Is It A Good Time To Buy?

GDB2222

pickledpink wrote: »

We all know they're going to go back up again - and we all know it would be IMPOSSIBLE for them to drop down to the levels some of you losers are hoping for!

Eventually, house prices will go up again. I think everybody agrees with that, assuming we have some inflation. The question is when that will happen, and how far they will dip down in the meantime?

Currently, the average home costs 5.25x average earnings. (Source: http://www.hbosplc.com/economy/includes/07_08_08HousePriceIndexJuly2008.doc)

The long-run average is around 3.5x average earnings. For prices to get back to that 3.5 x multiple would require a further fall from today's levels of around 33%. (That's because 5.25 less 33% = 3.5)

So, a 30% drop in prices is very possible, as all that will do is bring prices back to their long-term average multiple of earnings. I really can't see why that is impossible or implausible. Sorry.

Chris2685

Jumping_Bean wrote: »

Where on the graph have prices ever dropped 10% or more and then "shot back up"?

Sorry, I maybe worded my previous post a bit too hastily.. It won't shoot back up straight after the crash, but what I meant was that when credit becomes more freely available again house prices probably will shoot up, because people will have the (maybe deluded) ability to pay more as they will have better access to borrow more money... Unless the future learns from this crash, and limits the credit forever, which is unlikely in a competitive free market...

Jumping_Bean wrote: »

That's a good point. It seems to me that the situation boils down to 2 groups of people:

1) Those who must have the house they want right now at whatever cost. Most of these (First time buyers anyway) can't actually afford to buy. Hence the need for stupid salary multiple mortgages. IMO these are the people who are usually in lot's of other debt for the other things they couldn't wait for, but this is just my opinion.

2) Those who are prepared to wait a while for prices to become more reasonable.

Just depends on how impatient you are.

This is true, the trouble is, most of those people in group 1 have been in group 2 for so long that now that they (we) are seeing that we can afford property all of a sudden, it is very hard to resist jumping onto the ship whether it sinks or not!

Jumping_Bean

Chris2685 wrote: »

This is true, the trouble is, most of those people in group 1 have been in group 2 for so long that now that they (we) are seeing that we can afford property all of a sudden, it is very hard to resist jumping onto the ship whether it sinks or not!

I really think a lot of group 1 are going to wish dearly they were in group 2 in a couple of years. Hindsight is a wonderful thing.

Daz1

Jumping_Bean wrote: »

That's a good point. It seems to me that the situation boils down to 2 groups of people:

1) Those who must have the house they want right now at whatever cost. Most of these (First time buyers anyway) can't actually afford to buy. Hence the need for stupid salary multiple mortgages. IMO these are the people who are usually in lot's of other debt for the other things they couldn't wait for, but this is just my opinion.

2) Those who are prepared to wait a while for prices to become more reasonable.

Just depends on how impatient you are.

Erm......how about a 3rd group? Those who can actually afford to buy their house who aren't in debt and who want to get a home of their own and aren't overly concerned about getting the last drop of discount from the market and are more concerned about having a place of their own

Daz1

If I recall some basic logic, prices are swayed in some way by what people are prepared to pay. As people are different, they will be prepared to pay different prices for the same item. Ever walked out of a shop without buying because you felt they were too expensive or hesitated to buy something cause you felt it just wasn't worth it? Well, the shops exist somehow and have to cater for customers. If everyone felt their items were too expensive or weren't worth it, they would close after day 1.

Its the same with houses. Some people feel the prices are too high and won't pay, others are comfortable paying the price as they feel they are getting value for money. Those that buy out of desperation or "at all costs" to get on the property ladder have not thought things through. This is true of all sectors. Take fashion. Some people can afford to have a new wardrobe every season with designer labels. Others refuse to buy new clothes all the time cause they feel its a rip-off. Neither of these groups are wrong. The group that has to have the latest fashion item and ploughs themselves into debt to get it when they really can't afford it is the group with the problem......not either of the other 2

mewbie_2

Tassotti wrote: »

No-one ever offers advice but just rant at people, and now this blip has occurred...

My opening rant was to let off steam, and I chose to post it in house prices so it was not targeted at an individual in the main house board. We're all made of stronger stuff in here. The point is that I have tried to offer advice, and in the main, it is pointless.

DD asks quite reasonably - why do I care? I think it is worrying that FTB's in particular are still stretching themselves and their parents in order to buy into this bubble. I don't lose sleep over it. As has been pointed out many times this is a money saving site, and informing those who amazingly don't know that it is a risky time to buy could be viewed as being completely in line with the purpose of the site.

The graph that some use to point out long term trend and prices always go up. Do we all see the same graph? I see a huge, ridiculous, frightening rise, out of all proportion to previous movements. To me, there is only one thing that happens next, and it looks as if it will be deeper and longer than anything else in history.

And finally the 'blip'. This can only come from the Black Knight, who has moved on from guarding bridges to working in finance. "It's only a blip", "I've had worse cuts shaving", etc.

Apologies for length of post - sometimes a pithy one liner just won't cut it.

Pobby

If credit becomes easier to obtain will people flood back into the market place? I don`t think so.

I think a lot of people will be spooked by falling prices, uncertain economic climate and, of course, the media hype has gone very rapidly in reverse.

MrMalkin

I'd just like to say, that it's terrible threads like this one that have made this particular sub-forum the worst on the boards. It was a thousand times better when the posters who seem to think that their ill-educated, ill-thought out and narrow-minded opinion matters to anyone at all were confined to a single thread.

Why the subject of house prices seems to bring out such vitriol from both sides, I really don't understand. It has had the unfortunate effect of making a potential helpful board be saturated with the sound of small-minded idiots crowing 'I told you so' and 'nuh-uh, I knew this was going to happen!'. Let me tell you something - you're all equally !!!!!!.

Some people come here for help and advice. We don't give a damn about your ego.

Pobby

MrMalkin, you must have been a long time lurker seeing as this is only your sixth post.

jamescredmond

MrMalkin wrote: »

I'd just like to say, that it's terrible threads like this one that have made this particular sub-forum the worst on the boards. It was a thousand times better when the posters who seem to think that their ill-educated, ill-thought out and narrow-minded opinion matters to anyone at all were confined to a single thread.

Why the subject of house prices seems to bring out such vitriol from both sides, I really don't understand. It has had the unfortunate effect of making a potential helpful board be saturated with the sound of small-minded idiots crowing 'I told you so' and 'nuh-uh, I knew this was going to happen!'. Let me tell you something - you're all equally !!!!!!.

Some people come here for help and advice. We don't give a damn about your ego.

you obviously weren't viewing 12 months ago, when things got really out of hand.

on the one side were the bulls, bawling out anyone who dared to suggest the market was about to fall. on the other were the bears, busy talking/willing the market down and reacting 'big time' to the bulls.

then there were the rest of us, who tried to make sense of it all.

it didn't take long for me to realise that all was not well on planet housing, along with just about everyone else.

i'm not the sharpest tool in the box, but then not quite the 'retard' you had in mind.