Overpaid for house...

shortcrust

Given that the best measure of a home’s value is what someone is willing to pay for it I’m not even sure it’s possible to pay ‘too much’.

Let’s imagine two buyers who each fall in love with a house. They bid against each other and one ends up paying 400k. Now imagine almost the same scenario but this time only one of the buyers sees the house. They’re the only buyer and they get it for 350k. What’s the house really worth? The answer of course it that it’s a daft question.

Crashy_Time

shortcrust wrote: »

Given that the best measure of a home’s value is what someone is willing to pay for it I’m not even sure it’s possible to pay ‘too much’.

Let’s imagine two buyers who each fall in love with a house. They bid against each other and one ends up paying 400k. Now imagine almost the same scenario but this time only one of the buyers sees the house. They’re the only buyer and they get it for 350k. What’s the house really worth? The answer of course it that it’s a daft question.

Simpler way to put it is that you pay 400k for a house, then go and install PropertyLog or something similar and see that houses near you on Rightmove are cutting 25k, 50k even 75k to sell .......to most people that is a head meets wall numerous times situation IMO. Very few properties are really that special that people fall in love to the extent that they no longer care what they paid or borrowed to get the keys, seeing the neighbour drop their price freaks a lot of people out IMO.

qwert_yuiop

Crashy_Time wrote: »

Simpler way to put it is that you pay 400k for a house, then go and install PropertyLog or something similar and see that houses near you on Rightmove are cutting 25k, 50k even 75k to sell .......to most people that is a head meets wall numerous times situation IMO. Very few properties are really that special that people fall in love to the extent that they no longer care what they paid or borrowed to get the keys, seeing the neighbour drop their price freaks a lot of people out IMO.

If you’d bought a house in Northern Ireland around the peak in 2007, you’d have seen its value drop over 50% in the next couple of years. The horror, the horror.
You’d now be half way through your 25 year mortgage and after a few years of modest rises, your house is still worth nowhere near what you paid for it.
You’re probably never going to recover financially from that unfortunates decision. Regrets, you’d have a few.

shortcrust

qwert_yuiop wrote: »

If you’d bought a house in Northern Ireland around the peak in 2007, you’d have seen its value drop over 50% in the next couple of years. The horror, the horror.
You’d now be half way through your 25 year mortgage and after a few years of modest rises, your house is still worth nowhere near what you paid for it.
You’re probably never going to recover financially from that unfortunates decision. Regrets, you’d have a few.

Really? In 13 years time you’d be mortgage free whereas your neighbour who rents will be paying rent every month for the rest of their life. The horror eh? Add in the fact that you’ve got an asset to draw on later in life and the decision suddenly won’t seem quite so unfortunate.

shortcrust

Crashy_Time wrote: »

Simpler way to put it is that you pay 400k for a house, then go and install PropertyLog or something similar and see that houses near you on Rightmove are cutting 25k, 50k even 75k to sell .......to most people that is a head meets wall numerous times situation IMO. Very few properties are really that special that people fall in love to the extent that they no longer care what they paid or borrowed to get the keys, seeing the neighbour drop their price freaks a lot of people out IMO.

I’m not convinced your view on how homeowners perceive the ups and down of the property market is grounded in reality. We get a distorted view on here because worrying about house prices is one of the reasons people come here. I often read about how people are obsessed by house prices but the people I know in real life probably wouldn’t know much about current prices in their area. I occasionally chat to my neighbours about the prices nearby houses have sold for and they haven’t got a clue. Most people don’t think about it unless they’re planning to sell etc.

People might end up wishing they’d bought at a different time, but I don’t think people often regret buying. A market crash doesn’t change the fact that you’ll eventually be - as I said in my post above -mortgage free with a valuable asset. I think about my gran who was able to have a really good standard of living on a modest pension because her mortgage was paid and who has been able to use her house to pay for really excellent care in this last part of her life. I don’t think she spends much time reliving the horror of the times when her home lost a chunk of value.

qwert_yuiop

shortcrust wrote: »

Really? In 13 years time you’d be mortgage free whereas your neighbour who rents will be paying rent every month for the rest of their life. The horror eh? Add in the fact that you’ve got an asset to draw on later in life and the decision suddenly won’t seem quite so unfortunate.

Or pay a paltry rent for a few years and then buy? What would your financial position have been if you’d delayed your purchase until the 50% losses had occurred. The argument in favor of buying you describe remains valid - buy after the crash and not at the peak of the boom.
The decision to buy was disastrous.

shortcrust

qwert_yuiop wrote: »

Or pay a paltry rent for a few years and then buy? What would your financial position have been if you’d delayed your purchase until the 50% losses had occurred. The argument in favor of buying you describe remains valid - buy after the crash and not at the peak of the boom.
The decision to buy was disastrous.

Where’s the disaster?! It might be galling when people get a better deal than you, but buying a house you like and can afford doesn’t somehow morph into a disaster because a few years down the line other people buy similar houses for less or because other people buy better houses for the same.

I think agonising over the many many decisions we could all have made differently to our advantage is something people do more in theory than in practice.

qwert_yuiop

shortcrust wrote: »

Where’s the disaster?! It might be galling when people get a better deal than you, but buying a house you like and can afford doesn’t somehow morph into a disaster because a few years down the line other people buy similar houses for less or because other people buy better houses for the same.

A financial disaster if you’re paying a mortgage that you can’t really afford. You’re effectively a high earning pauper. That 600 or 700 a month might be money you’d like for something else even if you can afford it.
The decision to buy a year too early was a blindingly obvious mistake.

shortcrust

qwert_yuiop wrote: »

A financial disaster if you’re paying a mortgage that you can’t really afford. You’re effectively a high earning pauper. That 600 or 700 a month might be money you’d for something else even if you can afford it.
The decision to buy a year too early was a blindingly obvious mistake.

But the point is you’re not in a worse position because of the price drop. You’re pretty much where you thought you’d be, perhaps with a slightly higher mortgage because of LTV. If you can’t really afford the mortgage now then you wouldn’t have been able to afford it if prices had been stable. The only change is what other people are paying.

If we had crystal balls your argument would have some credence but we don’t. If I’d taken the advice of the doomsayers on here I’d have delayed buying in 2016, I’d have spent 25k on rent since then and the house I bought would now be out of my price range.

You might not believe me (I suspect you don’t want to believe me...) but the honest truth is I wouldn’t lose a massive amount of sleep if prices crashed tomorrow. It wouldn’t really change anything in my life.

qwert_yuiop

Well of course it wouldn’t. You’d still be paying the same mortgage. The difference is you’d be paying a lot more than you would have been if you’d delayed your buy a while.
I appreciate that the crash in ni (and the Irish republic) was unusually severe, but the fact remains that those who bought after the bubble are significantly better off than those who jumped in before the bust, and to state otherwise is plain wrong. Exactly the same will apply the next time England suffers a crash.