Brief thought

[andrewducker]

I wonder if falling house prices are bad for the economy in a way I haven't heard mentioned - because they put people off from moving somewhere for a new job, because they can't sell their property without losing money.

Free-flowing workers are good for an economy, surely having the better-off ones stuck in one place must be bad for it.

Comments

[interactiveleaf.livejournal.com]

If you haven't heard it mentioned, you're not following the same economic writers I am.

Part of the reason for the rising home prices in the first place was that the politicians need two disparate things: They want home ownership as opposed to rentals, and they want a mobile workforce. The ability to buy a house and sell it three years later for a profit was one of the answers to that conundrum.

[the-mendicant.livejournal.com]

i'm in two minds on this debate. From a personal point of view, I've been on the market for 3 1/2 years and the asking price has dropped £100,000. In that time I've been desperate to move several times and was seriosly looking at a relocation from Rutland to Nottingham to be closer to my job. I've now changed jobs to be nearer my house and don't want to move out of the area.
My location hasn't be a disincentive to me finding other work it just made for a nightmare commute.
I guess it depends why kind of a role one is looking for and how mobile your job is?

[naath.livejournal.com]

Except of course houses being cheaper means more people can afford to move to better-located/nicer/larger/whatever houses.

About 40% of people have mortgages (apparently, er, I lost the cite for that but I was looking it up because Lord whatshisface claiming the "majority" of people were benefiting from low interest rates). Clearly only some of them ever actually coughed up the huge house prices of recent years.

Moving house always costs money, but IMO you had a house and now you have a different house and you haven't "lost" any meaningful money. You still have the investment, if house prices go up later then you'll have all your imaginary money back; only attached to this new house now. And if prices are lower then the difference between "this house" and "that nicer house" is now a smaller sum; so you should be happy!

Of course some people are stuck in negative equity and would have very big problems if they tried to move, I don't have a figure for how many people that is though.

[octopoid-horror.livejournal.com]

I like the way that people (I'm not referring to you here, not these days anyway) often have this weird assumption that property has an intrinsic value and it should magically be exempt from all the disclaimers you see on financial products.

If someone buys it with a view to selling at some point, and talking about losing/gaining money then they're treating it as an investment and, as such, more people should think more about that and what it means. Especially since you're buying it with debt in most cases. I mean, would most financial advisers suggest that people buy FTSE stocks with money that they borrowed?

That's not saying that buying property is bad, but that people still sometimes seem to talk about property in a dangerous way, without realising that referring to a property market means something.

[stillcarl.livejournal.com]

But if all else is equal, (as in the prices are the same for the same quality house where you're moving to and they're falling at the same rate too), you'll be able to afford the same quality house as the one you're selling.

Falling prices hurt speculators (and those who borrow on their house), not those with just one house.

[don-fitch.livejournal.com]

Yes, buying a house means giving yet another a hostage to fortune -- you can't easily pick up and move to some place where jobs are temporarily more available. I happen to belong to an older generation that thinks of buying a house as being a facet of having a place to live and raise your family (if so inclined, which I wasn't), retire into, and eventually die In (not soon, thankyouverymuch). So I live in a modest residential suburb of Los Angeles (CA, USA), in a house that is (supposedly) worth more than seven times what I paid for it, and view with some bemusement the six neighbors (twice as many at any one time as I can remember in the past 50 years) who are now scrabbling to sell their houses.

On another hand, having some (albeit only potential) equity in a house strikes me as being better than having the nothing of people who rent their residence.

(The preview of this has a weird repetition that i hope will not appear in the actual posting.)

[danieldwilliam.livejournal.com]

There seems to be an acute issue in the US where 25% of households are in some form of negative equity (so I’ve been told). It’s not just that the nominal value of the asset has fallen and selling it locks in cash loses. The problem is that being sellable for less than the outstanding financing the asset can not be sold. This coupled with the increasing numbers of households with two incomes mean that labour mobility is reduced. This I think is made worse because negative equity is probably more common in depressed areas of the country.

This in turn is starving growing areas of the economy.

Consequently (at least in part) the US economy is not growing at rapidly as it usually does after a recession.

I’m not sure how this phenomenon affects the UK. Less so I think as we are smaller and therefore it’s easier to have a house in one part of the country and work somewhere else.