House prices....

tara747

x12yhp wrote: »

Yes, it is! But people seem so blind to reality and their minds so stuck on 'rent is lost money' that they were (and clearly, continue to be) willing to gamble financial armageddon instead of accepting a few more years of rent and saving.

I have heard arguments that this approach is useless because you cannot save. But if you cannot save whilst renting, then you almost certainly cannot afford a mortgage and all the incidentals which come with it.

So I am with you all the way!

Me too!

I have saved loads in the last few years, so has OH. In that time, our friends who bought have slid into negative equity and are stuck, many in tiny shoeboxes in rough areas that they are desperate to get rid of. They only bought to benefit from HPI and move on after 2-3 years. Now they're trapped.

While rent is less than mortgage interest payments on a comparable house AND house prices are falling, it makes infinite sense to rent.

I thank my lucky stars (and my common sense) that I did not follow their lead - and boy did they try to convince me to do so at the time! The phrases 'you can't lose', 'you'll miss the boat', 'house prices are never going to fall' and (my favourite) 'rent is dead money' were oft-heard during that time... they've been awfully quiet since then, but you don't hear me crowing over their misfortune because I'm not like that.

I think they thought they were trying to help me tbh, but luckily I had done my own research and ignored their 'advice'.

OCD

Saw this thread on the new posts page. Would not be one to comment on such a thread normally, preferring to stick to more practical/immediate topics, but pgcil1's comments just struck me as being rather intriguing

I think prices are still at 2005 levels. There are some stark examples of people still asking for peak prices - even when selling on the same street as more sensibly priced houses.

I've not heard someone say that the problem with the property market is that banks aren't willing to lend enough, without a healthy dose of sarcasm.

House prices could come down to a level that banks are willing to lend people, a more affordable level. Alternatively banks could lend people more than they can sensibly afford, in order to create and upward movement in house prices. For whose benefit? Which one seems more sensible?

pgilc1 wrote: »

Not going to argue anymore - Yes, there is a percentage of sellers who need to get real, but the other side of that is, that there a lot of buyers who need to either get real or accept they aren't going to own a house any time soon.

You are right, it basically comes down to which person, the buyer or seller, is more desperate.

Sellers may need to move due to a huge variety of reason, and may not have the luxury of staying put and waiting to achieve the price they think they "deserve". For example, unemployment, relocating to work, a change in family circumstances such as divorce will all make selling a requirement to be achieved quickly. Increasing bills and increasing mortgage payments may also put a strain on the seller.

Meanwhile, buyers have the freedom to be able to move quickly in response to changes in circumstances. Their deposits increase while prices drop and affordability increases. I think there is less pressure for the buyer. The seller has more to lose.

From my point of view, why rush to buy something that is likely to be more affordable a little further down the line? Why take a gamble on what will be a very expensive and risky purchase in a time of uncertainty, with reports of increased unemployment. If prices are rising only slightly now, when they are clearly being supported by low interest rates, what will happen when rates increase.

Sure, house prices MIGHT rise, MIGHT remain flat, or MIGHT fall - who knows? But why take the gamble of committing yourself to a mortgage for the next 20-30 years, spending your hard earned cash that you have to graft for to buy some low quality housing that could well be worth a fraction what you paid for it. You would be assigning yourself to a much lower quality of life for the best part of a lifetime - for what? Being able to paint a wall a different shade of magnolia? I'm happy with renting for now. I'll let my landlord pay for all the maintenance on this place, which could well be worth less than it is now come this time next year. Meanwhile my rent is lower than the interest I would pay on a mortgage.

Of course, whatever anyone says, no one knows what house prices will do, but I know I'm not in a rush, nor are most of my contemporaries.

You can't just keep lending more and more money to successive generations to keep prices rising. People should be rewarded for working hard, not for when they bought property (when they were born). I would feel bad if younger generations of hardworking people - like the doctors and nurses I hope will look after me - could not afford to buy a terraced two up two down, with both parents working, while I live it up in my 3 bed semi. It would be nice (although I understand, not necessary) for there to be a REALISTIC INCENTIVE for these people.

tara747

Well said OCD.

motorguy

tara747 wrote: »

But you *do* seem to care, that's the impression I get anyway.

Probably only from the perspective of what i've seen on the market for similar money, but then we're back into the what its advertised at and what it sells at are two different things scenario. Really, thats all.

tara747 wrote: »

How much did you pay for your first house and in what year?
How much did you pay for the house you were trying to sell and how high was the highest offer you received?

You can tell me to get lost of course

Also, you talk about the 'oh i'm simply NOT going to pay that for a house' attitude... but you say you're not prepared to 'give away' your house for peanuts'. Don't you think they're sort of similar attitudes?

I am genuinely interested in your views and this is a very interesting debate, so I hope you don't take offence at my questions.

How much did you pay for your first house and in what year?


£30K. 3 bed semi, brand new. 1988.

How much did you pay for the house you were trying to sell and how high was the highest offer you received?


The last house we had, bought for £130K in 2005. 4 bed detached, garage, brick driveway, new. Was told in March 2010 that we "need to put it on the market for £145K and we *might* get an offer within a year, but expect it to be low". Similar house next door on the market at £145K since then, no offers.

Also, you talk about the 'oh i'm simply NOT going to pay that for a house' attitude... but you say you're not prepared to 'give away' your house for peanuts'. Don't you think they're sort of similar attitudes?

Very much so, but playing devils advocate on here against some of the smug 'oh sellers will take what i jolly well decide to give them' approaches.

tara747

pgilc1 wrote: »

Probably only from the perspective of what i've seen on the market for similar money, but then we're back into the what its advertised at and what it sells at are two different things scenario. Really, thats all.



How much did you pay for your first house and in what year?


£30K. 3 bed semi, brand new. 1988.

How much did you pay for the house you were trying to sell and how high was the highest offer you received?


The last house we had, bought for £130K in 2005. 4 bed detached, garage, brick driveway, new. Was told in March 2010 that we "need to put it on the market for £145K and we *might* get an offer within a year, but expect it to be low". Similar house next door on the market at £145K since then, no offers.

Also, you talk about the 'oh i'm simply NOT going to pay that for a house' attitude... but you say you're not prepared to 'give away' your house for peanuts'. Don't you think they're sort of similar attitudes?

Very much so, but playing devils advocate on here against some of the smug 'oh sellers will take what i jolly well decide to give them' approaches.

Thanks for the reply. I'm going to be even more nosy and ask what your salary was in 1988 (you really can tell me to get lost if you want lol, just wondering if it was sensible in relation to your mortgage).

And how long do you intend keeping your first house for?

joefizz

Another one who usually lurks but felt like registering to post.

Ive followed this thread with interest as a friend of mine is an estate agent, not a high street estate agent but someone who deals in the entire aspects of the business side of it.
His comment to me was that the fundamentals have never changed and that the average house should be worth 4-4.5 times the average salary and lending anything else is just madness.
In his opinion the NI house bubble was always bound to burst. I own my house outright I bought it in 1995 and at the time it was 3.5 times the average salary and I was earning twice the average salary. At any stage my house is one of the 'average' ones often quoted. At the height next door was going for 250k, now they cant give them away at 130k (the 2005 value). If my friend is right it has a lot more to drop down to roughly 90k.
90k of course strangely works out at the final amount I would have paid for the house if Id gone full term on the mortgage.

I dont think thats much of a coincidence.

tara747

joefizz, I think you're right. In the last two crashes in England, even London prices have gone back to those fundamentals. Apart from the very exclusive areas of course (e.g. Kensington, Belgravia etc) - but those really are exceptions and unique to London. I don't see huge numbers of pop stars, directors of FTSE companies, Russian oligarchs and sheiks over here... :rolleyes:

Of course, there was no crash here in the 90s as the baseline average price was so low, so a lot of people really doubted that it could happen, and even now some think that it has bottomed out every quarter only to be proved wrong.

OCD

One thing I often wonder is whether those who bought houses when they were more sensible multiples of salary think younger generations should be denied the same opportunities in life with respect to obtaining a house to raise a family.

Sellers who refuse to lower their prices to more realistic levels:
In most cases, if sellers were to reduce prices to say 2005 levels, they would still have sold their house for significantly more than they paid for it. So why the reluctance to reduce the price? Obviously you need to consider the price of your subsequent house. However, if it is due to the thought of not achieving the price that is was once reported to be worth (at the peak of the market) then this would be bemusing, as this is fantasy money - only realised through a completed sale at that that price. Holding off reducing the price may be counterproductive. You may miss out on a an offer which could see you on the way to your next move, whatever your motivation and reducing the number of months you have to pay the mortgage on the property. Depending on the number of months (years?) your house doesn't sell for, this could be a considerable amount and of the order of the reduction required to attract an offer.

Then there is the consideration of whether prices are rising or falling. If prices start to come down this should also make sellers take into account the period of time it takes to sell. It puts more pressure on sellers than buyers.

As a buyer, if you see a house you like, for a price which is clearly too high it would seem sensible to wait in a falling market. The seller may accept a more sensible offer price. Alternatively they can leave the house on the market and the buyer can wait until the price drifts/jumps down (all to apparent if you use tools like property bee). If it sells, go for another similar house at a lower price at a later date.

x12yhp

It is also worth noting that, short of the people who sold just before the downturn, the ones who have done best since then are the ones who reduced most and soonest. The ones who have done worst are the ones who have waited and dropped a bit, waited and dropped a bit... and continue to do so. Some will have turned down offers which they would jump at, a couple of years on.

tara747

OCD wrote: »

One thing I often wonder is whether those who bought houses when they were more sensible multiples of salary think younger generations should be denied the same opportunities in life with respect to obtaining a house to raise a family.

.....

Then there is the consideration of whether prices are rising or falling. If prices start to come down this should also make sellers take into account the period of time it takes to sell. It puts more pressure on sellers than buyers.

As a buyer, if you see a house you like, for a price which is clearly too high it would seem sensible to wait in a falling market. The seller may accept a more sensible offer price. Alternatively they can leave the house on the market and the buyer can wait until the price drifts/jumps down (all to apparent if you use tools like property bee). If it sells, go for another similar house at a lower price at a later date.

Sound points and advice.

x12yhp wrote: »

It is also worth noting that, short of the people who sold just before the downturn, the ones who have done best since then are the ones who reduced most and soonest. The ones who have done worst are the ones who have waited and dropped a bit, waited and dropped a bit... and continue to do so. Some will have turned down offers which they would jump at, a couple of years on.

Indeed. One of my friends is in this category. Refused a decent offer on her first house in 2008 (the offer was £40K below the mythical 'peak' value she had her heart set on but £70K more than she paid for it in 2004, greedy mare), only to be dismayed at the continuing crash and further reduction in house prices. She rented it out and bought another house with her new husband (at 2008 prices), so she has lost out twice. And her tenant is a pain in the proverbial. She has learnt a harsh lesson.