Are Falling House Prices A Good Or A Bad Thing?
http://news.bbc.co.uk/1/hi/business/7782…
“The head of Barclays bank has predicted that economic gloom will deepen, with property prices falling by up to 30%.”
Category: house prices
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gud
i blame immigrants.
Buy low, sell high. It’s the way our economy is designed.
For people trying to sell – Bad
For people buying – Good
Good for the buyer – bad for the seller.
It’s generally a bad thing.
Swings and roundabouts, the waves of life are all ups and downs
but we still swim to the far bank.
If you have investment properties or are wanting to sell a home falling house prices are a bad thing but if you are looking to buy your first home it is a good thing
Very bad for those who purchased when the prices were high. Good for those who sold and didn’t purchase when the prices were high.
Good for house buyers, bad for house owners who are planning to sell or used their house as an investment, especially bad for real estate agents and their companies, even worse for banks that provide mortgages.
Fine by me.
We sold a year ago just as the bottom started dropping out of the market, just managed to clear our mortgage (and only then because I’d sold my place when I moved in with the lady who is now Mrs Beastie and I dumped fifteen grand into the mortgage account) and are now renting while we save pending either a move to New Zealand or, if that falls through, getting a whopping big deposit on somewhere we would stay for years.
If you aren’t selling, or securing loans on it, the value of your house is meaningless.
I don’t really know. But if you’re not planning to sell your house then it doesn’t really matter surely. The issue will be mortgages when in negative equity perhaps. It’s not great for first time buyers either as they’ll still need huge deposits to get a mortgage unless the average house drops to about £60k.
Also, those with money may well buy up more houses when they get cheaper, meaning we may end in a situation where 10 per cent of the population own 100 per cent of the houses and we all have to rent.
Overall bad.
People who want to sell now won’t be getting the price of their house back, also their monthly payments will go up for whoever lent them the money to turn a profit.
People who buy now won’t necessarily be equipped to keep up with payments when the market recovers.
Happened to my parents, they bought their first house in the boom in the late 80’s when all the council houses were being sold, then when boom went bust they saw their mortgage bill rise by something like £100 a month.
What interests me is how not that long ago house prices were soaring and everyone was saying that people my age (I’m 20) would never own their own home, funny how quickly situations reverse isn’t it?
Why We Should Let Housing Prices Keep Falling
By Edward L. Glaeser
Edward L. Glaeser is an economist at Harvard.
Our current financial crisis stems ultimately from the large number of investors betting, unsuccessfully, on real estate. So, when real estate markets came tumbling down, Wall Street fell with them, putting the entire global economy at risk.
The connection between real estate and the current crisis has led a number of observers to argue that the government should try to do something to stop housing prices from falling further. A miraculous new boom in housing prices would enrich our troubled banks, and reduce the need for any explicit bailout. Some argue for large-scale credit market interventions that would make borrowing cheaper. Others think that bailing out troubled homeowners will stop the price decline. Extreme solutions include large-scale public purchases of housing or destroying large swaths of the housing stock.
There is a superficial attractiveness to policies that seem to promise an end to falling housing prices, but there are three reasons why these proposals don’t make much sense to me.
First, the government has no business trying to make housing less affordable to ordinary Americans. Over the past 10 years, areas like New York and San Francisco, which had always been expensive, became completely out of reach. According to the National Association of Realtors, the median housing price in San Francisco was over $800,000 in 2007, and has declined to a mere $685,000 in the second quarter of 2008. The real problem is not the current price decline, but the previous price explosion.
There is no reason to hope that middle-class Americans should pay more for any basic commodity, whether that commodity is coffee or oil or housing. Government should be fighting to reduce supply-side barriers and make housing cheaper, not trying to inflate prices artificially.
Second, most of these proposals seem likely to be expensive failures. The government just doesn’t have the tools to rewrite the laws of supply and demand. If the cost of building a home in Las Vegas is $150,000, and there are no restrictions on building, then all the credit policies or bailouts in the world aren’t going to permanently keep prices above $150,000.
Interest rates, and credit availability, do affect housing prices, but the impact is modest. The figure shows the time series of housing prices (according to the price index assembled by the Office of Federal Housing Enterprise Oversight) and the real 10-year interest rate, before the current downturn. Over the whole period, a 1 percent cut in the real rate is associated with a 3.3 percent increase in prices. Further interest rate reductions are unlikely to undo much of a 20 or 30 percent housing price decline; no credit market policies can keep housing prices above construction costs forever in areas where there are few legal or physical restrictions on building new houses, as in Phoenix and Atlanta.
Bad. A lot of people used there homes to release cash either as small loans or downsizing releasing large amounts of capital. If that cant happen then less money circulates.
And whats the point in house prices dropping when banks aren’t lending money.
I imagine the desperate will sell cheap or be auctioned so some bargains will be snapped up by the few who have available cash the rest would stay put and wait for the upturn.
So who will be selling thier house if they don’t need to.
The dependence on housing prices is a bad thing. It’s like an economy based on the price of used comic books.
We need to get back to an economy that is linked to actual production output, like the old manufacturing based economy we used to have.
Housing prices should be about three to four times buyers’ salaries, in a healthy and sustainable economy. Unfortunately, they’re still over eight times in many places. And with unemployment rising, there are less potential buyers. Houses are over priced, people can’t afford them.
The banks changed their lending policies about ten years ago, and that’s what got us into this mess.
It is a bad thing for people who end up in negative equity (the value of the house falls below the mortgage) if they need to sell.
It is a really good thing for first time buyers as it makes buying a home much more affordable, which in turn makes the housing market more buoyant.
I am in a really good position because my mortgage is less than half of the value of my home, so if I need to move house my house is worth less, but so is the house I am going to buy
ITS THE DOMINOES affect we need first time buyers
you see it works like this. a 1st time buyer buys a flat the peeps that sold the flat move up and buy a terraced house then them that sold the house move up and buy a semi and so on
So we need houses to drop low enough so people can start to buy again.
And when people start buying again houses will
go back up in price.
its all apart of the Economy
i hope you can see the Answer there
It’s bad because not only are prices falling but the lack of available credit to buy homes makes the situation worse. If you own a home and want to sell or refinance it is bad. There will be less equity in your home now and you wouldn’t get as big a loan and if you bought when prices were up and want to sell you will take a big hit. If you are able to buy a home right now, you should be excited – you will get a great home at a cheap price. Now the only question is can you get financing to complete the deal.
Your question is getting lots of mixed answers [good for buyers, bad for sellers], but I think a slightly different question is more relevant: “Are RAPIDLY falling house prices a good or a bad thing.” And here, the answer is that they are a disaster. It’s not that they are too low now, but that the rapid fall in prices is wrecking the credit and banking system and destabilizing the whole economy. Even perfectly legitimate, healthy businesses suddenly can’t get credit. The free market theory that supply and demand should come to *equilibrium* doesn’t seem to be happening.