So my estate agent really has been terrible... (snotty letter time)

[Saracen]

Well, how far is that? In real terms houses more than doubled from 1996-2007, so it's not at all absurd to think that in real terms they could fall by 50%. So far we've only seen 20% falls. In pretty much all previous house price crashes prices have fallen below the historical average of 3.5x average earnings.

They could fall by 50%. We won't know for sure until hindsight tells us. I think it unlikely they'll fall that far, but as it depends on things not yet known, like how the economy develops over time, we can't know for sure.

The point, though, is that most owners won't sell if prices drop too far. They simply stay put. Already, the speculative element of the motivation for moving house has largely vanished. When you add uncertainty about the economy and uncertainty about jobs, there's strong motivation for people not to do anything that involves large and perhaps risky financial transactions, or large transaction costs.

So for those that keep their jobs, even with pay cuts, or where their partner can finance the mortgage, you they simply wait out the recession and any housing crash. It's only those that have to sell that do so when the financial impact is bad, such as those that can't keep up mortgage payments, or those facing mandatory remortaging because fixed rate deals are or have reached the end of the term and they can't afford the mortgage at current rates and terms. As this crisis goes on, the number of people coming to the start of that process goes down. Many that had to sell for that kind of reason, or that got repossessed, have already been through it. As a percentage of the housing base, those facing that goes down every time another one goes through it, and those remaining are progressively on surer ground.

No, there's no limit. As prices fall more people will end up in negative equity. Banks probably won't start doing 'margin calls' on owner-occupiers, although in many cases there are clauses in the mortgage that allow them to, but in the case of buy-to-let investors they will have absolutely no compunction in demanding chunks of repayment in order to get the value of the outstanding loan below the current value of the property. If it happens this will drive many BTL investors to the wall and trigger repossessions. And that flood of repossessions hitting the market will in turn lower prices further and cause more margin calls.

Of course there's a limit. An absolute limit is £0. Or do you think people will pay someone to take their house off their hands? What house could be bought for 50p? £100? Of course there's a limit to how far prices will fall. The issue is where it is.

Negative equity on it's own doesn't mean people have to sell, or that prices will fall further. In fact, for many, it guarantees they don't sell. It's a stabilising factor. If you're in negative equity, selling is the very last thing you do, unless forced to. The value of any asset is only locked in once you sell. So if it's in negative equity, don't sell. Wait it out. That's exactly what a lot of people did last time. They waited until things picked up again. It took several years last time, and my guess is it'll take longer this time. Maybe a lot longer. But pick up they will.

About the only people that really get hurt by negative equity are those that can't wait it out, perhaps because of job losses, or ill health, or because they can't get a competitive remortgage. But as long as they can keep up mortgage payments, they wait it out and don't crystallise that negative equity into a hard loss by selling up if they aren't forced to.

It is, IMO, very naive to think that there's some limit beyond which prices cannot fall. The same forces that drove prices up way beyond any semblance of good sense could also cause them to plunge way below their 'fair' value. The government can try to interfere all it likes, but they don't have the funds to rig a free market any more. The bank bailout put paid to their spending power.

It's not about rigging the market. It's about people simply not selling, and most don't have to. The psychology of buying in a seller's market, like we've had, and the psychology of selling in a recession are very different. If I don't like the offer I get for my house, I just won't sell it.

I'd say availability of finance was the most obvious, personally.

I don't agree. If people aren't confident, if they don't feel secure in their job, they won't make major decisions like moving and it doesn't matter if finance is available or not. Finance being available is simply an enabler, not a motivator. Nobody thinks "oh look, my bank will offer me a mortgage, I'd better move". They decide, for whatever reason, that they want to move and do so if they can get the finance, and don't if they can't. People have to want to move before it matters whether finance is there or not, and wanting to move is motivated primarily by confidence.

Yeah? I heard that 5 year fixes are going up in price.

Indeed they are. But what does that have to do with what I said? I said credit was starting to become available, not that the price was static or dropping. Just because its becoming available doesn't mean rates (prices) won't go up, because it isn't a demand/supply equation that determines price. The price of fixeds is determined by how the market sees the future of the eco'nomy. It is, effectively, a long term bet and price is responding to perceived cost and risk. Availability, on the other hand, is a function of recapitalisation programs coming through, bank results slowly clarifying, of confidence growing within banking and them starting to lend to each other again, because they're a bit more confident.

But soon, they'll all have blown their wad and prices will fall again. It happens in any kind of market crash, and is referred to as a 'bull trap' or a 'dead cat bounce'. Have a look here:

http://www.housepricecrash.co.uk/ind...-inflation.php

There were periods in the crash of 1989-1996 when prices rose in both real and nominal terms. That didn't stop the crash going on, after these brief rises prices just resumed their relentless downward spiral. And, as I say, the economic fundamentals this time are much, much worse.

The single biggest feature of a dead cat bounce is that you don't know whether it's a dead cat bounce or not until afterwards.

Those that time their buying intervention right won't suffer a dead cat bounce. That's the trick of buying on timing .... getting it right. But for long term assets like houses (or stocks), it's not necessarily the case that people buy not expecting further falls. If you're playing a long game (like some people buying bank shares in recent months) you're betting that :-

1) The company won't go broke and leave you with nothing
2) Long-term, you get strong gains, enough to justify the risk.
3) With a bit of luck, you get income in the meantime

Suppose you've got a large chunk of cash sitting in the bank. Right now, getting a decent rate of return on it isn't easy. The time will come when putting it in property starts to look very attractive, because, after all is said and done, you have a concrete asset with both an income-generating potential and a capital growth potential. If you buy a house at the right time, and because it's a falling market you can negotiate hard on price, you might well end up getting a bargain, even if it does fall another 10% in the next year. That depends on intending to sit on it for quite some time and wait for prices to rise (which they will, though not at the rate they were), sooner or later.

What will stop a lot of people doing this is financing costs or availability of credit, and that's the limiting factor on many people doing BTL is getting BTL mortgages, but not everyone needs credit. And if you've got the money, the comparison is between the income and growth potential in property, and the income and growth potential, and risk, elsewhere. It's about comparative ROI.

Yes, that's obvious. But if you do think prices are about to stop falling, you are, IMO, deluding yourself.

Perhaps, but I very specifically didn't say I thought prices were about to stop falling.

And IF you're going to buy property, the best time to do it is (IMHO) while it's still falling, but preferably, just before it stops falling. IF you think we might be facing another two or three months of falling prices before a recovery and that those falls won't, therefore, be huge, buy now. At least start the process now. Why? Because the price you can negotiate will be better while the seller still thinks the market is in the toilet. If he thinks we're entering recovery, he'll think all he has to do to better his sale price is to wait. Sell before prices reach a peak, and buy before they reach a trough.

So with signs of improving confidence, with finance availability starting to ease, with people looking to buy before prices start to recover and a frenzy of those waiting for the best bargain before jumping in start to move for fear of missing out .... well, the circumstances are such that it wouldn't take that much for the fall to stop and a recovery to start, even though the economy has more pain to go.

I'm not predicting that this is what will happen .... just that the conditions are such that it COULD and some of the biggest factors in whether it does, like confidence levels, are both fickle and difficult to forecast.

I've added most of the emphasis.

Rave, you seem absolutely sure that house prices have a long way to fall yet. As I said more than once, you may be right. But it's a very complex picture and there are factors suggesting that the dire prognosis is easing. Yes, it might be a dead cat bounce .... but sooner or later, it won't be and that time might be now ..... and I hope that it is but, personally, I'm sure not betting the ..... erm .... house on it.

[Nick]

Uber-thread hijack...

[Rave]

Uber-thread hijack...

Sorry. I'll be back tomorrow to reply to Saracen when I'm a bit more sober. My relevant and constructive advice now is: don't waste any more time with these chancers. Go multi-agent immediately. I think you have 4-5 months max to reel in a sucker before the the next massive downwave hits. Get the house sold, take the cash and run.

[Nick]

Hi Rave... the thing about the housing market is that it's like Einstein's theory... it's all relative.

To anyone outside the market, prices are up and down etc.

To anyone in the market and not in negative equity, what you buy or sell for and what you get is actually fairly stable. If I sold my house for 10K less than I paid, I'd be buying at 10K less too, as other houses will be 10k less.

If the prices drop more, I sell for less and buy for less.

Same if they go up.

The ONLY time it makes a difference is if I drop out of the market for a while. Sell now, rent for a bit and then buy when the next slump you say is coming actually gets here.

But selling up now and buying, expecting a slump to come isn't actually such a good idea unless we have a fair bit of equity in our house, so we don't end up in negative equity once we've moved.

But even then, if we did slip into negative equity, right now is the time to be in it. Interest rates are rock bottom, so a mortgage costs less, especially mine which is a .49% over BoE rates... so I'm paying 0.99% right now.

And again, negative equity is only an issue if a) you have over-stretched yourself on the mortgage or b) you need to move.

I know a fair few people who are in negative equity, but not bothered as they're not going anywhere and their mortgage payments have dropped like mine have.

My only worry is that house prices down south are more volatile, so fluctuate more than up north... so this 12 weeks of dicking about basically means I may not be able to get as much for my money as 3 months ago.

Price have dropped up here but not by as much... but they won't creep back up again as quickly, which is the main issue.

Ahh well...

[Kumagoro]

I agree with a lot of what rave has said, if you look at the nationwide average house index
all previous crashes since around 1970 have been roughly 50% falls.

So far its playing out quite similarly to last time with the dead cat bounce around this time too.
The bottom should therefore be about 2012.

I think that the real trouble for people will come when interest rates start going up. I have read
that most people have 2 year fixed mortgages so many will end up in trouble if the interest rates go up.
Even if they come off after only a small rise they may not be able to get a fixed one and
have no choice but to have a tracker which will go up and up.

How high an interest rate can you practically afford?

[Funkstar]

I'm with Nick on this. Sorry Rave

I've just sold my place for about 15% more than I thought I would get for it. I think it set a new precident for one bedroom flat prices in my area. Granted I think I payed top rate for the new place, and my mortgage is significantly higher than it was previously, but at Nick said, now is the time to be in that position. By the time interest rates are moderate, that regular monthly payment won't be nearly as painfull.

[schmunk]

my mortgage is significantly higher than it was previously, but at Nick said, now is the time to be in that position. By the time interest rates are moderate, that regular monthly payment won't be nearly as painfull.

You hope.

How far do interest rates need to go up before you can't afford your interest-only payment?*





*this is rhetorical - I'm not expecting an accurate answer.

[Funkstar]

You hope.

How far do interest rates need to go up before you can't afford your interest-only payment?

Well it's not interest only (i don't think those martgages exist any more). I have no idea what it would need to go to, probably about 10% or so though

[TheAnimus]

I think he is refering to the Interest Only component, of the Intrest and Repayment part of your mortgage.

The thing Rave probably dosen't understand is that plenty of people are much better off than they where before, i've got about an extra £200 a month at the moment. Its quite nice really.

The trick is can you afford the mortgage, for most people a property isn't an investment, it certainly shouldn't be your only savings (eggs one basket n all). If yes, whats the problem, does it matter than your flat is worth more or less? Your pegged so that you will always be able to afford that place, and if prices surge up, your not quite so far disconnected as you would of otherwise been.

The other thing is Rave, a mirror image of my flat has just sold for more than i paid 2 years ago + risk free rate. Prices haven't fallen here in zone 4 london it would seam!

[schmunk]

I think he is refering to the Interest Only component, of the Intrest and Repayment part of your mortgage.

[Nick]

Sorry to resurrect an old thread, but I thought you lot might like this... despite sacking off my awful estate agents, they are still marketing my house and have just called me, prompting me to send the email below:

From: Nick Haywood [HEXUS.tv]
Sent: 29 September 2009 18:43
To: 'kennyb@burchelledwards.com'
Subject: FW: Is poor customer service led from the top?

Hi Kenny,

Please note this a forward of my original mail sent to you back in July.

Can I just say how utterly delighted I am that Burchell Edwards in Mansfield are still representing us. I was even more delighted to recently receive a phone call from them instructing me to drop the price of my house by up to £40,000 to stand a chance of selling.

Of course, I did not wish to undermine your good self by doing your job for you and telling them I’d sacked the whole sorry lot of you, so I let your ‘salesman’, (a true misnomer), have his say and then politely ended the call.

Ken, (can I call you Ken? What about ‘The Big K’, is that ok, K? Maybe just ‘K’?... or perhaps not..), whilst I appreciate the verve and proactivity displayed by your team in taking just 6 months to come up with the genius marketing plan of dropping our price by 40K, I have to wonder if you at all realise that with me having sacked you I won’t be paying a dime over should a miracle happen and some severely determined soul eventually prise our details out of your staff’s hands and buy our house...

So, just so we really are as crystal clear on this as I can possibly, possibly be:

YOU ARE SACKED!

To put a fine point on it; you are binned, terminated, let go, your services are no longer needed, your position is redundant, you have your walking orders, the door is open for you to pass through, you are doing the Spanish (look that one up like I did), you are fired, dismissed, discharged, given the axe, got the boot, your job is in the can, you’ve been dropped, you are ejector-ineffector (urban dictionary for that one), expelled, given the bum's rush, you have your marching orders, you’ve got your notice, this is your pink slip, your walking papers, you have been kicked out and laid off.

Are we clear?

Once again, and as always, yours in eternal hope that even though Burchell Edwards has managed to FAIL at being SACKED, you lot finally get the message,

Thanks,

Nick


From: Nick Haywood [HEXUS.tv]
Sent: 18 July 2009 12:17
To: 'kennyb@burchelledwards.com'
Subject: Is poor customer service led from the top?

Hi Kenny,

I’m not surprised to see that despite my returning your call twice now, I have yet to receive any form of contact back in sorting out the issues I have with the Mansfield branch of Burchell Edwards.

In fact, I am incensed that the ONLY contact I have had with your staff, that was even mildly proactive, was to ask me to drop the asking price of the house by £10,000! This was just four days after the brochure was finally produced and ten days after my initial complaint.

Of course, the excuse for this was that the property had been on the market for some while with little or no interest.

This makes me livid.

As the mass of evidence I have here clearly proves, the reason we have had no interest is because your staff failed at every stage to effectively market our property.

So it is with absolutely no regret that I am discontinuing our contract with you with immediate effect.

Should you mistakenly feel that this is in anyway unfair, I would ask you to check out the contract we signed, which will clearly shows that your company have breached it practically from day one.

I understand that there is usually a two week notice period but let’s be honest, given your staff have done less than the absolute minimum since the 22nd of March, SEVENTEEN weeks ago, how would I be able to tell if you were representing us or not?

So, that’s us clear of you and moving onto an estate agent who shouldn’t find it hard to better the service we’ve had from you... let’s face it, short of arson, they’d have to go some to be worse than your lot.

In closing off this arrangement, I would like your staff at the Mansfield branch to return, or provide proof of destroying, all details that we have provided for the purpose of the sale.

Further, I require you to now send, by Recorded Post, our HIP report and any other details produced for the purpose of sale, excluding your own marketing material.

Though it goes without saying, I suppose I had better make it clear that we have no intention of using Burchell Edwards legal services or any other services that you may provide.

I would like our details removed from any databases with these other branches of your company.

Kind regards,

Nick Haywood

[Knoxville]

It's very subtle but I think maybe they'll get the message this time

[[GSV]Trig]

Really, I woudlnt be suprised if they didnt get the message...

[TAKTAK]

I like the use of internetz language in the email

fail at being sacked, etc

[SammEl]

I know they are being a real bad business etc, but even with someone like me (one of the craziest people you'll meet if you annoy me, ha), I wouldn't go down that route, you sound child like in the email, and you honestly put yourself like your head is firmly up your own arse.

Should of kept it cool, and said the same things.

No disrespect or anything, but you do...

And by it, they will just laugh at you, because at the end of they day, you haven't gained anything from them.

[M0nkeyb0Y]

And by it, they will just laugh at you, because at the end of they day, you haven't gained anything from them.

Maybe not, but I imagine he felt a little better after writing it