The Million Dollar Question (well - one of many out there at the moment!)

olbigead

Posting this really as a means of getting people's opinions. Don't expect anyone to have the right answer (and if they did they would be set to make lots of money in the future!)

As a potential FTB, who is sitting tight and building up a healthy deposit - what do people think would be the first indication to a stablising housing market? i.e. The decline of house prices are going to stop (or significantly slow) and/or mortgages will be at 'their best' (I appreciate the term 'their best' is extremely subjective, for me - as someone who is risk averse, I am speaking from a Fixed Term perspective).

Should I be looking out for the BoE not cutting, or indeed raising, the base rate and an indication that I need to get going? Or are there any other key indicators to keep an eye on? Or is it as simple as reading the news (my slight worry, with admittedly a selfish hat on, is at that everyone will react at that point and I might not get as good a deal as if I were to react quicker).

Any advice or opinions would be welcomed!!

beecher

I wouldn't advise becoming too worried about guessing the bottom of the market. I think if you see somewhere you're happy to live in for a good while, have a healthy deposit and can easily manage the mortgage it shouldn't matter too much if you buy it before average house prices are at their lowest.

In saying things are so uncertain at the moment that I certainly wouldn't be looking to buy now. I'd be keeping an eye on the rates available to FTB with your size of deposit and see how they go. Install property bee and see how quickly or otherwise properties are selling in the area you're interested in. And be aware that no-one knows for sure what's going to happen in the economy for the forseeable future.

olbigead

Thanks Beecher.

I'm at that stage at the moment where my deposit is between two key figures with regards to LTV. Currently at app 13% - and it seems like 20% will get me a lot more attractive Fixed Rates. Fingers crossed we'll hit that kind of figure in 6-9 months!

Radiantsoul

No-one knows is probably the honest answer.
Prices cannot contine to fall at the existing rate of around 2% per month indefinitely.
One way of viewing it would be to take the difference between buying and renting. So where I live you might find a £175k property being rented for £800 per month. At 4.5% a 25 year mortgage would cost £975 of which £660 is interest and £315 is capital repayment. If the price of the same property falls to £150k the mortgage is £835 with £564 being interest and £272 being principle. At the price level I suspect someone with relatively long term aspirations to stay in one place are likely to prefer to buy than rent.

To me the floor is quite closely tied in with rental markets as rental properties are a close substitute for mortgages. Now it is tree that owning your own house has costs that rental properties don't, however actually getting a landlord to sort stuff out is pretty stressful at times.

I am not sure rates will be cut by much again and probably not next month. So when credit begins to flow again it is probably a good time to get a mortgage.

If you are risk adverse then you will probably want to wait several quarters for prices to stabilise first. Prices will not shoot up for a while, although I suspect interest rates will do at some point in late 2010.

Conrad

If as you say you have a disposition to worry, you will probably miss the bottom, as by definition only those of a more sturdy nature will take the plunge at the darkest hour, ie; just before dawn.

I wouldn't let it get to you as being too money obsessed is a very bad traite longer term. I know an old buzzard that became such, and now his family have abandoned him and he has no one.

dunstonh

what do people think would be the first indication to a stablising housing market?

There is no one thing to look for and there is no way to tell for sure. Some things to look at though are:

1 - Property prices stopping their drops in the US. They are about 2 years ahead of us and they are still dropping there.
2 - Repossessions in the UK no longer rising (the figure on these is still very low - that is why the media are quoting percentage increases rather than the actual figures. e.g. if you have 2 and next year you have 4 thats a 100% increase. A 100% increase sounds much worse than 4.)
3 - unemployment showing signs of hitting its peak.

The last house price crash was over 4 years. So far this has been 18 months. No two crashes are alike but it is worth noting that this could be going on for a lot longer yet.

Conrad is right though. The best time is when the news is still bad and everyone is gloomy. Wait until things are looking up and you've missed it. He is also right about not letting it worry you. I would think his views, like mine, are because this is something that has happened before and will happen again. Been there, done that, here we go again. Its not new unless you are aged under 35 or have a bad memory or you have become addicted to news channels and awful modern reporting. You cant do anything about it and it doesnt matter what is said. Property prices and stockmarket etc will go up again and in the future it will go down again. You can expect at least 2 of these style events in a 25 year mortgage, maybe 3 or 4 (they average once every 7 years since 1956).

You should go for it when you know that a mortgage at 9% wouldnt cause you financial problems and if you can get 20-30% discount on the house price.

Radiantsoul

dunstonh wrote: »

The last house price crash was over 4 years. So far this has been 18 months. No two crashes are alike but it is worth noting that this could be going on for a lot longer yet.
.

This crash seems to be a speeded up version. Last time around the root causes was probably the Oct87 stock market fall. But according to Nationwide figures prices continued to rise until Q2 08(almost three years later). Prices then fell almost every quarter up until Q4 1995.

This time around prices began to fall in Q2 08 following the credit crunch emerging in Q3 07. The prices falls are much more dramatic, in part this is the lack of inflation in consumer prices, but also perhaps because there are enough people who can remember the last crash(the last time prices actually fell being in the 1950s). The fact that people are aware prices can and do fall will presumably alter behaviour.

paulsin

I'm in the same position as you. I've basically decided to buy and complete around Jun-Sept. I can't honestly see the prices falling much more after Sept. The thing is, you won;t time it at the bottom, as if vendors believe its hit the bottom, they will hold on longer for a sale. Time is when prices are still falling, but evidence of slowing and you are more likely to get a really good deal. If the market has the slightest feeling that house prices bottom out early 2010, then it will be very difficult to get a good deal Nov, Dec 2009 time.

The main thing is, keep looking, track prices in your area, get a short list of houses so you can act fast, and watch for big falls- remember the 15-30% figures quoted are mainly driven by repos prices and city centre flats. The average house may not have fallen as much, but there will be someone out there who wants a sale regardless of market. To illustrate this point:

3 bed semi with consv over the road up for 150k in June. Dropped to 130k now as he wants to more to Liverpool (I;m in hull).
Attached 2 bed semi, small garden 130k in June, still 130k. They clearly don;t need to move.

Use the property search websites and scan the areas your interested in. it will take a while at first to get through them all, but once you have, regular checks will help build up a good picture of the market in your area and aid you in finding a bargain at the right price.

olbigead

Thanks all for responses so far.

Tracking the property prices of a selection of 'suitable' properties is a good idea and Property Bee is a tool I had not heard of before - so that should make things a lot easier in that respect!

JayZed

You should buy as soon as Margaret Beckett says that there are signs of an upturn in the housing market.

Dan_1976

The year is 2012?