Is there any reason to be optimistic about house prices at the moment?

Midnight_Cowboy_2

Is there any reason to be optimistic about house prices at the moment? I'm not asking hypothetically, I'm considering the question in the light my real-life situation.

Months ago, I put my house on the market, the plan being that if I found a buyer I'd pocket the cash and wait for prices to fall. I have now just agreed a sale on my house. I took an offer, but not a ridiculous one (just 5% off), because there is a shortage of property for sale in my area at the moment - people have given up trying to sell and are letting instead. As a consequence of this, I ended up with a bidding war on my house (yes, you read that correctly). Now, logically, I see a load of reasons not to be optimistic about house prices, but also see two reasons to be optimistic:

1. shortage of stock driving prices up;
2. insanely low interest make mortgage repayments very good value (esp compared to renting)

I'm concerned that, by a miraculous combination of bad timing and sod's law, I may actual have sold at the lowest ebb and that prices could ease higher as summer approaches. I'm getting cold feet. Am I mad?

ILW

Your buyer will prpbably sell your house in six months and make a £50k profit.
Or they might not.
Who knows?
Glad to be of help.

Midnight_Cowboy_2

Of course, anything could happen! Even that nightmare scenario not because they've 'made' money out of me, but that my plan to buy again later would become a disaster...

QTPie

Midnight_Cowboy wrote: »

I'm concerned that, by a miraculous combination of bad timing and sod's law, I may actual have sold at the lowest ebb and that prices could ease higher as summer approaches. I'm getting cold feet. Am I mad?

Hi

Everything in life is a gamble and property is certainly something that you need to make your own mind up about... There will be LOTS of people (and experts) out there with varying conflicting advice: you have to way up the risks of everything and decide what is right for you in your situation.

We have just sold (well exchanged contracts) and got "late 2006" price for our house (but we live in a VERY popular city). I am JUST beginning to see a few properties in the range we are interested in (larger family homes) come on or be reduced to what is beginning to be more reason prices (ok their asking prices are still near 10% above late 2006 prices, but I am BEGINNING to think that we may negotiate to be able to buy in the market that we sold in). That is all I want really: we wanted to move anyway, we are not profiteering, we just want to take an affordable step up the property ladder (buying in the market that we sold in).

To make the best out of the situation, yes BOTH of us missed the boat (if we had both sold a year ago...). It depends what you want out of the situation and how patient and flexible you are.

Yes I worry a little (finding the next house - which I hope that we will keep for 20/30 years - is always worrying), but I feel that we will be in a good position to buy when the right place comes up at the right price. How easy it will be, I don't know until we start negotiating (we are just about to sign a rental contract for 6 months - so that gives us time to settle, assess things, look around, negotiate and proceed with a sale...).

Life is full of unknowns...

QT

daveb975

Midnight_Cowboy wrote: »

I'm concerned that, by a miraculous combination of bad timing and sod's law, I may actual have sold at the lowest ebb and that prices could ease higher as summer approaches. I'm getting cold feet. Am I mad?

Not mad at all - you are just concerned that you have made the right decision. Logically, house prices should carry on coming down with all of problems we have at the moment, but it is anyones guess how far and how quickly.

In terms of your specific concerns, I think that the lack of supply will only serve to maintain prices in some very small areas. If you want to move to a specific property type in a specific road then there may be a problem, but if you are looking in a relatively wide area then I would not worry.

I dont think that the current low mortgage rates will be doing too much to support prices for two reasons. Firstly, not many decent deals are around for new applicants - it is fine if you are already on an old base rate tracker, but otherwise you are likely to be offered a rate at 4%+.

Secondly, those on low rates may be able to afford to pay back a massive mortgage, but it is unlikely they would be able to get one. Banks are shying away from offering very high multiples of income and very high LTV ratios meaning most people will struggle to get a mortgage big anough to support current house prices, let alone driving them up again.

garthdp

The safest way is to think of a house as somewhere to live not a cash cow as it were.Those days are for good or bad behind us.Its a big risk and if you were planning on banking the money in the interim, you are not going to get a great deal of interest on it.

Midnight_Cowboy_2

Good point, although we had already planned to use the interest to pay the rent while we wait to see what happens. Agree about a house not being a cash cow. My problem is that there is a big price jump to get to the kind of house that we want, and I don't think we'll ever make it. However, if we sit out a year, we may just do it.

Midnight_Cowboy_2

QTPie wrote: »

Hi

That is all I want really: we wanted to move anyway, we are not profiteering, we just want to take an affordable step up the property ladder (buying in the market that we sold in).

To make the best out of the situation, yes BOTH of us missed the boat (if we had both sold a year ago...). It depends what you want out of the situation and how patient and flexible you are.

Yes I worry a little (finding the next house - which I hope that we will keep for 20/30 years - is always worrying), but I feel that we will be in a good position to buy when the right place comes up at the right price. How easy it will be, I don't know until we start negotiating (we are just about to sign a rental contract for 6 months - so that gives us time to settle, assess things, look around, negotiate and proceed with a sale...).

Life is full of unknowns...

QT

Yes we're not profiteering either, in the sense that the BTLers may have planned to do - we just want to take a step up that we couldn't otherwise afford.

Although you may say we all missed the boat, I think that house prices topped out because there were no buyers at those prices. Mid 2007 houses were coming onto the market at very high prices but there were no bidding wars, and buyers were having to accept offers. "Having sold a year ago" is a nice dream, but there were no buyers a year ago. I was trying to sell a flat then and it barely got a viewing in the 4 months it was on the market.

QTPie

Midnight_Cowboy wrote: »

Yes we're not profiteering either, in the sense that the BTLers may have planned to do - we just want to take a step up that we couldn't otherwise afford.

Although you may say we all missed the boat, I think that house prices topped out because there were no buyers at those prices. Mid 2007 houses were coming onto the market at very high prices but there were no bidding wars, and buyers were having to accept offers. "Having sold a year ago" is a nice dream, but there were no buyers a year ago. I was trying to sell a flat then and it barely got a viewing in the 4 months it was on the market.

If we sold a year ago, we most probably would have got another £40k for it... (an identical house sold for £40k more a year ago). Unfortunately we were not ready for the market then and I was concerned about a couple of others in our development being for sale at the same time... Oh well.

Really depends what you are looking for... We are looking for larger 4/5 bedroom family homes (ideally 3 receptions, large kitchen breakfast room, 5 bedrooms and a nice sized garden). Those are pretty much the "holy grail" of properties in this city (many of the houses that size have been converted into flats): so I expect us to have our work cut out trying to get one (a nice one comes up at a good price, then it will probably go quickly...).

I think it all depends on your expectations and fussiness.... At the moment there are several houses on the market that are the sort of things that we are looking for and our maximum budget (taking into aco!!!! stamp duty etc) is 93.5% of their current asking prices. So I have some confidence that we should be ok. IF you look at the sort of houses you are interested in in your area... how do their current asking prices compare with your maximum budget?

It is hard to say what exactly will happen. The warning is that if things worsen a lot more, then buyers will only be left with the dregs at the bottom of the barrell (that is what a surveyor friend told me happened in the depths of the last recession): anyone who doesn't have to sell, wont sell.

Who knows, asking prices could be slashed another 20% AND some good property could come onto the market. BUT just because the market has "dropped another 20%" it doesn't translate to all sectors of the property market in all areas of the country...

Who knows though.

QT

Midnight_Cowboy_2

I guess the value of my house has fallen by about 17% from the peak. You shouldn't worry about the 'lost' £40k, if you are trading up you have gained as a more expensive house will have lost more.

ModernSlave

There is no boat.

There is just a house, which you can enjoy living in, or an investment, which you can monetarise and worry about. If it sells for a lot then you'll have to pay a lot for another one. If it sells for a little then you'll pay a little for a replacement.