normal seasonality of the housing market. Yesterday, we reported June’s median price of single-family houses; and based on seasonality, prices can be expected to go down for the rest of the year.

But the year-over-year comparison eliminates this seasonality. On a year-over-year basis, the median price of single-family houses dipped 1.2% in June, the fifth month in a row of year-over-year declines.

Second: Sales of single-family houses in June were down by 22% from June 2019 and by 23% from 2018. Since October last year, the declines in the current month from the same months in 2019 and 2018 ranged from -15% to -28%, because the mortgage-jailed households aren’t buying.

Third: New listings in June (396,100) were down by 23% from June 2019 and by 24% from June 2018, according to data from realtor.com, in part because the mortgage-jailed are not listing their homes because they’re not moving out because they’re not buying a new home to move into because they don’t want the payment of a 7% mortgage:

These declines in the 20% to 25% range keep cropping up across the demand and supply measures, compared to pre-pandemic times, indicating that a substantial portion of the normal buyers-sellers have vanished as buyers and as sellers because they got their 3% gift from God, and they’re not going to give it up, and so they’re not buying a new home and so they’re not selling their old home, and the whole market, buyers and sellers, has shrunk by their number. And that may be the new normal for years to come.

[JoeDavola]

I get the impression there's still some denial that asking prices might be the problem rather than mortgage costs?

[belfastchild]

12 hours ago, JoeDavola said:

Its the way I feel about Belfast, and a 3 bed semi like the one I grew up in 'only' £250-£300K, vs £80K in the late 90's.

I'm just not paying it. I'll move out somewhere a bit cheaper, and/or just settle with a smaller place.

Not sure if its this thread or another one but learn to drive Joe. You are basing your searches around city centre and train stations and thats where the most expensive are. 10 mins drive and you will have something the same for half the price, 20 mins drive and you can have a mansion for the same price.

Saying that the bus lanes and major routes have helped although the gliders have pushed up prices (and I dont think they are any faster?). North Belfast/Newtownabbey prices will go up when the new glider routes come in to effect.

[Axeman123]

27 minutes ago, JoeDavola said:

I get the impression there's still some denial that asking prices might be the problem rather than mortgage costs?

Well...

US I think, but you can imagine similar hard sell here. Electronic messenger being ubiquitous is a new element though, even in 2008 you might have had a text message etc but most of this stuff would have been voice and hence no audit trail. This could be a first for man kind, a fully documented bubble pop.

[Mikhail Liebenstein]

13 hours ago, Wight Flight said:

That's exactly why i tried to break the link with Surrey for my two.

I might have gone a bit extreme, but i didn't want them to financially kill themselves not realising there are other options.

 

We are in Surrey too, though mine will likely be OK as both pre-teen and guessing prices will be lower by their 20s. There is also some decent inheritance to be had once the early boomer in laws drop.

[Wight Flight]

Just now, Mikhail Liebenstein said:

 

We are in Surrey too, though mine will likely be OK as both pre-teen and guessing prices will be lower by their 20s. There is also some decent inheritance to be had once the early boomer in laws drop.

That's some strong hopium you are smoking there sir.

 

[Wight Flight]

1 hour ago, Mikhail Liebenstein said:

 

We are in Surrey too, though mine will likely be OK as both pre-teen and guessing prices will be lower by their 20s. There is also some decent inheritance to be had once the early boomer in laws drop.

The problem with that is even if they are able to stay, they might discover, as mine have done, that every one of their friends has left.

 

[Ina]

My probate sales are collapsing.  Dead people’s houses used to fly off the shelf until a year ago as doer uppers fought over them.  No longer.  It is a combination of the prohibitive costs of doing them up when you are not a builder and have to hire a builder plus mortgage costs, plus the cost of living crisis and utility bills.

An African couple came in to the office yesterday to have some new build conveyancing documents witnessed.  They could barely speak a word of English yet had managed to secure a mortgage to purchase a £380k new build.  He is apparently a social worker and she said she works in the private sector.  As I’ve said before I look daily on our “monies in” spreadsheet and every other buyer has a foreign surname.  Genuinely I’m confused as to how this will pan out.

[reformed nice guy]

1 hour ago, Ina said:

He is apparently a social worker and she said she works in the private sector.  As I’ve said before I look daily on our “monies in” spreadsheet and every other buyer has a foreign surname.  Genuinely I’m confused as to how this will pan out.

I think we will learn a lot of the reasons why you cannot confidently trust a contract in the third world as you would in the west

[spygirl]

2 hours ago, Ina said:

My probate sales are collapsing.  Dead people’s houses used to fly off the shelf until a year ago as doer uppers fought over them.  No longer.  It is a combination of the prohibitive costs of doing them up when you are not a builder and have to hire a builder plus mortgage costs, plus the cost of living crisis and utility bills.

An African couple came in to the office yesterday to have some new build conveyancing documents witnessed.  They could barely speak a word of English yet had managed to secure a mortgage to purchase a £380k new build.  He is apparently a social worker and she said she works in the private sector.  As I’ve said before I look daily on our “monies in” spreadsheet and every other buyer has a foreign surname.  Genuinely I’m confused as to how this will pan out.

Oh I know.

The new Brits will fuck off when they are faced with a large loss on thier house, rather than the ££££££ they were expecting.

Lots of London HTB are EUers.

It's going to be brutal on several fronts.

And I'd bet big money the Mr n Mrs Bongo will have a NW mortgage.

NW are clueless of non native risks.

[spygirl]

2 hours ago, Ina said:

My probate sales are collapsing.  Dead people’s houses used to fly off the shelf until a year ago as doer uppers fought over them.  No longer.  It is a combination of the prohibitive costs of doing them up when you are not a builder and have to hire a builder plus mortgage costs, plus the cost of living crisis and utility bills.

An African couple came in to the office yesterday to have some new build conveyancing documents witnessed.  They could barely speak a word of English yet had managed to secure a mortgage to purchase a £380k new build.  He is apparently a social worker and she said she works in the private sector.  As I’ve said before I look daily on our “monies in” spreadsheet and every other buyer has a foreign surname.  Genuinely I’m confused as to how this will pan out.

Oh I know.

The new Brits will fuck off when they are faced with a large loss on thier house, rather than the ££££££ they were expecting.

Lots of London HTB are EUers.

It's going to be brutal on several fronts.

And I'd bet big money the Mr n Mrs Bongo will have a NW mortgage.

NW are clueless of non native risks.