FTB ONLY: The MSE Guide to reasons why putting off that purchase is a good idea.

Procrastinator333

First off, you should make up your own mind and your own decision. Take what people say with a pinch of salt and try to look at the data behind their posts and not their opinions.

You can believe a monkey like this:

https://forums.moneysavingexpert.com/discussion/2781564

Obviously a regular poster, but why would you believe someone who has to hide their already hidden ID. They won't even post under their real forum name. Considering their forum name hides their identity anyway, that is just pathetic.

Reasons not to buy today:

1. Renting is not dead money. Only people who failed gcse maths can make such a sweeping statement. What is the interest element of a mortgage if not dead money. It varies from location to location, but compare what an interest only mortgage would cost you vs renting the same property. For me, my rent is £1,100. The interest on the mortgage would be £1,300 ish. So I'm saving £200 a month by renting.

2. House prices are in a bubble. Only a complete muppet would hint that prices are in a bubble and yet tell you to ignore this as you will hold the asset for 25 years. If you think they are in a bubble, wait a while and get it after house prices drops. IT DOES MATTER if the price of your house is £30k cheaper next year. Typically you pay 2.5X the ticket price for a home, so that is £75k extra over the life if a mortgage, or £3k per year for that 25 year mortgage.

3. If you are a good tennant (pay on time) you get what you want. Once you have shown you are a good tennant, the landlord will go a long way to trying to keep you. Shelves, sky dish, new carpets, decorating etc etc. Just be realistic, do bits yourself, ask for improvements to be paid for by the landlord over time.

4. You get a minimum of 2 months notice. Statute law protects tennants. You get a min of 2 months from the date your rent is due. And if you dig your heels in, they probably can't throw you out for the best part of 6 months. But in reality, again, if you pay the rent, you won't be going anywhere.

5. Class divide my !!!. Any person who looks down on you for renting isn't worth knowing. You may not get so much credit if you are not a homeowner, but that is a good thing. IF you are saving for a deposit you shouldn't be using credit anyway.

6. Mewing. If you think mewing is a good idea, then this post is lost on you. Oh, and don't forget, prices have to go up for you to be able to MEW and that your mortgage costs will then increase.

7. Prices are falling. The 3 month averge for the 3 leading indexes now stand as follows:

Halifax: -0.9%
Nationwide: - 0.9%
Rightmove: -3.4%

Ignore the noise of -3.6% this month. With low transaction volumes, the mothly figures are useless. Halifax next month will almost certainly be positive. The 3 month average is the only one worth looking at.

8. Downward pressure. I'm not going to list them all, but try drawing up a list of all the factors that will push prices down, vs those that will push price up over the next 12 months. Decide for yourself if the falls will continue. My opinion is we will see a continued slow decline.

9. Interest rates and LTV. The low LTV buyer is quite fairly made to pay higher rates. Imo, the time is right to let these gradual falls play out while you rent to continue saving money in to your deposit pot and keep aimiing for that higher LTV value. Once you get to the 20% or maybe 15% mark, you gain access to much better rates. It is then a more difficult decision.

Imo, you really have nothing to loose by waiting for 6 months or maybe longer and everything to gain. There are of course other factors that over ride monetary considerations and fair enough. Just don't lie to yourself that it doesn't make any difference if your house is cheaper next year.

Ghoul - you are a tool.

carolt

As always, it's a personal decision, based on whether you value moving now over buying in at almost certainly cheaper prices a few months/a year or two down the line.

Cost is not the only factor to be taken into account when buying a house, but for those for whom it is an overriding factor would be wise to study the predictions for future house price direction before making a decision.

Currently, everyone from the IMF to Rightmove thinks prices are due for a fall.

Cleaver

Procrastinator333 wrote: »

1. Renting is not dead money. Only people who failed gcse maths can make such a sweeping statement. What is the interest element of a mortgage if not dead money. It varies from location to location, but compare what an interest only mortgage would cost you vs renting the same property. For me, my rent is £1,100. The interest on the mortgage would be £1,300 ish. So I'm saving £200 a month by renting.

I agree with Carol that chosing to rent or buy is a personal decision, and let's not do another 50-page extravaganza of forumlas and equations to work out renting vs buying.

But I just wanted to say that working this out so simplistically doesn't mean that you're 'saving' £200 by renting. There's a load of other variables, many of which are unseen and not calculable, that means that you might be 'saving' a lot more than £200 a month or you might be losing out to the tune of hundreds by not buying.

But as no one can work this out accurately, it isn't worth worrying about. If renting suits you for whatever reason then rent. Same for buying.

Procrastinator333

Cleaver wrote: »

I agree with Carol that chosing to rent or buy is a personal decision, and let's not do another 50-page extravaganza of forumlas and equations to work out renting vs buying.

But I just wanted to say that working this out so simplistically doesn't mean that you're 'saving' £200 by renting. There's a load of other variables, many of which are unseen and not calculable, that means that you might be 'saving' a lot more than £200 a month or you might be losing out to the tune of hundreds by not buying.

But as no one can work this out accurately, it isn't worth worrying about. If renting suits you for whatever reason then rent. Same for buying.

Quite right, you could layer many more items on the cost argument and there are loads of other reasons for buying vs renting. This was really one point just to show how even with the most simple of calculations, renting is far from dead money despite what many like to suggest.

1984ReturnsForReal_2

Good maths, good logic

You missed out one vital piece of information.

Some people want stability & their own home (a place where they belong).

Procrastinator333

1984ReturnsForReal wrote: »

Good maths, good logic

You missed out one vital piece of information.

Some people want stability & their own home (a place where they belong).

No I didn't. I noted there are plenty of other reasons for buying vs renting and fair enough. In a year or 2, "other factors" will over ride price for myself and whatever happens we will be buying.

Buy for any of those other reasons. But people shouldn't lie to themsleves and say that a £30k drop doesn't matter because they won't be moving.

If you don't have a family on the way or here and have few ties, I just don't see what the risk is in waiting 6, maybe 12 months to see how things go.

neas

carolt wrote: »

As always, it's a personal decision, based on whether you value moving now over buying in at almost certainly cheaper prices a few months/a year or two down the line.

Cost is not the only factor to be taken into account when buying a house, but for those for whom it is an overriding factor would be wise to study the predictions for future house price direction before making a decision.

Currently, everyone from the IMF to Rightmove thinks prices are due for a fall.

And during the last crash nobody spotted that house prices would recover... ergo the pundits are always wrong... they always bet on the trend... and never see the change... i.e. halifax's 3.x% drop.. nobody called that.

Also carolt you know personally that the 'wait' has been longer than 'a couple years'. For example if someone had bought in 2004/2005 vs someone who had waited in 2004/2005 would probably be at the same 'wealthiness point' at this time. Basically they'd of waited 7-8 years to buy vs someone who bought and then had the advantage of low interest rates to 'save' monthly the effective rent they would've been paying vs their mortgage interest... thereby savings them approximately 10,000 extra versus those who rented.

Hindsight is a wonderful thing and those who will have taken advantage the most of this house price crash will be those that:

Paid the least amount in mortgage payments over their respective periods


which could be broken down to the following 'best case':

1. Bought when IR were low and fixed through any 'interest rate rise' period

2. Bought when house prices were at the lowest point (but how do you know which is the lowest?)

Speaking Hypothetically that house prices do fall over next x amount of years (call it 4 years).

A. Hypothetically if I was a FTBer now and had no deposit... i wouldnt be able to afford to buy either way. so I'd aim to sav 15% deposit (maybe try for 25%) over 3-4 years as if i didnt i probably wouldn't be able to get mortgage when house prices bottormed

B. Hypothetically if I was a FTBER now with 25-35% deposit and could afford to fix and pay mortgage now, i'd use the 'hysteria' or 'falling market' syndrome to catch the remaining GOOD properties AND more importantly find one willing to immediately take a 10% drop in their price (thereby getting ahead of falls in exchange for owner 'getting rid' of their property).

Scenario A requires you to have significant 'extra earnings' above your rent and outgoings which as inflation rises will erode your 'saving potential' as well.

Scenario B is pretty much what i've done, baring the 10%, i negotiated 8% off, but fixed for 5 years.

And unfortunately nobody has a crystal ball, while yes house prices could fall 50%, over what period would that occur? 5 years? 10 years? Are you willing to hold off for that long? The fact of the matter is everyday Jo would prob hold off 1 year at most... because of that inate feeling of wanting something 'your own'.

I was a 'waiter' for 3 years and heres my experience of it:

1. The wait and overall fall was less and longer than everyone touted on this forum. Many individuals spotted 50% falls occuring over 2 years... end result = 10-5% drop over 3 years because when falling house prices affected economy (which they do) government stepped in and dropped interest rates.
2. Overall '5 year fixed' interest rates stayed pretty much the same (well dropped 1-1.5%) for a 33% deposit. So what will happen when IRs rise?
3. During that period my 'saving potential' was dropping as inflation was eroding my savings and my savings werent getting as much interest.
4. People will spout 50% falls but dont put a timeline on it... or they revise their figures... point being... nobody truly knows what house prices will do. For example nationwide could spout a small fall or a small rise next month in contradiction to halifax... so what would that mean? not alot.
5. while house prices fell and rose nationwide the ones in my area seemed to be fairly constant with mahybe 10% being knocked off. 10% isnt a great deal in my area but was helpful nonetheless.
6. When house prices fell around 8-10% people withdrew their properties from markets and when prices rose again people put them back on again.... maybe this will happen again. Certainly i know that say a 4 bedroom beautiful house in my area hasnt really dropped in price much.. because collectively the owners aren't forced to sell, have no mortgage and can just sit it out for years and years. Only houses i saw for sale were horrible repossessions that resembled shoe boxes or rabbit hutches.


So what to take from all my ramblings? Dont listen to the extremes on this forum.. those stating house prices will double/triple etc and also those who say house prices will half. Go for a middle ground and read up on things do your own sums and calculations and accept that nobody has a crystal ball.. if you buy today you could 'lose' 20% of value of property in a few years but longer term that would probably (note probably :O) be negated by rising house prices later. Also the flip side is... if you wait... house prices could fall, but only rubbish houses be on the market.. meaning you wait and wait and eventuayll house prices start to rise (you missed the bottom) and only when they've rose back up again will you see your 'house'. Or you wait and house prices fall a bit, rise a bit, essentially stagnate... but mortgage lending becomes constrained so that as a FTber you need 25% deposit.... which means unfortunately for you a much much longer wait.. by which time house prices could've started rising again.


Sum it up - Nobody has a crystal ball -both bears and bulls have been wrong on their predictions and ultimately its only speculation.

But if you want my GUESS - then house prices will fall between 10-20% stagnate around that point and then rise. This will be across a 10 year period... but other factors such as higher interest rates may make buying the house just as expensive.

Its why i bought and fixed on a 3.99% interest rate, my interest on mortgae is less than what my rent was on a 1 bed flat, but now have 3 bed house that i am working to make my own (painting, new kitchen, changing living room etc etc). I may 'lose' money on this purchase but the worst case being that so long as i have equity remaining and can sell I will benefit from my next purchase being cheaper too (but moreso due to percentage wise) meaning i'd save then anyways. So i need to make sure i prepare over 5 years to repay as much mortgage as possible to offset neg equity. my starting equity was 33% so i'd say work it to 40-50% and if house prices did fall 40% then i'd prob be ok . Its all about risk aversion .

Hope you all get your dream homes someday, and dont regret the choices you make as sometimes living in a house for 5 years as opposed to saving 20% off the price might be worth more to some people, i know i was fed up of renting.

carolt

Thanks, neas - good luck in your home and hope you're happy there. :beer:
What an exceptionally long post, though!

I think you're arguing with the wrong person,though - I was agreeing with you that price is only one of the factors and how crucial it is will vary from individual to individual.

That doesn't change the fact that prices are generally expected to fall over the next year or so, could be longer - depends on how the economy pans out, esp under the influence of cuts. Time will tell.

chucky

FTB ONLY: The MSE Guide to reasons why putting off that purchase is a good idea.

wouldn't you say that it depends on the size of the deposit for the FTBer?

Procrastinator333

chucky wrote: »

wouldn't you say that it depends on the size of the deposit for the FTBer?

Very true, but again, I just wanted to offer a thread title that was a polar opposite of Ghouly.

If you have 25% deposit you can get some very very low rates.

chucky

Procrastinator333 wrote: »

Very true, but again, I just wanted to offer a thread title that was a polar opposite of Ghouly.

If you have 25% deposit you can get some very very low rates.

agree - Ghouly is a nutcase and agree that if you can get a decent mortgage rate you can buy a property now and be ok.