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Debate House Prices
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House prices - the truth
Comments
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And I think you`ll find that in most cases, what people are prepared to pay for a house is based pretty well on the maximum they can borrow for it (+ any deposit). I admit I can`t back this up with any evidence, but I think that I make a valid point.
the max OH and I are prepared to pay is a lot less than the max we could borrow plus a deposit!...much enquiry having been made concerning a gentleman, who had quitted a company where Johnson was, and no information being obtained; at last Johnson observed, that 'he did not care to speak ill of any man behind his back, but he believed the gentleman was an attorney'.0 -
neverdespairgirl wrote: »the max OH and I are prepared to pay is a lot less than the max we could borrow plus a deposit!
Probably because you can afford the sort of property you want for less than your borrowing max. When we 1st, 2nd and 3rd bought we maxed what we could take because of the property we wanted to buy. For our last move we wouldn't have thought of maxing - a combination of increased income increasing the max excessively and enough equity to afford what we wanted without maxing out.I'm a Forum Ambassador on the housing, mortgages & student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.0 -
And I think you`ll find that in most cases, what people are prepared to pay for a house is based pretty well on the maximum they can borrow for it (+ any deposit). I admit I can`t back this up with any evidence, but I think that I make a valid point.
I reckon people will have an idea on what their deposit + maximum borrowing figure is, then look through property ads to see what they can buy. Or they`ll have an idea what they want to buy, then see if their deposit + borrowing figure will cover it.
I completely agree that this goes on with some cases, and obviously there's a huge section of this forum that assumes that the general public are debt-hungry morons and that this is the norm for absolutely everyone. I'm not so sure this is true.
We've just bought a house (which we'll be happy in for years and years) and the mortgage was 1.9x our wages at the time we purchased. Our friends have just bought for cash as, unfortunately, one has lost their parents recently and they had built up about £50k in their last house through HPI. Another friend is planning to buy with his girlfriend in Leicestershire and refuses to pay stupid money but has identified a budget of £130,000 (they probably earn about £50,000 between them) which they're happy with for their first house. Of course, I have a few friends that also fit your description and ares strecthing themselves as far as they can, but as house prices generally rise over time they'll probably end up winners in the long term. We're all in our late twenties by the way.
People on this forum know that I think house prices are probably overheated and I think they'll probably fall (although not by much, and I don't really have any confidence of my predictions). The one thing I always disagree with on this forum is that the public are all stupid, poor, idiots who are buying houses at 7x their income and lying about their income. This happens of course, but most people are pretty sensible and getting on just fine. IMHO.0 -
If you believe that houses can be over or undervalued you must believe there is a "correct" value. How is that determined? How do you recognise it when you see it? Or is it just something you just know?
House prices have got to be measured by how many people are able to buy it.
If there is a surplus of buyers the prices rise as we have seen the last couple of decades because of easy toget credit.
If there is more supply and few people able to afford that supply then prices have to come down.
This is one way to measure if houses are over or undervalued.
At the moment the is increasing supply coming to market and on top of that very few people able to buy until prices come down a long way.0 -
At the moment the is increasing supply coming to market and on top of that very few people able to buy until prices come down a long way.
The key thing is 'At the moment'.
Moment change however and it's quite plausable that supply could become restricted again if sellers decide not to sell in a falling market.
We've had a turbulent couple of months with the election and the emergency budget.
It will be interesting to see how the next few months pan out.:wall:
What we've got here is....... failure to communicate.
Some men you just can't reach.
:wall:0 -
Why would people not try to sell if they know prices are in a long term decline?0
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Why would people not try to sell if they know prices are in a long term decline?
I wouldn`t, because I still need somewhere to live. If I`m thinking of moving to a slightly better area, or better house, I`d wait.
If I knew prices were going to fall by 25% over 3 years, I probably wait about 2.5 years, then move.
People with more than one property (as investments) might think differently.30 Year Challenge : To be 30 years older. Equity : Don't know, don't care much. Savings : That's asking for ridicule.0 -
Why would people not try to sell if they know prices are in a long term decline?
Depends how you define long term.
Long term for me, history show that house prices only increase.
History also shows that over a short term period house prices can lower.
Indeed, on a UK average I recall the correction of the 90's lasted 6 years, however I have also shown that there were areas that fully recovered within one year.
So how do you know how long and by how much any specific area will be impacted.
Certainly over the lifetime of the average morgage (25 years), history also shows that house prices have always increased, never decreased.:wall:
What we've got here is....... failure to communicate.
Some men you just can't reach.
:wall:0 -
Probably because you can afford the sort of property you want for less than your borrowing max.
Not entirely. We're prepared to "want" what we can afford without maxing out, too....much enquiry having been made concerning a gentleman, who had quitted a company where Johnson was, and no information being obtained; at last Johnson observed, that 'he did not care to speak ill of any man behind his back, but he believed the gentleman was an attorney'.0 -
Probably because you can afford the sort of property you want for less than your borrowing max. When we 1st, 2nd and 3rd bought we maxed what we could take because of the property we wanted to buy. For our last move we wouldn't have thought of maxing - a combination of increased income increasing the max excessively and enough equity to afford what we wanted without maxing out.
We've done the same, we maxed 1, 2 and now property 3 on IO loans to get up the housing ladder as fast as we could, and because I knew my salary would increase rapidly as I gained experience after leaving Uni. Property 4 will be bought for cash as it will be our retirement cottage.
In my view there is little to be gained in buying a property that is 'just adequate' in order to pat yourself on the back that you didnt max out your credit. All that happens is that you move more often and therefore spend more money on arranging mortgages, estate agent fees, stamp duty, etc. etc.0
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