Why as a homeowner trading up are property rises good for me

Graham_Devon

chucky wrote: »

only an idiot would tell you not to buy something now instead of buying it in 10 years time when it is more expensive. we have lots of those around here.

Did a poster ask a toughie that you didn't much care for?

treliac

HAMISH_MCTAVISH wrote: »

And those in negative equity, and anyone looking to upsize to only a moderately more expensive place with equity of less than 40% where they won't get a new mortgage at comparable rates, and anyone looking to take a sideways step with less than 40% equity and a non-portable mortgage, and anyone whose next move will be to leave an inheritance, etc, etc, etc.

False.

In the crash, the price of typical FTB properties fell significantly more than the price of typical 2TB properties.

The gap actually widened, instead of narrowing.

And in the recovery since early 2009, the price of FTB properties has actually risen more than 2TB properties, as julieq keeps pointing out.

So the gap has actually narrowed with rising prices.

Now granted, if you're looking to move from a 500K property to a 900K property, these things are irrelevant. But for the majority of FTB properties, people looking to move to the next step were disadvantaged by the crash, and have been helped by the recovery.

It may be a sad fact, but they're in negative equity because they bought at prices that were too high.

The selling, buying gap widens as prices increase and narrows as prices decrease. I've been there and through the whole process several times and I know what benefits and what disadvantages.

Pointing to narrow examples, probably in limited parts of the country, doesn't change that.

Generali

The_Fox wrote: »

But even those that do go into negative equity for example, IF they wre to get mortgages then it would be better for them to have a property crash as the costs would be far cheaper.

Am i missing something here

I think the bit you are missing is that if your loan is greater than the value of the house then generally you can't sell as the sale has to pay off the full value of the loan let alone provide a deposit for the new place.

A mortgage is a secured loan. The only way you could do this is if banks were providing 125% mortgages and we all saw how that turned out.....

HAMISH_MCTAVISH

The_Fox wrote: »

Sorry!!

I am sure it's not you Hamish, but i do not understand anything you have said, and now read it for the fourth time.

No problem.

I do understand that those in negative equity are not able to get the mortgages to move, and i realise such as the way the property market is rigged that many need house price inflation in order to get a deposit, perverse but thats the property market for you.

Correct. But it's not just negative equity.

Example 1:

If you used to have 25% equity, and prices fall 10%, you only have 15% equity.

Now you sell up and move. The mortgage is not portable (transferable) so you must take out a new one.

Your nice little 25% equity mortgage at base plus 2% goes out the window, and you have to get a 15% equity mortgage at base plus 5%.

So your mortgage costs increase by 3% per year, or 15% over a 5 year fix.

You'd have been better off without the 10% price falls....

Example 2:

You own a FTB newbuild flat, worth 100K.

You want to buy an older 2TB terrace, worth 140K.

Prices fall by 20% on the flat, but only 10% on the terrace. (very common in the crash)

You lose 20K on the flat, but only buy the terrace 14K cheaper.

You'd have been better off without the price falls.

But even those that do go into negative equity for example, IF they wre to get mortgages then it would be better for them to have a property crash as the costs would be far cheaper.

Am i missing something here

Just reality.....

The reality is that they can't get decent (if any) mortgages, and when they can they're more expensive, eliminating the gains from cheaper prices in most cases at the FTB level. Then you add in the difference in price falls between FTB properties and 2TB properties, and the crash was completely self defeating for most of these upsizers.

IF there was no mortgage rationing, IF there was no rate discrimination, and IF there was no difference in prices falls between different types of houses, then yes..... theoretically.... price falls make sense. But it simply didn't work out that way for most.

Eton_Rifle

Theoretically falling prices would be good for you but in practice it seems to result in less good houses coming on the market as everything just stops.
So although the next house up should be cheaper, actually finding it may be another matter altogether.

HAMISH_MCTAVISH

treliac wrote: »

The selling, buying gap widens as prices increase and narrows as prices decrease. I've been there and through the whole process several times and I know what benefits and what disadvantages.

Pointing to narrow examples, probably in limited parts of the country, doesn't change that.

Not limited parts of the country at all, widespread and very much the case as a national average.

FTB houses fell much more than 2TB houses in the crash, and rose more in the recovery.

It is an indisputable fact that the gap widened with falling prices in the crash, and narrowed with rising prices in the recovery in that segment of the market. We've had entire threads about it, with sourced data.....

As I said, not applicable for people selling and buying big expensive houses, but for most FTB-s it was absolutely the case.

Loughton_Monkey

I am looking to downsize in, say, 5 years time. Will be looking to release about 40% of the value. Hence, I definitely want prices to rise dramatically between now and when I downsize. And preferably lower rises on smaller houses....

After that, we will be in the house we will die in [assuming I don't go that marginally more mad and get put into a home]. Hence I don't give a Monkey's Cuss what happens after the downsizing. They can crash 80% for all I care. Macaque will be creaming himself, but my nieces and nephews will be spitting venom.

Can anyone get 'Jim' to fix that for me?

Running_Horse

whatawaste wrote: »

Can someone please try and explain to me why as a homeowner who is now looking to trade up why property prices falling would not be a good thing for me.....

Playing devil's advocate...

When we sold our grotty old terrace in 2007 things were booming in a confident market. It meant there was competition among buyers and we got full asking price on day one. Although it meant we paid full price for our dream home, it has held its value better than the place we sold. Houses in our old road now sit on the market for months.

I would not want to be coordinating a complicated chain in the current market. What used to take weeks, now can take months or even years. That is not a plea for higher prices, just a quicker more confident market, so those who need to move can do so.

the_flying_pig

HAMISH_MCTAVISH wrote: »

[the usual !!!!!]

i know maths 'aint your strong point H but let's be clear:

1. for someone who's considering trading up to a second time pwoperdee that's initially double the price of his first time one, for pwoperdee inflation to be in his advantage it must be the case that the inflation on his first pwoperdee is at least double that on the second.


2. for someone who's considering trading up to a second time pwoperdee that's initially 1.5* the price of his first time one, for pwoperdee inflation to be in his advantage it must be the case that the inflation on his first pwoperdee is at least half as much again over that on the second.

3. for someone who's considering trading up to a second time pwoperdee that's initially double the price of his first time one, for pwoperdee deflation not to be in his advantage it must be the case that the deflation on his first pwoperdee is at least double that on the second.

[etc]

As a matter of absolute fact there is no magic identity which dictates that conditions 1-3 will [as you perhaps imply] be satisfied more often than not.

Indeed, one of the favourite mantras of the pwoperdee rampers on here and elsewhere is that detached/otherwise desirable pwoperdee tends to inflate quicker than others [i.e. that 1-2 will rarely be true].

HAMISH_MCTAVISH

the_flying_pig wrote: »

1. for someone who's considering trading up to a second time pwoperdee that's initially double the price of his first time one,

2. for someone who's considering trading up to a second time pwoperdee that's initially 1.5* the price of his first time one,

3. for someone who's considering trading up to a second time pwoperdee that's initially double the price of his first time one,

Yes, I know reading comprehension isn't your strong point Piggy, but I already stated for someone trading up to a house double or so the first one it's not a factor.

Most FTB-s in most areas simply don't though.

The more common move by far would be from a 100K flat to a 140K terrace, for example. Very few people move from a 100K flat to a 300K detached.

And as I noted, the price of entry level properties fell on average far more than the price of second tier properties. Plus of course the difference in mortgage rates for anyone with less than 40% equity. Between the two, it's very much the case that few people at that level of housing benefited from the crash.