House prices fell in May

[temi]

UK house prices dropped by 2.4% in May, according to a report by the Halifax, Britain's biggest mortgage lender.

Its looks property prices keep going down and down

[Paul Carcone]

House prices dropping is NOT a bad thing...even if you are a house-owner!

The only time that the fall in house-prices becomes something important, is when you are looking to leave the market altogether - i.e. if you are looking to sell up to retire abroad.

So why does this not really matter?

Well...a couple of reasons.

First, the WHOLE market will move and a drop in prices will be a GOOD thing when you are looking to upgrade to a bigger property.

Why?

It is likely that the more expensive houses are going to suffer a larger drop than smaller ones and, as such, the gap between your house value and the one you wish to move into will decrease. As such, it makes buying a larger hiuse more affordable. This is particularly so when people in more expensive houses are keener to sell their properties - so you might be able to snap up a bargain from someone desperate to sell!

Secondly, the market is cyclical and prices will go up and down over a period of time. As such, you just need to be careful abut when you chose to buy and sell properties

Of course, there are A LOT of factors to consider...but it's not all doom and gloom!

Paul Carcone

[temi]

Originally Posted by Paul Carcone

Of course, there are A LOT of factors to consider...but it's not all doom and gloom!

It depends on whose viewpoint you a looking at it from, if you are looking at it from the viewpoint of those who are beginning to fall into negative equity, its gloom

[Paul Carcone]

Again...negative equity is only important if you are looking to come out of the market any time soon. Given that the housing market, as with every other market, is cyclical, prices will pick up in due course and the negatie equity situation will reverse.

Negative equity is something that will always take place when people buy at the top of the "up" cycle...but the effects, in the LONG TERM, are purely psychological.

The main losers, of course, are multiple buy-to-let investors who are looking for a quick profit on an upward market. If you are in this bracket then you might feel the pinch and be restricted in your moves, but "normal" homeowners who have not overstretched themselves financially should not experience any problems in the long term.

Paul Carcone

[temi]

Paul,
The effect is not Psychological, its financial. For example if you bought a property for £200,000, now want to move, emigrate or whatever and you can only get £180,000 for your house, I would say you are £20,000 out of pocket, that is financial.

BTW pay, why not add your signature to your profile instead of pasting it into the body of your post?

Thanks

Originally Posted by Paul Carcone

Negative equity is something that will always take place when people buy at the top of the "up" cycle...but the effects, in the LONG TERM, are purely psychological.

[Jeddo]

I go along with you, temi. The psychological effects are only one aspect. While most people are in the housing market for the long term, their view of their 'investment' depends on their circumstances and intentions. If someone was able to release equity of £250k by selling up, think what that would buy in today's terms. Contrast this with £125k in 5 years' time, should the market suffer a 50% drop (entirely possible in some people's opinion). The fact that they need to live somewhere must of course be factored into the equation, but there are more options than simply buying back into the same market.

The silver lining IMO is that the bubble has finally burst and property values can once again return to more realistic levels. Let's face it, no one should ever have needed, wanted or been able to borrow 5 or 6 times their income.

[temi]

Jeddo,
The bubble has busted indeed and I am quite pleased about it. As I post this message, there was an item on the radio about mortgage lending last month being more than 50% less than same period last year, it is said this will make price come down even more.

Originally Posted by Jeddo

The silver lining IMO is that the bubble has finally burst and property values can once again return to more realistic levels. Let's face it, no one should ever have needed, wanted or been able to borrow 5 or 6 times their income.

[Tony]

The headline on the Evening Standard is the same. Mortgage lending down by 53%. Prices will go lower especially as unemploymnet rises with the economic downturn.

Tony

[gabriel]

Mortgage lending is down again. A report from the Bank of England says 24% fewer mortgages were agreed in May 08 than in April 08 and this is 64% down on the previous year. This makes 13 months in a row when mortgage approvals have fallen.

Hardly bodes well for the housing market.

[temi]

I just read this news at BBC online as well, I am quite pleased by the downward trend of house prices on the one hand, on the other hand I hope it does not crash completely.