Recession?

hellies

Sorry, this is a bit vague! my oh has got it into his head that we should sell our house now as there is going to be a huge recession and house prices are going to drop dramatically he thinks we should clear our debts with our equity and then buy a house when the prices have dropped. Im really not sure this is going to happen, since we got on the property ladder 2 years ago we have made a lot of equity and knowing our luck house prices will continue to rise if we sell our house! does anyone have any information regarding this apparently expected recession, and any advice?

Thank you!

xx

david29dpo

If you treat you house as a money cow, then go ahead. if you treat your house as a home in which to live, play etc, dont.

Running_Horse

Dump your other half. He sounds like an idiot.

pinkshoes

If we are going to have a recession, there's going to be a nasty surprise instore for quite a lot of people renting too, as home owners will up their rents quite dramatically to try and cover any negative equity!!

I've already had one friend who's been evicted from their private rented home as the landlord couldn't pay the mortgage due to increased interest rates!!

Follow David's advice above!

boyse7en

Option 1:
You sell, you rent for a year, prices drop and you buy back. You win!

Option 2:
You sell, you rent, prices stay the same as interest rates rise. You lose!

Option 3:
You sell, you rent, prices rise. You can't buy. You lose!

Option 4:
You don't sell, you pay mortage. An honourable draw!

Given that the chances appear 2:1 against you making money, I'd keep the house. If you can afford the mortgage OK, then you will still have a house even if prices drop, rise or fall through the floor.

talksalot81

Lesson 1 on the internet - dont generally listen to people who give short, black and white answers.

There is no guarantee of recession although it is not remotely a ridiculous thought. If your OH is correct, you could find yourselves in some difficulties, especially if there happened to be a job loss (common in a recessionary climate). So, in start contrast to the ill considered reply above, you need to sit down and think about matters. How close are you to your limits? If you were forced into a higher IR (say 8%) could you survive on your current salaries and expenditures? If one of you lost your job, how would you stand? Would you have any chance of covering your outgoings on one salary?

You also need to think how far the market would potentially need to drop to make this worth your while. You would therefore need to have some idea of rental costs for a relatively extended time (you are talking about several years).

Maybe your OH has done these sums. In that case, you need to check them! If not, you need to do them yourself to see whether his fears are in any way valid. My feeling is that, if you are in any risk that your incomes could not cover costs in either an increased IR scenario or a job loss scenario, you need to have significant equity in the house - probably 50% ish. This is necessary because it then gives you a get out. If the worst happened, you could sell up and afford to price it appropriately because out your equity. If you had only 20% equity, you have very little power of persuasion to buyers before you actually end up hurting! On the other hand, if you could cover the outgoings on both of those IR or job scenarios, you will be safe almost irrelevant of your equity.

The third consideration is that your OH is actually trying to turn a profit. In that case it is even more of a guess as to what you should do. That will probably fall to your own prejudice. Personally if I could make 50% of my property value in my pocket, I would STR now. Even if prices continued upwards, the money in your pocket would keep you going for many many years. The only flaw in this is if prices rise consistantly and rapidly (as the last while) forever. In my view this is total nonsense else in a very few years, one will need to be a millionaire to buy even the smallest property. That being the case, I wouldnt much care for it.

talksalot81

pinkshoes wrote: »

If we are going to have a recession, there's going to be a nasty surprise instore for quite a lot of people renting too, as home owners will up their rents quite dramatically to try and cover any negative equity!!

I've already had one friend who's been evicted from their private rented home as the landlord couldn't pay the mortgage due to increased interest rates!!

Follow David's advice above!

And LLs will be in for a shock - people wont be able to afford their properties and they will sit empty losing the LL even more money! Maybe your area is different, but we have a great excess of rental property - if the price goes up, the tenant goes somewhere else.

hellies

Thanks for all of your advice. The problem is oh doesnt know much about property, he just get his info from internet and tv. He is panicking that the house is going to be worth half of what we owe on our mortgage and we will be stuck there forever, although I think we should 'ride the storm' if there is a recession- i like our house, it is our 'family home' and i have no desire to go through the stress involved in moving as we have already done it twice in 2 years and i am pregnant.

As far as I can see (and I am by no means experienced in property!!) it must be better to stay put and if it does drop it will go back up again?

xx

pinkshoes

I guess the whole recession thing is a catch 22 situation then! The only rental properties that wouldn't go up would be either council ones, or ones where people have only a small mortgage remaining. There's lots of rental properties here, but most seem to be highly mortgaged...

Ditto for selling the house. If there really is going to be a recession, then no one would buy your house, so if you DO sell it, then the majority decision would be that the recession isn't going to happen...

In reality, if we DO have a recession, houses could be the least of your worries, as alot of people could loose jobs, food/goods prices etc... would rocket!

Moorepart

hellies wrote: »

there is going to be a huge recession and house prices are going to drop dramatically he thinks we should clear our debts with our equity and then buy a house when the prices have dropped. Im really not sure this is going to happen, since we got on the property ladder 2 years ago we have made a lot of equity and knowing our luck house prices will continue to rise if we sell our house! does anyone have any information regarding this apparently expected recession, and any advice?

Thank you!
xx

I'm going to buy 300 shells for the over and under just in case some people need a bit more persuasion due to increasing levels of hunger:p

'Don't Panic Hellies, don't panic':rolleyes:

terrierlady

traffic to new homes developments has slowed down so many deals on offer, most developers going for a support mortgage deal ie £150 monthly payments for a year or 4.99% deals etc, that must prove country wide that sales are slowing but not a recession as still selling, the quality of foot traffic is better, more people who are looking to buy rather than just looking to while away a few hours.