Property crash, just maybe it really is different this time (Part 3)

[AlfredTheLittle]

5 hours ago, Kendo said:

Here’s a blog on some research from the US, which argues that rising interest rates have locked a lot of people into being unable to sell, putting more upward pressure on home prices than the downward pressure from lower demand / credit owing to higher interest rates.

https://calculatedrisk.substack.com/p/the-lock-in-effect-of-rising-mortgage

The conclusion reads:

This paper finds that for every percentage point that market mortgage rates exceed the origination interest rate, the probability of sale is decreased by 18.1%. This mortgage rate lock-in led to a 57% reduction in home sales with fixed-rate mortgages in 2023Q4 and prevented 1.33 million sales between 2022Q2 and 2023Q4. The supply reduction increased home prices by 5.7%, outweighing the direct impact of elevated rates, which decreased prices by 3.3%. These findings underscore how mortgage rate lock-in restricts mobility, results in people not living in homes they would prefer, inflates prices, and worsens affordability.

The logic seems to be the wrong way around there - they could still sell, but would need to lower their asking price and accept a loss. Eventually they'll have to, and then affordability will increase again, whereas with zero interest rates and infinite house prices affordability only goes one way.

[Kendo]

1 hour ago, AlfredTheLittle said:

The logic seems to be the wrong way around there - they could still sell, but would need to lower their asking price and accept a loss. Eventually they'll have to, and then affordability will increase again, whereas with zero interest rates and infinite house prices affordability only goes one way.

It seems to be talking more about a group that want to sell rather than need to sell (for the three Ds), and that supply is restricted early on because they don’t/can’t accept a loss. In time, more take the plunge to sell. That’s the key with a lot of this - time - time for people’s expectations to change and time to accept that property is worth less. Wish time would just hurry up.

[Option5]

Interesting article in the Grauniad yesterday.

The end of landlords: the surprisingly simple solution to the UK housing crisis

https://www.theguardian.com/lifeandstyle/2024/mar/19/end-of-landlords-surprisingly-simple-solution-to-uk-housing-crisis

[onlyme]

8 hours ago, Kendo said:

Here’s a blog on some research from the US, which argues that rising interest rates have locked a lot of people into being unable to sell, putting more upward pressure on home prices than the downward pressure from lower demand / credit owing to higher interest rates.

https://calculatedrisk.substack.com/p/the-lock-in-effect-of-rising-mortgage

The conclusion reads:

This paper finds that for every percentage point that market mortgage rates exceed the origination interest rate, the probability of sale is decreased by 18.1%. This mortgage rate lock-in led to a 57% reduction in home sales with fixed-rate mortgages in 2023Q4 and prevented 1.33 million sales between 2022Q2 and 2023Q4. The supply reduction increased home prices by 5.7%, outweighing the direct impact of elevated rates, which decreased prices by 3.3%. These findings underscore how mortgage rate lock-in restricts mobility, results in people not living in homes they would prefer, inflates prices, and worsens affordability.

For a while, until it collapses.

The same argument is being made about new build supply in the US, lumber companies are against the wall and shutting as demand (and lumber prices) down so much.

 

 

[onlyme]

2 hours ago, Kendo said:

It seems to be talking more about a group that want to sell rather than need to sell (for the three Ds), and that supply is restricted early on because they don’t/can’t accept a loss. In time, more take the plunge to sell. That’s the key with a lot of this - time - time for people’s expectations to change and time to accept that property is worth less. Wish time would just hurry up.

If history is anything to go by these are 4 or 5 year swings. It takes that long. The question is whether we come out the other side with a rebound or the mess made from the last 20/30 years is big enough to consign the lot to the bin for a generation. The multigenerational bear market in bonds/yields had to break some time and who is to say it won;t be followed by a similar one to the upside.

 

Edited March 20 by onlyme

[Heart's Ease]

 

Picked up from Twitter...

[Kendo]

20 minutes ago, Option5 said:

Interesting article in the Grauniad yesterday.

The end of landlords: the surprisingly simple solution to the UK housing crisis

https://www.theguardian.com/lifeandstyle/2024/mar/19/end-of-landlords-surprisingly-simple-solution-to-uk-housing-crisis

Yes, I posted this in the How would you solve the UK housing crisis thread. Some interesting points made although I’m not sure it’s that simple or the magic bullet presented.

[Frank Hovis]

27 minutes ago, Option5 said:

Interesting article in the Grauniad yesterday.

The end of landlords: the surprisingly simple solution to the UK housing crisis

https://www.theguardian.com/lifeandstyle/2024/mar/19/end-of-landlords-surprisingly-simple-solution-to-uk-housing-crisis

 

Cracking article, well summed up by this paragraph.

 

Solving the housing crisis does not need to involve an ecologically unforgivable project of mass-scale housebuilding. It does not need to involve asphalting green belts, destroying precious amenities through “infilling”, converting office blocks into flats or wasting government money on quixotic home-ownership schemes. We simply need to relearn the wisdom of the last century: to acknowledge that landlordism is the enemy of affordability, and to ensure that the housing economy is not defined by the staggering rental yields that our unregulated market can produce.

[Bobthebuilder]

37 minutes ago, Frank Hovis said:

Cracking article, well summed up by this paragraph.

If they are publishing stuff like that in the MSM especially the guardian, there must be a political decision to turn public opinion. Big taxes coming for LLs I expect.

[sancho panza]

4 hours ago, AlfredTheLittle said:

The logic seems to be the wrong way around there - they could still sell, but would need to lower their asking price and accept a loss. Eventually they'll have to, and then affordability will increase again, whereas with zero interest rates and infinite house prices affordability only goes one way.

I ahd a quick flick through the article.there's an improtnatn element missing frome the article and thats the role of 30 year rates keeping hosues from being sold.

porting mortgages in US not common and so if you're moving now your IR is going to double or treble.

so we revert to the 3 Ds.

long term fixed rates solve one problem(IR risk) by creating another(illiquidtiy)

1 hour ago, Heart's Ease said:

 

Picked up from Twitter...

intersting site and stats

[CVG]

3 minutes ago, sancho panza said:

I ahd a quick flick through the article.there's an improtnatn element missing frome the article and thats the role of 30 year rates keeping hosues from being sold.

porting mortgages in US not common and so if you're moving now your IR is going to double or treble.

so we revert to the 3 Ds.

long term fixed rates solve one problem(IR risk) by creating another(illiquidtiy)

intersting site and stats

Great site for regional and home type breakdown as above. Up in places, level in others and down elsewhere. The maps are pretty crap. My last purchase shows on the wrong road. Could do better here.

[Frank Hovis]

3 hours ago, Bobthebuilder said:

Big taxes coming for LLs I expect.

 

 

[Axeman123]

9 hours ago, AlfredTheLittle said:

The logic seems to be the wrong way around there - they could still sell, but would need to lower their asking price and accept a loss.

IMO the real issue is that there are people that can hang on for years due to a "cheap" mortgage already in place, epecially in the US with 30 yr fixes, but couldn't even get a new mortgage to move to a smaller property or a cheaper part of the country. In the UK 2 and 5 yr fixes will force a resolution much sooner. Few people would choose to sell at a loss or go bankrupt whilever they have a head in the sand option, especially if the mortgage payment is comparable to the alternative of renting.

The concept of a reduction in supply resulting from this is a politically motivated lie of course, as people living in houses they would prefer not to would presumably buy another rather than sleep rough.

[spygirl]

5 hours ago, Bobthebuilder said:

If they are publishing stuff like that in the MSM especially the guardian, there must be a political decision to turn public opinion. Big taxes coming for LLs I expect.

Theres no need to raise taxes on LL any more.

Just force banks to hold 100% capital against all IO BTL loans.

Tis coming soon.

 

 

[Guest]

5 hours ago, Bobthebuilder said:

If they are publishing stuff like that in the MSM especially the guardian, there must be a political decision to turn public opinion. Big taxes coming for LLs I expect.

Should start with abolishing mortgage interest relief for landlords and giving HMRC a wodge of cash to track down every landlord who has not been declaring at any point in the last 25 years. Probably a million or more easy targets there but previous governments (including the current one) couldn't be bothered.

[spygirl]

6 hours ago, Option5 said:

Interesting article in the Grauniad yesterday.

The end of landlords: the surprisingly simple solution to the UK housing crisis

https://www.theguardian.com/lifeandstyle/2024/mar/19/end-of-landlords-surprisingly-simple-solution-to-uk-housing-crisis

A truly amazing article.

Goes back to the 70s, and the brave attempts by Healy n Callaghan.

Then brings Fatcher in, and ... nothing; all Fatchers fault.

What happened from ~1990??? eps 1998ish when bank credit state rapidly expanding? Bad Fatcher!

Fatcher got rid of LLs by expanding mortgage to the pleb.

The rise/semi boom caused by idiot lifeco and endowments, peters out in 90,s resetting HPE to low levels.

Brown wanted a massive credit expansion to make economy expand and make him look good.

He removed all controls by treasury n BoE, unleashing the biggest credit boom the UK has ever seen.

Of course, by 2000, there not a huge number of house buyers.

Pushing button. Hmm demographic dip and 89-93 recession make housing a bit of dog.

Hmm.

No worry - just let all the boomers take on 2, 3 IO BTL!

BoE can print the money!

Whos watching the banks?

Boe? No Treasury is?

Treasury? No FSA is?

FSA? No BoE is. Lets discuss this at the next tripartite meeting, chaired by Mrs Balls.

No problems -We have eelimnated Boom n Bust.

 

 

 

 

[spygirl]

14 minutes ago, Darude said:

Should start with abolishing mortgage interest relief for landlords and giving HMRC a wodge of cash to track down every landlord who has not been declaring at any point in the last 25 years. Probably a million or more easy targets there but previous governments (including the current one) couldn't be bothered.

Err?

https://www.housepricecrash.co.uk/forum/index.php?/topic/229792-countdown-to-leveraged-btl-going-bust-thread/#comment-1103223898

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Posted April 15, 2017

  On 15/04/2017 at 18:22, Fairyland said:

Do you think:

1) Interest rates will never rise?

2) Rents will never fall?

 

My personal view is that interest rates will be zero in real terms for the rest of my life

Rents do fall they have certainly fallen in inner London over the last 18 months. However over a longer period I think local rents will track local GDP growth

[sancho panza]

I thought things were insane here but jsut check out some of these canada charts especially given they start in 08 not 00

worth noting the similarity timing wise with unwinding QE

https://wolfstreet.com/2024/03/18/the-most-splendid-housing-bubbles-in-canada-national-house-prices-flat-in-feb-16-from-peak-condos-drop-further-on-bank-of-canadas-5-massive-qt/

[JoeDavola]

Folks are just over two months...actually possibly closer to 3 months sale agreed on their place at this point; haven't found anywhere worth moving to that they didn't get outbid by a cash buyer.

Bungalows are the biggest rip offs on the market because they're hoping for a rich and/or desperate boomer.

Will be interesting to see if their latest buyer pulls out if my folks haven't found somewhere by say the summer.

Edited March 20 by JoeDavola

[ccc]

1 hour ago, JoeDavola said:

Folks are just over two months...actually possibly closer to 3 months sale agreed on their place at this point; haven't found anywhere worth moving to that they didn't get outbid by a cash buyer.

Bungalows are the biggest rip offs on the market because they're hoping for a rich and/or desperate boomer.

Will be interesting to see if their latest buyer pulls out if my folks haven't found somewhere by say the summer.

You know the most depressing thing ? 

All these years of efforts your parents have put into a move they just don't need. 

And every single person on the other side who have done the same for fuck all. 

Just think of how many simple wee two bedroom houses could have been built / sold / bought / whatever for all that wasted effort. 

Absolute fucking disgrace. 

[wherebee]

14 hours ago, Frank Hovis said:

 

Cracking article, well summed up by this paragraph.

 

Solving the housing crisis does not need to involve an ecologically unforgivable project of mass-scale housebuilding. It does not need to involve asphalting green belts, destroying precious amenities through “infilling”, converting office blocks into flats or wasting government money on quixotic home-ownership schemes. We simply need to relearn the wisdom of the last century: to acknowledge that landlordism is the enemy of affordability, and to ensure that the housing economy is not defined by the staggering rental yields that our unregulated market can produce.

shit article.  No mention of demand - population increase by mass immigration.  They even quote that the UK has an average number of properties per capita; no it fucking doesn't if there are 10 million illegals in the UK not in the official figures, which is what I believe to be the case.

private landlordism is a symptom of the massive overpopulation of the UK, not the cause.  If there were less people seeking a home, private rentals would have to either be in good condition or they would stand empty.

[ccc]

3 minutes ago, wherebee said:

shit article.  No mention of demand - population increase by mass immigration.  They even quote that the UK has an average number of properties per capita; no it fucking doesn't if there are 10 million illegals in the UK not in the official figures, which is what I believe to be the case.

private landlordism is a symptom of the massive overpopulation of the UK, not the cause.  If there were less people seeking a home, private rentals would have to either be in good condition or they would stand empty.

Yep mass immigration is the foundation of the rest of it. 

[JoeDavola]

6 hours ago, wherebee said:

shit article.  No mention of demand - population increase by mass immigration.  They even quote that the UK has an average number of properties per capita; no it fucking doesn't if there are 10 million illegals in the UK not in the official figures, which is what I believe to be the case.

private landlordism is a symptom of the massive overpopulation of the UK, not the cause.  If there were less people seeking a home, private rentals would have to either be in good condition or they would stand empty.

I wouldn't say it's a shit article, but your point about the illegals reminds me that that housing market now isn't as simple as houses divided by population.

You have to take a particular person or even sub-demographic and divide them into places they'd actually want to live.

Immigration not only takes up housing but the areas that immigrants settle into en masse (i.e. bottom of the market HMO slum type) then become no-go places for all but the most desperate locals, even though very few people have the balls to say that.

[Frank Hovis]

6 hours ago, wherebee said:

shit article.  No mention of demand - population increase by mass immigration.  They even quote that the UK has an average number of properties per capita; no it fucking doesn't if there are 10 million illegals in the UK not in the official figures, which is what I believe to be the case.

private landlordism is a symptom of the massive overpopulation of the UK, not the cause.  If there were less people seeking a home, private rentals would have to either be in good condition or they would stand empty.

 

It is a good article because it has clearly identified one cause - BtLs - which if they were taxed out of existence would substantially reduce house prices.

Mass immigration is the single biggest cause of HPI but he wanted to have his article published in the Grauniad.

[JoeDavola]

7 hours ago, ccc said:

You know the most depressing thing ? 

All these years of efforts your parents have put into a move they just don't need. 

And every single person on the other side who have done the same for fuck all. 

Just think of how many simple wee two bedroom houses could have been built / sold / bought / whatever for all that wasted effort. 

Absolute fucking disgrace. 

It's actually even worse than that.

They moved house 11 years ago at the bottom of the market, from a house that they never should have left, Dad was just paranoid that it was 'falling down' (was it fuck, and he's a joiner if he can't cope with it who can).

The house they left 11 years ago is far more suitable for an aging couple; ironically it's the kind of house they'd love to move back to now - Mum openly says she prefers it to where they are now,I  as do I, and it's also gone up in value more than the house they're currently in.

So if you take both moves; the house they left and the attempts to leave this house - you're easily talking 5 years of either preparing to move house, trying to move house, and moving house. None of it was necessary. They had the perfect house 13 years ago and should have stayed there.

There was then the drama of them renting for a few months after the first move where Mum was more miserable than I've ever seen her.

So yeah, 5 years and I'd guess about £50K in lost property value and moving/rental costs....and why? I think essentially Dad got bored when he retired and had to create some fucking aggro/drama in his life, hence instigating the last move that Mum claims she never wanted to make.

I have to own my own decisions regarding not buying housing at the right time, but I'd be lying if I said there wasn't some bitterness at having a father who was a retired joiner/builder with fuck all else to do for the last 12 years who not only didn't offer any advice to buy but was completely disinterested when I did view places and openly told me to fuck off when I sheepshly suggested he help me do a place up. Yet I think this 5 year saga was essentially driven by his own boredom.

Edited March 21 by JoeDavola