This recession is turning into a much longer and deeper one than anyone expected which is becoming more visible to a wider range of people as time goes on.
Individual house sales are a fairly rare event for most people so we’re still seeing people putting houses on the market at prices based on a purchase price from a few years ago which, in many cases, was a higher price than the current market will support. That houses won’t sell at these prices is obvious but in many cases the owners simply can’t afford to sell them at the current prices so they add to the collection of “for sale” signs which in turn make things seem a little bit worse as their numbers build. As an example of how far away from the current prices these can be take the example of a house a few hundred yards from me which was bought at the peak of the market at around £300,000 whereas identical houses are now selling (slowly) for around £170,000. Had those people bought on an 80% mortgage they’d need house prices to rise another 40% from their current level just to cover the mortgage.
However, even when houses are priced at an appropriate level that still doesn’t mean that they’ll sell quickly as once a buyer is found and the house is taken off the market it’s quite likely to get the “for sale” sign back as buyers frequently can’t get mortgages: in one local case it took three buyers before reaching one who could get a mortgage.
Sadly all this means that people will be stuck in their houses potentially for decades if they can’t simply write off what could be a substantial loss.Copyright © 2004-2014 by Foreign Perspectives. All rights reserved.