Buy now while you still can

lynzpower

Alternative Title of thread - Sell now while you still can

F_T_Buyer

PoorDave wrote:

My feeling is that it's the many people around who say things like you last sentence that will correct the market back upwards as soon as it starts to fall.

As soon as a small fall occurs, surely more more can suddenly afford a house, thus increasing demand, and pushing prices back up. Surely people aren't saying "yeah, but i'd wait for the bottom of the trough before buying"?

Investors maybe. People buying to live surely not

This "soft landing" could happen. But in my opinion it has gone far too high. Look and listen to those trying to justify BTL, especially on this website, "it will go up in value so it's worth it". Look at the rent side, does it provide enough return for the risk? Nope.

So who is going to buy when it falls 5%? BTL still doesn't make sense. And those who bang on about "it goes up in value" won't buy, because it's not going up in value. It's just cycles...

If you believe this, why did prices fall so far during the last bust? It over shoots the fundermentals, then under shoots it.

PoorDave

You could be right, although my feeling is that there would be rate rises that weren't as big as the last big crash, so a less steep drop is possible.

I think a 5% price fall would attract people who were on the borderline of being able to afford what they wanted. They go from not being over the line, to finding themselves in the position to buy for the first time - the thing they've wanted for year remember, so i think they'd do it, although you might argue anyone paying enough attention to see a 5% drop and know they could afford to buy would be smart enough to wait a little longer

greencat_2

Important to remember that prices don't go down (or up) in a straight line. This is due to people rushing in because they think the bottom has been reached (or selling because they think the top has been).

During the early 90s there were a number of false dawns when experts said prices wouldn't go down anymore (and similarly in the 2000s another bunch of false dawns when people said they couldn't go up anymore).

Because houses are so much more expensive now (and therefore mortgages that much larger) - my guess is that it would take less of an interest rate rise for those with large mortgages to feel uncomfortable.

F_T_Buyer

Things are a lot worse now, we have much much more debt that in the 90s. If interest rates went up to 4.75% affordability will be the worst it has every been:

http://www.guardian.co.uk/uklatest/story/0,,-5960616,00.html

And this is on just interest payments. So we have the nearly the worst affordability at historically low interest rates. Could you imagine if rates got to 5% - which is widely predicted. What happens if they returned to the average of 6-7%.

This is why the media, financed by the EAs and banks, are going crazy with ultra bullish stories. Look how the BBC says rates 'may' stay at 4.5%:

http://news.bbc.co.uk/1/hi/business/5208366.stm

Then look at the Telegraph:

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/07/24/cnecon24.xml&menuId=242&sSheet=/money/2006/07/24/ixcity.html

There's a clear message from the BBC, 'don't worry, keep spending'.