Everybody loves a good crisis. People tend to confabulate, conflate, deliberate and speculate as things develop and numerous points of view emerge.
The current house price crash is no different.
It is without doubt a crisis and there are a variety of opinions on the future of house prices.
The general feeling is that prices will continue to fall and there could still be quite a way to go before they bottom out.
But what if this isn’t the case?
The argument for a continued decline in prices is based on graphs of former house price crashes and graphs about the price to earnings ratio, both of which do suggest things don’t look good.
Coupled with the overall picture of the global economy it is fairly safe to say a robust recovery is still some way off but are there any factors that could prevent house prices from plummeting any further?
There has been recent news to suggest prices have crept up in some areas already but such ‘blips’ are common during an overall decline.
There is still a huge demand for houses but buyers have been and are still being stifled by uncertainty and a large proportion of UK homeowners are now either in negative equity, close to negative equity or stuck with a high ‘loan to value’ mortgage and unable to move.
But rates are low and according to recent news they could stay low for many years. http://www.guardian.co.uk/business/2009/aug/19/interest-rates-bank-money
So for people with low loan to value mortgages there is a very real opportunity to upsize and still have manageable monthly repayments.
A fortunate few new buyers with big enough deposits are able to shop around for bargains.
But will the numbers add up to enough prospective buys to prevent prices from falling?
What would happen if house prices do stop falling?
The affordability ratio had been skewed for several years toward the high end before the bubble burst and people were still clambering over each other to buy so is the affordability ratio really a determining factor in the direction of house prices?