Will Our Housing market Suffer a US Style Collapse?

#21
Easy answer: it depends.

What it depends on is more tricky. Mortgage lending volumes have dropped by 12% this month and there are quite a few people hanging back from buying waiting for the price correction, because they now simply cannot a mortgage or at least an affordable deal right now.

In some parts of the country there is a price crash already in progress where mugs have bought buy to let flats on guaranteed yields (i,e cashbacks) way too late in the cycle, come off the end of that and find there is a huge oversupply in what have become buy to let ghettos. New buyers are scared off and that just makes it worse. This is not exactly news!

Yet dozens of developments are still being built with offers of similar incentives. The fear is that novice investors are being lured by perks such as discounts on off-plan flats and guaranteed rents for periods of up to two years in the hope that they can sell for a capital profit when the subsidies stop.

The auction catalogue included half-a-dozen flats barely two years old at Henry Laver Court, part of a Barratt development in the heart of Colchester, Britain's oldest town and a popular commuter zone for City workers. The flats sold, with incentives, for between £224,995 and £249,995 last year. Their reserve price at the auction last week was £140,000; five sold for £145,000, the other for £155,000. Local estate agents have similar flats in the development on the market for £180,000
.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/07/23/cmbuytolet23.xml

I have no sympathy for these people at all nor the mortgage lenders who advanced stupid sums, Greed, pure and simple.

But in other parts of the country demand for this sort of thing is holding up and so are the prices.

Will that feed into the mainstream market though? Not to the same extent but the first and second time buyer market is stagnating a bit and things will slow down.

If it injects reality into a market pumped up by mortgage lenders and greedy agents all well and good. Some will suffer but then the entire property market is built upon the misery of others.
 
#22
Australia is worse for this, hoardes of ordinary Australians are rushing to buy investment properties.

I find the level of greed demonstrated very worrying.
 
#23
Please please please let Sven be right for once just in time for my lump sum in a few years time. But i doubt it as previously said the ammount of revenue to the chancellor (ooops sorry he's the PM now isnt he) higher housing prices are giving not a chance to be honest. :roll:
 
#24
Sven:

Have you worked out yet why mortgage lenders have withdrawn 40% of their plans... Not their money you'll note, just their mortgage plans?

Do you understand that the "crash" in the markets that the media is touting are in the "sub-prime" lending? Do you understand that sub-prime lending is inherently dangerous for lenders? Do you understand that sub prime lending makes up around 10% of the total US market in the USA? Do you understand that only around 10% of the sub prime mortgages are defaulting? Are you capable of doing the maths do determine what percentage of the entire mortgage market is having a problem? Do you understand that it was generally only the low end, high risk lenders that have run into problems with sub prime lending due to their aggressive sales of these products?

In regions where other factors are responsible for "issues" in the market then, at worst, there have been losses in value in the 10-20% region... But that is after those same properties realizing 30-300+% gains in the previous 5 years...

So, pray tell, where the f$ck is this "crash" that chicken little is talking about that Britain is about to suffer?

Are you an elected MP? I frigging hope not because if you are so naive as to believe the crap you are doing then Britain is utterly screwed.
 
#25
Airbourne:
Do you understand that the "crash" in the markets that the media is touting are in the "sub-prime" lending? Do you understand that sub-prime lending is inherently dangerous for lenders? Do you understand that sub prime lending makes up around 10% of the total US market in the USA? Do you understand that only around 10% of the sub prime mortgages are defaulting? Are you capable of doing the maths do determine what percentage of the entire mortgage market is having a problem? Do you understand that it was generally only the low end, high risk lenders that have run into problems with sub prime lending due to their aggressive sales of these products?
Unfortunately the sub prime lending was traded in packages with better quality debt. I think it was some instrument called Collateralized debt packages. It now turns out that the sub prime was the bad meat that taints the rest. Now all mortgages are effected to some degree. The good meat was supposed to hedge against the risks involved holding the bad which returned more filthy stinking lucre. Trouble is the defaulting rates on the high whiffing risk debt have caused the good meat in the package to turn bad as well.

This one isn't over. You wouldn't buy sub prime steak now would you?
 
#26
This one isn't over.
The only reason the sub prime market is news is that, for the largest part, it affects the lower end borrowers, ie: the poor... So the media jumped on it.

With the default rate at less than 1% of the whole wrapped in "meat" of higher value means that the actual value is yet further diluted if you purchase some of the bad debt. Then, when you buy the debt there is, on average, a few points to allow profit to be made... yet they are losing a maxumum of 1%. Hardly a "crash"...
 
#27
Airborne_Aircrew said:
This one isn't over.
The only reason the sub prime market is news is that, for the largest part, it affects the lower end borrowers, ie: the poor... So the media jumped on it.

With the default rate at less than 1% of the whole wrapped in "meat" of higher value means that the actual value is yet further diluted if you purchase some of the bad debt. Then, when you buy the debt there is, on average, a few points to allow profit to be made... yet they are losing a maxumum of 1%. Hardly a "crash"...
Just answer me one question - with a straight Yes or No. Has the median price of a new house in the US dropped by 9.7%?

Here's a clue
 
#28
Sven said:
Airborne_Aircrew said:
This one isn't over.
The only reason the sub prime market is news is that, for the largest part, it affects the lower end borrowers, ie: the poor... So the media jumped on it.

With the default rate at less than 1% of the whole wrapped in "meat" of higher value means that the actual value is yet further diluted if you purchase some of the bad debt. Then, when you buy the debt there is, on average, a few points to allow profit to be made... yet they are losing a maxumum of 1%. Hardly a "crash"...
Just answer me one question - with a straight Yes or No. Has the median price of a new house in the US dropped by 9.7%?

Here's a clue
Median?

Not mode or medium?

Its nice to quote statistics to fit in with what you want.

And anyway 9.7%????? Did our prices not go up by that over the last 2 years? So what is the problem?
 
#29
Airborne_Aircrew said:
Are you an elected MP? I frigging hope not because if you are so naive as to believe the crap you are doing then Britain is utterly screwed.

:lol: :lol: :lol: :lol: :lol:


He did not get enough votes.
 
#30
Sven:

You have to be one of the most retarded people I have ever run into on the web!

Did you read your "clue"? More importantly did you comprehend it? To quote from it:-

The speed with which US house prices will fall in 2007 will dwarf that of this year. Here's why...
Did the tense in which that was written not give you the teeny feeling that it wasn't a current article? It was an opinion piece dated 02.11.2006... That's a year ago... and you are going to use a predictive piece written a year ago to "prove your point"... If I look in one ear will I see the wall on the other side of your head? :roll:

Allow me to give you some facts. These facts are based on the worst housing market in the entire USA - South East Michigan - which, funnily enough, is where I live. You can therefore accept that I'm speaking, not only from a US perspective, (rather than believing any trash you read in a newspaper that fits your agenda), but also from a homeowner's perspective in the worst market in the US.

In 1995 I purchased a house for $99,500, (we'll call it $100k to make the maths easy for you). In 2005 I bought another house and moved. At the time I moved I looked to try to refinance the first house since it appeared that the market was going soft and the bank appraised the house at $180,000. So, in the years 1995 - 2005 my house increased in value by 80%. It's now 2 years later and, as I related before, SE Michigan is in a bad way due to the auto industry. The rate of foreclosure is, by far, the highest in the nation with 1:185 mortgages defaulting. My $180,000 house is now, realistically valued at about $160,000. So, in two years, in the worst housing market in the USA I have "lost" $20,000 or around 10% of my house's value. But, if you do the maths you will note that I am still $60,000 in profit, (we won't discuss the amount of money paid in mortgage interest because that is nit-picking for the sake of it).

The figures you see are quoted from places like San Francisco CA, Scottsdale AZ, Florida etc. where a combination of baby boomers buying retirement homes and speculators trying to jump on the rising prices have overinflated the market rapidly. I have a friend near Washington DC who, just 18 months ago, was in a bidding war for a house and watched the asking price be constantly overbid to the tune of some $40,000, (which was about 20% of the price of the house). That took place over the course of a week. That, of course, had a "knock-on effect on the houses around and houses who's asking price was in the same ball park the week before were raised by as much as 15% right there and then.

So, you're doom and gloom use of figures are utterly unrepresentative of the reality but is useful for your agenda. You probably believed that the loss of 300+ points on Wall Street a couple of weeks ago was a "crash" too as the media tried to state... Despite the fact that 300+ points is only a couple of percent.

There has not been a "Crash" Nothing is "Collapsing"... Stop scaring people into thinking you have something of value to offer them.

Come to think of it... what, exactly, are your applicable skills and experience that make you believe that you are fit to be an elected official and run a country - they clearly aren't in finance or real estate?
 
#31
Side issue re US - I was in the states last year and was staggered at the property taxes. You look at a house and think, "That's a bargain". Then you discover that three tiers of local govenment (including special administrative districts for the schools) are going to come looking for money as soon as you buy.
 
#32
This is an interesting thread, from which I have become better informed.

I just think it is rather unneccessary for some of the gratuitous unpleasantness to the individual who was helpful enough to kick it off.
 
#33
On a seperate note AA...............

who do you think is the best bet to take over from Dubya next year?

I went to a talk by John Simpson of BBC News fame on Wednesday night (he's got a new book to sell). When asked this, he was very quick to suggest Clinton - on the ground that it would get Bill back involved, and since he knew how everything and everybody ticked, there was no learning-curve eg. with a bunch of new academics, staffers etc from Texas/Arkansas/California/Georgia etc etc
 
#34
I hope Obama wins - he listens to the question and then answers it; very rare in a politician.

The link from this opinion to house prices is tenuous, though.
 
#35
Airborne_Aircrew said:
Have you worked out yet why mortgage lenders have withdrawn 40% of their plans... Not their money you'll note, just their mortgage plans?.
Money I'm afraid. Choice has reduced primarily because there is insufficient cheap money to sustain these offers.

Airborne_Aircrew said:
Do you understand that it was generally only the low end, high risk lenders that have run into problems with sub prime lending due to their aggressive sales of these products??
And do you understand that the impact has been felt right acoss the piece including AAA? It's not confined to sub-prime and it will affect, for a significant period, the wholesale price of money which will have a significant impact on the demand side and therefore asset prices.

Airborne_Aircrew said:
So, pray tell, where the f$ck is this "crash" that chicken little is talking about that Britain is about to suffer?
It's on the way. Incidentally, are we to understand that you are one of those poor souls who have come late to the buy-to-let party and are now just a tad worried that your 'investment' is about to go up in smoke.

Finally, you can talk all you want about supply/demand/interest rates propping up the market but the biggest factor in play is that of sentiment - if enough people believe that house prices are going to fall then it becomes a self-fulfilling prophecy. Me, I'm speading as much alarm and despondency as I can - there's a buying opportunity just around the corner.

CBO
 
#36
Gobby:

Property taxes aren't really bad though they are something one needs to look at if you are "pushing the envelope" with regard to the mortgage you can afford. The taxes are usually rolled into the monthly mortgage along with PMI, (Private Mortgage Insurance - if you owe more than 80% of the value of the house to the mortgage you get to pay this - the secret is remembering to make them cancel it once your equity exceeds the 20% or they will have you paying it forever). My taxes are as follows:-

House 1: Value - $160,000. Annual Property Tax - about $2500 IIRC

House 2: Value - $400,000. Annual Property Tax - about $3500

I know that looks "off" but the property taxes are set by the town, (city as they call them here), so they can vary quite radically over the space of a few miles.

Sonof:

Hillary is practically a shoe-in for the Democratic Presidential Nomination. Her political machine is too powerful for the other Democrats to have much of a chance of beating her. Obama is getting the "trendy" money etc. but he is far too inexperienced to be a viable presidential candidate so, regardless of whether people like him the Democratic machine will make sure he doesn't get the nomination. Edwards is a non-starter who is "fishing" for the Vice Presidential nod from Hillary.

The problem the Democrats have is that they will probably have Hillary as the nominee. It's a problem for several reason:-

1. She is very polarizing. 50% of registered democratic voters stated recently that they could not vote for her under any circumstances. Note: those are dyed in the wool, vote a 'straight democrat ticket' every election, voters - not a random sample.

2. She is not perceived as likable... In fact, quite the opposite is true. This is witnessed by the campaign that she has recently embarked upon in order to rehabilitate that image.

3. She is not perceived as entirely honest or trustworthy. There have been many scandals that have come very close to bringing the Clintons down. Several people have fallen on, (or been pushed onto), their swords in order to maintain them.

4. Bill is as much a liability as a benefit. Many are just fed up of him and do not wish him to be put in a position to continue his embarrassment of the country. Others think the sun shines etc. and that he should be made emperor...

There's also another thing that tends to influence presidential voting here in the US and that's the "balance of power". Currently they have a Democrat House and Senate with a President, (read: Veto power), that is a Republican. It takes an awful lot for the American electorate to vote in all three from the same party... Not to say it doesn't happen, but it's unusual.

The last issue is that of the process... Of late the Democrat Party is being run at the behest of the far left of the party, (Moveon.org etc.). In order to get the nomination all the nominees have to pander to the far left. This is done publicly and their words go on record. Then, once they have the nomination they need to woo the voters in the middle and, by doing so, have to move their rhetoric back to center which often contradicts what they said just months before. Of late the positions they have to take to placate the far left have been almost lunatic so it will be interesting to see how well they will be able to rehabilitate themselves to get the center vote.

I think/hope we get a Republican president with 'nads... If I was a voter I'd probably vote for Guiliani... But he has his skeletons too... :roll:

CBO:

You're dead right, sentiment is huge... But over here, apart from small pockets, the sentiment is that things are actually going quite well. A sentiment I agree with.

Incidentally, are we to understand that you are one of those poor souls who have come late to the buy-to-let party and are now just a tad worried that your 'investment' is about to go up in smoke.
You would be wrong if that's what you think. When we purchased the new house we did so with the intent of not being "house poor" so we bought well within our means, (even with the other house not being sold at the time of purchase we were qualified for a loan twice that of the value of the house we purchased). Consequently, despite the fact I'd love to be rid of the old house, we still live very comfortably without renting the old house... I'd still like to get rid of it though... It wasn't an investment...
 
#37
sonofgreenfinch said:
This is an interesting thread, from which I have become better informed.

I just think it is rather unneccessary for some of the gratuitous unpleasantness to the individual who was helpful enough to kick it off.
I would agree with that. It does seem unnecessary
 
#38
I dunno. It makes my brain hurt. But I tend agree with this bloke...

Roger Bootle (Managing Director of Capital Economics and economic adviser to Deloitte) in the Daily Telegraph said:
So is there going to be a housing market "crash"? No. Stockmarkets may crash but housing markets don't. Indeed, even when prices are significantly too high, as they may well be now, the first reaction is for the market to freeze up rather than for prices to fall. Even later, the inhibitions to falling prices are quite severe. In the housing market, prices dribble lower rather than plunge. That is what I suspect may happen next year and for a good while to come.
Full article here: http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/10/15/ccom115.xml.

Some interesting comments below the article as well.

I am less bullish than A_A. I agree that in itself the economics of it are not too dire, and that we are unlikely to suffer ( or, in my case, rejoice in :D ) a collapse. But - like other posters - I think that the "credit-crunch" will cause, and is already causing, effects on the wider housing market and general economy beyond the limited impact strictly entailed.

It really is all about confidence. I work with City Investment Banks, and it looks as if times are becoming pretty tight. I'm not confident that the City & Gov't will be able to contain the immediate sub-prime effects.

Charlie
 
#39
I would agree with that. It does seem unnecessary
Just take a look at the thread title... Then look at the OP's "proofs" that are a year old... His lack of comprehension let alone his lack of grasp on the situation labels him a fool. Then he has he temerity to talk about things which he has absolutely no knowledge of other than what he read in a newspaper.

It grips my sh1t when people regurgitate utter rubbish that the slightest amount of critical thought would refute with the intent of spreading fear... It grips it even tighter when the person doing it is an aspiring politician... :x
 
#40
Airborne_Aircrew said:
I would agree with that. It does seem unnecessary
Just take a look at the thread title... Then look at the OP's "proofs" that are a year old... His lack of comprehension let alone his lack of grasp on the situation labels him a fool. Then he has he temerity to talk about things which he has absolutely no knowledge of other than what he read in a newspaper.

It grips my sh1t when people regurgitate utter rubbish that the slightest amount of critical thought would refute with the intent of spreading fear... It grips it even tighter when the person doing it is an aspiring politician... :x
Yes, I pretty much noticed that. He is entitled to post though and IMO a retort using polite language can be far more effective than a rude one.

When emotive language is used it can detract from serious points being made and appear as a rant. That is just my opinion though and you and everyone else are entirely entitled to your own. Sorry for going off-topic.
 

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