Boom - bust - boom When didn't it ?

VH

I agree, I think FTBs have missed the boat in most areas now. Far better to save and then take advantage when the market drops. Prices can't stay high forever and all the money saved will be a whacking great amount off a smaller mortgage.

Anyone who jumps onto the ladder now is likely to lose out big time.

Spendless

Can someone explain this to me please?

If FTB are waiting for prices to drop how do you know at which point to buy? How do you know they won't continue to drop further?

If houses prices driop this year should people buy this year, what happens if house prices drop further next year and the year after? Or what if they drop next year and then start to go up again the year after?

How would you know at which point to buy?

nelly_2

Sod saving we've just book a week in Newyork in June, a week in Rome in summer and a 10 day carabean cruise and a week in vegas for our honey moon at christmas.

Sensible? no

fun? yeah baby

VH

Spendless wrote:

Can someone explain this to me please?

If FTB are waiting for prices to drop how do you know at which point to buy? How do you know they won't continue to drop further?

If houses prices driop this year should people buy this year, what happens if house prices drop further next year and the year after? Or what if they drop next year and then start to go up again the year after?

How would you know at which point to buy?

The only way you truly know when prices have hit rock bottom is when they start going up again. A good way to predict this is to check past prices in the area you are interested in. There will be a historical 'lowest level' at which prices will usually rebound. This is most likely the cheapest you will be able to get a house at.

There is of course no guarantee that prices will drop back to these levels but it's down to judgement. Most FTBs entering the market now will be among the first to get their houses repossessed if there are interest rate rises and a crash.

This is obvious but if you keep saving and then buy at the bottom with a large deposit, you will make a massive impact on your mortgage. If you buy at the top then your deposit will make only a tiny difference and your mortgage payments will be many times more expensive.

Spendless

Thanks it's not for me personally i was just interested.

I've been both sides of scale. I was in negative equity with my first house -probably within the first year of purchase.

I bought the house we now live in cheap about 6 months before prices began to soar.

deemy2004

Spendless wrote:

Can someone explain this to me please?

If FTB are waiting for prices to drop how do you know at which point to buy? How do you know they won't continue to drop further?

If houses prices driop this year should people buy this year, what happens if house prices drop further next year and the year after? Or what if they drop next year and then start to go up again the year after?

How would you know at which point to buy?

That is what drives the market - Fear and Greed.
On the way up everyones jumping onto the housing bull so as not to miss on the gains thus driving prices every higher

On the way down most will be fearful of buying thus ever driving prices lower, the more they fall the more fearful the potential buyers will get.

Until it reaches a point where people do not even think of buying houses for gain.... Now Thats WHEN the best time to buy will be

Statistically its usually about 3 years from the peak give or take a year so a 2 to 4 year band. In our case since we have had such a bull run, it is likely the bear run will also be long so it will probably extend to the 4th year from the peak. As ever the south will turn up first.

dougk_2

Being that prices started dropping from last summer in the south, and now it appears there have been small increases in the last month or so in the south - have we had our crash (of about 2%!)???

Plasticman

dougk wrote:

Being that prices started dropping from last summer in the south, and now it appears there have been small increases in the last month or so in the south - have we had our crash (of about 2%!)???

Personally I think there is still much further to drop. The drop that we've seen so far isn't enough to readjust. First time buyers still can't get on the housing ladder and confidence in the market remains low. Interest rates are likely to be rising soon too which isn't going to help.

Pal

I am curious as to how a 30% drop in house prices would be catastrophic. 30% would take us back to house prices in 2001, when everyone thought that houses were overpriced!

I have no doubt that house prices impact consumer spending patterns, but it seems to me that consumers do not spend based on the relative value of thier house compared to last year or the year before. Instead they spend based on a combination of two factors:

- The difference between their mortgage and their house value (i.e. their paper wealth). The reasons for this bewilder economists the world over; and
- The monthly cost of servicing their debts, including their mortgage.

As a result it is not house prices that dictate spending but rather a combination of available credit based on their notional house value (i.e. can they get a higher mortgage), and their ability to fund that credit.

Personally I believe a house price crash in the order of 50% is entirely possible, and it might even be greater. While I do not believe we will reach 1993 levels again, house prices around the 1996/97 level are entirely possible.

I remember being warned off buying in 1997 because house prices had been rising for 4 years and were now overpriced!

frugal_dougal_3

nelly wrote:

I personally think house prices should be locked to inflation somehow, it would help prevent over borrowing and also negative equity.

It used to be. In the early 80's inflation was a nightmare, and anyone running a shop used to spend half their lives repricing their shelves. Supermarkets had employees working through the night doing nothing else but that. Items such as a simple bag of sugar or loaf of bread were going up 2 or 3 pence a week and the weekly shop was going up £5 a week or more.

Self employed people such as carpenters had to give estimates with very short time limits on them, otherwise they could not keep up with the cost of materials.

People were starting to believe that they would have to start carrying cash around in wheelbarrows.