I think you are correct there. What is a bigger problem is lenders giving mortgages to council house dwellers. Council renters can buy a council house at a price far below it's market value. Some lenders give these people a mortgage that they know the borrower can't afford. Result? The former renter is evicted andthe lender gets a council house at a bargain price.
There are and will be for the forseeable future more people who wish to own their own house than there are houses available on our limited landmass.
Around 300 a day have to be built just to keep pace with our rapidly growing population and this isnt happening even now. Its supply and demand but not only that property should be looked at as a long term investment, like your pension. I think house prices will stabilise over the next year but for what its worth i really cannot see a great depreciation in prices, people have to live somewhere and most people would prefer to own than rent (so they will find a way to buy) and at the end of the day..... it gets dark.
I can't recommend Andrew Farlow, the Oxford economist, enough. Before anyone relies on "people will always need somewhere to live", or "it's a small island", or "buy land, they're not making any more of it", or any similar saying, read his stuff.
Remember, it's not the stuff you don't know that gets you into trouble. It's the stuff you are absolutely certain about which turns out not to be true that shafts you.
And today 31/10 - American housing is taking a further pounding but the Nationwide says that British price growth has accelerated in the UK. WTF. People always say that American bubbles are "real" bubbles and always burst because of the lax planning restrictions and cheap gas which means that housing can always sprawl and the cost of building is low. I'm not so sure - people only want to live in some places, commuting is a nuisance, trafffic jams are getting worse. Prime real estate in the US is nearly as valuable as here, so our bubble might be just as real as theirs.
Well those of us in a mortgage with a few years fixed rates ahead can breathe easily for the moment. The hope is that it will be sorted within a year or two and the banks will push rates down to keep business!
Because they don't want to lose their houses? Shelter being a fundamental need people do whatever it takes to protect it.
Perhaps not as daft as it sounds. The credit card is unsecured debt and there's not all that much they can do if you rack up a big bill - at least, not turf you out of your house. There seem to be various ways and means of escaping this sort of debt with IVAs etc without having to go bankrupt.
Also, perhaps they have found a way of transferring the balances and using introductory 0% rates, so that it may not be more expensive debt.
you don't even need to care about the value of your house until you need to sell it. Yeah, it's nice to think that your house is worth X rather than Y... but in the daily management of your life it means nothing.
Your sums are correct, your comments about real value are correct. You are simply missing the very human angle that is panic in times of change.
Imagine an aging population base - bit like the UK you could say - a population that has so much of lifes capital tied up in the value of their house. I don't say that is a good thing - simply a fact of life these days.
If the value of the housing market goes down, panic sets in as our largely older population suddenly realises they can't sell up and live on the money they expected. They don't have time to wait for the upturn and so they dump on the hope of not losing too much.
This might well sort the housing market but public confidence and a suddenly poor elder population means hardship for the rest of the UK population too.
I agree that it is v v unlikely that there will be a large correction, the small downturn and then stagnation would be my guess.
I too wait with cash hoping for a bit more of a downturn