There has been more bad news for the housing market, with problems in credit markets getting worse rather than better.
In the UK, Bradford & Bingley has needed a government buy out. This will make the government the second biggest mortgage lender. When the dust has settled the UK banking sector will be much more highly [...]
The Housing Market refers to the supply and demand for houses, usually in a particular country or region. A key element of the housing market is the average house prices and trend in house prices.(see: History of House prices)
The Housing Market includes the following features
Supply of housing – quantity of housing strock
Demand for housing
House prices
Rented [...]
The credit crunch shows no sign of abating as Banks such as Barclays continue to post dissappointing results.
With the UK economy forecast to slowdown and unemployment rise, there could be a rise in mortgage repossessions and more bad loans for banks to write off.
A look back at the last 12 months of the credit crisis.
With House prices falling and the number of transactions dropping very fast, pressure is building on the government to introduce policies to help the beleagured market. Strategies include:
Freezing stamp duty. Home buyers would only pay the stamp duty after a delay of several years or when they sell the house.
Income support for those paying mortgage [...]
It is difficult to predict interest rates. The bank of England are being pulled in two separate directions.
Firstly, there is the real threat of an impending recession, due to:
Declining house prices
Rising costs of fuel and energy reducing living standards
lower consumer confidence
Natural end of business cycle
With unemployment rising and growth slowing, normally, the Bank of England [...]
Defaults on mortgages in the UK are still relatively low. The number of mortgages in arrears by more than 3 months is 1.1% or 129,000 out of 11,000,000 mortgages. In 1995 (when statistics started), the % with arrears was 3.82%. This was due to the higher interest rates in the early 1990s
However, the number [...]
In the short term, various measures are needed to stabilise the UK housing market.
The most important criteria is regaining a sense of normalcy to mortgage markets. Due to credit crunch and fall in confidence, banks and mortgage lenders are becoming unwilling to lend mortgages unless backed by large deposits. It means that many would be [...]
Looking at the historical data for UK house prices, we can see how volatile UK house prices have been.
When forecasting house prices and the future of the housing market, there are several things to consider:
Number of new houses built
Number of houses unoccupied / unsold
Number of households. This depends on both population growth and demographic factors [...]
UK house prices have fallen significantly in the first 6 months of this year. It is the first major fall in annual house prices since the great crash of 1989 to 2004 (where prices fell 20%)
The driving force behind the falling house prices are the shortage of mortgages available, especially for first time buyers. Even [...]
The fall in house prices continues, despite the odd statistical anomaly.
Mortgage approvals have fallen to the lowest level on record. This is due to the credit crisis which has led to a drying up of mortgage funds. Many would be homeowners are simply unable to get a sufficiently large mortgage.
There are also signs of problems [...]
Amidst all the talk of falling house prices and a collapsing housing market. Rightmove reported an unexpected increase in house prices in April of 1.2%. This rise seems to defy the gloomy prediction of a house price collapse and as we have argued, house prices in the UK are not overvalued as many claim.
However, it [...]
With House prices falling, to what extent should the government intervene?
Benefits of Falling House prices
1. Increase the affordability of housing. Currently many first time buyers are unable to buy houses because house price to income ratios are very high. As house prices fall, people will be able to live cheaper; this increases living standards, especially [...]
Why The UK Housing Market Experiences Boom and Bust Economic Cycles
A boom and bust cycles refers to the rapid increase in prices, followed by a period of falling house prices. This has occured on numerous occasions in the UK housing market, most notably during and after Lawson boom of the late 80s
Reasons For Boom and [...]
If house prices fall significantly, they will not just leave homeowners with negative equity, they will also cause serious economic consequences for the wider economy.
These are some of the most important factors.
1. Negative Wealth Effect.
Homeowners will see their major asset (housing) decline in value. Some who bought recently will see negative equity (House is worth [...]