Time to buy a house??

gozomark

according to Nationwide, average house price

2002 105,000
now 158,000

so would need 34% further fall to wipe out gains since 2002. However, there has been around 15% inflation since then, so for houses to be in real terms the same level as 2002 would need "only" a 22% fall from here - this is where my 25-35% further fall comes from

headache5678

With continued negative sentiment and TV / press coverage (e.g. Kirsty Allsop) suggesting a further 15-25% fall, this could well be a self-fulfilling prophesy.

In addition, the fundamentals look negative as already commented upon - what possible drivers are there to even maintain, let alone increase, prices in the next 2 years ?

earlgrey_3

I guess it's a welcome sign that at least someone out there not under pressure to buy would consider buying a house.

All the factors are completely different this time round so it's not the best guide but after the 89/90 crash it took 12 years for prices to return to previous levels after adjusting for inflation. The cause and the rise of BLT are quite different from the 90s but if the pattern does repeat itself then you've got plenty of time to get in.

Another very obvious difference then was that, possibly due to high inflation masking the fall, many of us without the problem of negative equity barely noticed the crash. It wasn't constantly talked about on every news programme and there wasn't the sheer panic there is this time round. Even though I sold a second home in 1990 I wasn't especially aware at the time of the lucky timing. The degree of shock this time could mean that confidence will take even longer to return. Why anyone should have been shocked is something else.

I was thinking of buying another home again a few years back but put it off because the market looked way overpriced. When prices started to fall I was secretly fairly pleased. It only later occurred to me that falling prices are as bad for buyers as for sellers. We might not be able to buy a second home for years due to the level of losses we could have. Prices were too high but prices in freefall are bad news for everyone - not least for first-time buyers.

Blah99

earlgrey wrote: »

Prices were too high but prices in freefall are bad news for everyone - not least for first-time buyers.

I'm not sure I agree with that. First time or no chain buyers are in prime position at the moment. They have at least 10 months to save for a deposit (and the sensible ones, having seen the crash coming/beginning) have been saving for the best part of this year. Another major bonus is that this is "free saving" - house prices are not rising at the same time as people are trying to gather a deposit, meaning that the deposit percentage requirement doesn't increase in absolute money terms month on month.

I saw this crash coming at the start of last year - I pulled out of the market (and pulled out of a purchase in progress at the time). Now I'm a no chain buyer and I'm sitting pretty, accumulating more money to increase my deposit, watching house prices fall and knowing that I'm in a position of negotiating strength when I come to buy a house - no chain buyers will be what restarts this market because they are very attractive to people looking to move on to their next house.

OfficeSpace

I'm off to view several houses next week as a first time buyer. Armed with my c10% deposit i can (amazingly) still have quite reasonable choice over mortgages. Plenty of houses for sale too. One in particular I'm going to view was on the market at £165k and is now down at £145k.. The owners needs to be sold by Christmas too. Big enough for me to live in quite some time and start a family in i suspect so i can take a longer-term view on the house.

earlgrey_3

Blah99 wrote: »

I'm not sure I agree with that.

I did specifically say prices in freefall are bad news for everyone and I do mean now rather than some indeterminate time in the future.

It's fine if prices stop falling once you've bought but if you buy within the next 10 months how confident are you they'll stop there? They sure won't if the 1990s pattern is repeated. I personally wouldn't want to buy a modest holiday home to find it's costing me £20K pa in depreciation alone. If many think like me, and I'd guess many second home buyers will, that's yet another factor that will continue to send prices south for some years.

When psices reach bottom the buyers then will be the most fortunate. Those who need to buy soon may be forced to take a hit year after year for some time.

earlgrey_3

OfficeSpace wrote: »

I'm off to view several houses next week as a first time buyer. Armed with my c10% deposit i can (amazingly) still have quite reasonable choice over mortgages. Plenty of houses for sale too. One in particular I'm going to view was on the market at £165k and is now down at £145k.. The owners needs to be sold by Christmas too. Big enough for me to live in quite some time and start a family in i suspect so i can take a longer-term view on the house.

The phrase in share-trading would be "never catch a falling knife".

I haven't a clue what current rents are but if you were taking a cold financial view you'd need to calculate the total cost of ownership, including both the cost of the mortgage and the future depreciation, and compare that with rental. Obviously everyone wants to own their own home so the costs aren't the only factor. Hope the house is just right for you, good luck.

odoon

I totally agree earl grey
Until we get prices to stop falling(first time buyers come back in the market)
to encourage people to buy now is madness.
I know young couples want their own homes,but to be in negative equity is
not the way to start family life.

£200,000 - 15% =£30,000 =a lot of rent.

peawack

Prices could fall another 30%. You would be crazy to buy for at least 3 years.

dwileflunker

I'd hold on as I think house prices will drop even lower and at a faster rate than you could recouperate with rent by buying now. Having said that if anyone really knew then we'd all be millionaires!