House price falls would be excellent for the economy

Jimmy_31

Cleaver wrote: »

You have your opinion Jimmy and that's fine - I hope you get a house some day for a price you feel happy with. I'd certainly like to see houses come down in price a bit so that FTBers can buy, but whether I think that will happen is a different story.

I have some issues with all this 'mugs who bought at peak' and 'getting conned by the banks' stuff you spout.

Most (not all, but most) homeowners buy a house using long term thinking. I've posted this on here before, but if I were a FTBer I'd use the following when thinking about whether I should buy a house:

• Do I have at least a 20% deposit for the house I want?
• Am I buying a house which seems good value? By that I mean, not my own definition of 'good value' ("pah, that house on for £200k is blatantly only worth £100k...". I mean a house that is similar to 2005/6 prices, or isn't priced at top whack, street record price.
• Can I get a mortgage for 4% / 5% fixed for five years or so?
• Is my mortgage repayment 35% or less than my monthly pay?
• Am I ready to see my house go up and down in value over the next decade? Am I ready to face interest rates at 8%?
• Am I ready to see further falls of maybe 10% or more and just be happy that I've bought a house I love, at a rate I can afford that I'm in for the long term? Will I be comfortable seeing my house fall in value?
• Do I really feel that I want to buy a place rather than renting one? Do I know why I want to buy rather than rent?

If you can do all these things you'll be fine. Doesn't matter whether you buy in 2003, 2005, 2007, 2009, 2011, 2013, 2015 or any other year. Sure, if you feel you can wait a year and get another £5k or £10k off a house then that's great, as your mortgage repayment will be less. But not really that much less. Wait 10 years and save half the deposit if you like. You gotta do what you feel is right for you.

But please stop all this 'bought at peak, conned by the banks' rubbish. The vast majority of people can afford their homes and have a long term view which will see them through just fine. Remember, most people who buy now have probably another two, three, four or even more property booms and busts to go through during the course of their ownership.

Yes i can understand what you are saying but for people to be paying over twice as much what housing cost before the boom then something has gone very wrong dont you think.
I am being totally truthful when i say that i know people who bought homes during the boom solely due to the fact that they were convinced they would be out priced forever, the banks, media and BTL landlords all played their part in this.
I have had a lot of people tell me ive got to look long term when buying a house (and i do in regards to how quick i can pay off the mortgage) but if the initial asking price is more than double what it was a few years previously then it doesnt matter how far ahead you look because you have had to initially pay over 50% extra for the house, so thats a lot of money that could have just been placed into savings that can be accessed instantly instead of paying down a bigger mortgage.

I may not be a fantastic economist but id much prefer my first step on the property ladder to involve me paying a pre boom price of a 100k than a boom price of 200k.

Maybe its just me but i dont see my home as some kind of investment or retirement plan, my house purchase will become my home and my savings will be for my retirement so id much rather be paying spare cash into my savings than paying a bigger mortgage.

DervProf

Jimmy_31 wrote: »

Maybe its just me but i dont see my home as some kind of investment or retirement plan, my house purchase will become my home and my savings will be for my retirement so id much rather be paying spare cash into my savings than paying a bigger mortgage.

I like your way of thinking (probably because that's exactly my thinking).

All the best with your plan. I think it has worked out OK for me (so far), and hope it does for you also.

Jimmy_31

DervProf wrote: »

I like your way of thinking (probably because that's exactly my thinking).

All the best with your plan. I think it has worked out OK for me (so far), and hope it does for you also.

Glad to hear its working for you Derv and fingers crossed all goes to plan for me, so far so good at the moment.

jay213

Cleaver wrote: »

You have your opinion Jimmy and that's fine - I hope you get a house some day for a price you feel happy with. I'd certainly like to see houses come down in price a bit so that FTBers can buy, but whether I think that will happen is a different story.

I have some issues with all this 'mugs who bought at peak' and 'getting conned by the banks' stuff you spout.

Most (not all, but most) homeowners buy a house using long term thinking. I've posted this on here before, but if I were a FTBer I'd use the following when thinking about whether I should buy a house:

• Do I have at least a 20% deposit for the house I want?
• Am I buying a house which seems good value? By that I mean, not my own definition of 'good value' ("pah, that house on for £200k is blatantly only worth £100k...". I mean a house that is similar to 2005/6 prices, or isn't priced at top whack, street record price.
• Can I get a mortgage for 4% / 5% fixed for five years or so?
• Is my mortgage repayment 35% or less than my monthly pay?
• Am I ready to see my house go up and down in value over the next decade? Am I ready to face interest rates at 8%?
• Am I ready to see further falls of maybe 10% or more and just be happy that I've bought a house I love, at a rate I can afford that I'm in for the long term? Will I be comfortable seeing my house fall in value?
• Do I really feel that I want to buy a place rather than renting one? Do I know why I want to buy rather than rent?

If you can do all these things you'll be fine. Doesn't matter whether you buy in 2003, 2005, 2007, 2009, 2011, 2013, 2015 or any other year. Sure, if you feel you can wait a year and get another £5k or £10k off a house then that's great, as your mortgage repayment will be less. But not really that much less. Wait 10 years and save half the deposit if you like. You gotta do what you feel is right for you.

But please stop all this 'bought at peak, conned by the banks' rubbish. The vast majority of people can afford their homes and have a long term view which will see them through just fine. Remember, most people who buy now have probably another two, three, four or even more property booms and busts to go through during the course of their ownership.

If all (or most) homeowners thought like this when buying, then what would be the problem with house prices crashing?

I mean they could afford the house when they bought it, if it was sundenly worth 30% less, what would be the problem if they bought it for long term? there repayments will remain the same or within the boundaries they planned for when taking on the mortgage. Maybe a few might end up in NE but what does that matter if they planned in the first place to pay that amount and decided they could afford that amount for 25, 30 or 35 years.

I'm going to go uni so wont be buying anytime soon, but when I finish if houses are still as overvalued as they are I will be thinking of emigrating to another country, hopefully somewhere with cheaper housing and more sunshine and where I can end up with more disposable cash. I aint done my research on emigrating yet but its just an idea.

Cleaver

jay213 wrote: »

If all (or most) homeowners thought like this when buying, then what would be the problem with house prices crashing?

Apologies, but I'm not really sure how the two things are connected? My list above are the things I, as a FTBer would be considering if I were thinking about buying a house. Wouldn't matter if the house was £100k or £300, irrespective of boom or crash.

If you're asking me what would be the economic and social impact of a very severe house price correction then we can discuss that.

HAMISH_MCTAVISH

Cleaver wrote: »

.
If you're asking me what would be the economic and social impact of a very severe house price correction then we can discuss that.

Can I ask instead?

Cleaver

Jimmy_31 wrote: »

Yes i can understand what you are saying but for people to be paying over twice as much what housing cost before the boom then something has gone very wrong dont you think.

Dunno, it just is what it is. We bought our latest house in 2009 for just a bit less than double what it last sold for in 1999. That seems okay to me really. But them in not really bothered about comparing my house to what it last sold for, I'm more bothered about whether all the figures stacked up okay, and they did.

Jimmy31 wrote: »

I may not be a fantastic economist but id much prefer my first step on the property ladder to involve me paying a pre boom price of a 100k than a boom price of 200k.

Maybe its just me but i dont see my home as some kind of investment or retirement plan, my house purchase will become my home and my savings will be for my retirement so id much rather be paying spare cash into my savings than paying a bigger mortgage.

As I say, buy a house for whatever you feel comfortable with paying. I personally don't see a typical £200k house falling to £100k, so wouldn't be prepared to risk waiting. I think a lot of people agree with me, so that stops prices falling 50%.

I agree with you around your house not being bought as a retirement plan, mine isn't either.

Jimmy_31

jay213 wrote: »

If all (or most) homeowners thought like this when buying, then what would be the problem with house prices crashing?

I mean they could afford the house when they bought it, if it was sundenly worth 30% less, what would be the problem if they bought it for long term? there repayments will remain the same or within the boundaries they planned for when taking on the mortgage. Maybe a few might end up in NE but what does that matter if they planned in the first place to pay that amount and decided they could afford that amount for 25, 30 or 35 years.

I'm going to go uni so wont be buying anytime soon, but when I finish if houses are still as overvalued as they are I will be thinking of emigrating to another country, hopefully somewhere with cheaper housing and more sunshine and where I can end up with more disposable cash. I aint done my research on emigrating yet but its just an idea.

I think i understand what you are getting at, when i buy my first home id be perfectly happy for house prices to crash, im planning to pay off my mortgage as fast as possible so once thats done then i may be looking to move to another house so a crash would benefit me and many other people in a big way.

The reason why a lot of people dont want a crash is because they want house prices to keep rising so when they retire they can downsize and get a chunk of profit from the sale.

DervProf

Jimmy_31 wrote: »

The reason why a lot of people dont want a crash is because they want house prices to keep rising so when they retire they can downsize and get a chunk of profit from the sale.

True. And here's a thought. This "my house is my pension" idea seems to be a relatively recent thing, and seems to be quite a popular "plan". I am wondering how it will work when increasing numbers of people come to retirement and want to "cash in". Will there be enough takers, willing to pay enough to keep all these people in comfortable retirement ?

HAMISH_MCTAVISH

DervProf wrote: »

. Will there be enough takers, willing to pay enough to keep all these people in comfortable retirement ?

This generation coming through now is far bigger than my generation....

You'll be fighting over our houses. We'll have to fend off the buyers with sharp pointy sticks.