House Price Crash Discussion Thread

mummyfrugal

Hello. This is my first ever post on moneysavingexpert. Im trying to sell my house at the moment. I did sell it once - but she dropped out - probably due to all the doom and gloom that is being predicted (she didn't give a reason but we know she had the mortgage approved).

I do feel sorry for first time buyers and I don't blame them being uncertain of what to do because no one really knows what will happen. I want to move on with my life because I have found a new partner, after being a one parent family for 5 years (which is not enjoyable and is financially hard). I have reduced my little 2 bed terrace by 11,000 (its not a mansion so a big % drop). I just can't afford to drop anymore as I only bought the house two years ago!! I have been advised to let it out, but I'm a bit of a softie really and don't think I'm cut out to be a landlady (although this would make economic sense I don't want to do it). Then in the news you get conflicting news that the housebuilding programme wont meet the numbers and there will be a housing shortage.... all this news is getting me down because I'm not here to make money, I just want to get on with my life.

What caused the housing market to inflate out of control was all the greedy buy-to-let people who bought up all the first time buyers property. I was talking to a couple (in 2006) who had just bought a house to let out and they said they wanted to buy a house every year!!!! How greedy is that - they didn't give a fig about the first time buyers.

In my opinion its just a matter of time (be it years) before the greedy people forget and we go full circle and it all starts again. They are already at the auctions bagging up the houses which are selling for next to nothing (repossessions and people who have no choice - they have to sell).

In the meantime, I will still try to sell my lovely home (its a home not a house) for a lot lot less than what I've paid/spent on it. I bought at the wrong time and am trying to sell at the wrong time!!! But at least I have a home and I am thankfull for that.

My heart goes out to those who have been or are being repossessed, first time buyers who are trying to buy (with the moving goalposts for deposits/mortgages), those who have a change in circumstances and have to sell at a substantial loss and those who like me bought at the wrong time and are paying the price (literally).

I don't have any sympathy for the buy to let people who were greedy and bought too much, and the property developers who are stuck with something they cant sell - fuelled by greed - they took houses that were meant to be homes for people to live in.

I hope after all this credit crunch some common sense returns to the world.

ixwood

mummyfrugal wrote: »

..

I hope after all this credit crunch some common sense returns to the world.

The credit/debt crunch is the common sense returning.

DirectDebacle

mummyfrugal wrote: »

Hello. This is my first ever post on moneysavingexpert. Im trying to sell my house at the moment. I did sell it once - but she dropped out - probably due to all the doom and gloom that is being predicted (she didn't give a reason but we know she had the mortgage approved).

I do feel sorry for first time buyers and I don't blame them being uncertain of what to do because no one really knows what will happen. I want to move on with my life because I have found a new partner, after being a one parent family for 5 years (which is not enjoyable and is financially hard). I have reduced my little 2 bed terrace by 11,000 (its not a mansion so a big % drop). I just can't afford to drop anymore as I only bought the house two years ago!! I have been advised to let it out, but I'm a bit of a softie really and don't think I'm cut out to be a landlady (although this would make economic sense I don't want to do it).

Hi, Welcome to MSE. First congratulations on an excellent first post. I agree entirely with your sentiments to the causes of the current situation, but we are where we are.

I claim no expertise but looking at your situation I would consider this.

First the good news. It seems you have purchased and borrowed sensibly so I am assuming that where you are now you will be able to stay if interest rates go up, fixed mortgage runs out etc. In other words you do not anticipate into being forced to sell. You wish to move as your family is now expanding and you want more room. From a security point of view this puts you in a good position in uncertain times. I would be cautious at the moment from altering this position. No doubt you worked hard and saved hard to buy your first home.

Aside from falling prices (which in itself should not deter people from moving) the real problem is with the banks not lending to each other. This means mortgagages are in short supply and those that are available are going to be expensive compared to a couple of years ago and hefty deposits are likely to be required. Under normal circumstances people would seek to move up and use the equity in the house as the deposit to finance the move. I am not sure if you sell at the £11000 reduction if you will be in this position.

If you stay put for a while and make do with the space you have, will you be able to save towards a deposit towards your next home. It seems likely that when the dust has settled and there is a slow return to sanity mortgages are going to have much tougher lending criteria attached to them. A larger deposit is certainly going to be one of them. Finding a way to increase your deposit is the best move I can think of at the moment. In general house prices are relative. Downwards and your 2 bed terrace is likely to drop in terms of cash less than the 3 bed semi you may desire. Upwards the reverse
happens and the price increase will create a larger differential (for deposit purposes).

I think that prices have further downwards readjustment before they level out and eventually start to pick up again, at a sustainable rate. I would look carefully at the numbers. You refreshingly want to buy a house to turn it into a home and will likely remain in your next home for many years. So don't worry too much about how much your current house has changed in value. The bigger picture is 'can I afford this move'. If you can then go for it. If you can't then you can't so sit tight until you can. The killer for you is that if you sell your house and only have enough to clear the mortgage (or worse neg equity) then you need the deposit for the new home. Really that and can you comfortably afford how much you need to borrow (allowance needs to be built in for unexpected high interest rates, periods of unemployment etc) are your main considerations, which I am sure you sensibly factored in when buying your current property.

Don't be in too much of a rush to dismiss the renting suggestion out of hand. I appreciate your sentiments but it would be a means to an end to achieving your move, not the seeds of growing your own property empire. Do the maths and if it will help you increase your saving rate for a healthy deposit on a new home then it is well worth considering. You should be able to compromise your principles slightly on this for the longer term benefit of your family. Renting isn't straightforward so investigate carefully what you will gain in £sd. An extra £50 per month for example and it may well not be worth the hassle.

Good luck.

mummyfrugal

Hi thanks for the reply DirectDebacle, I'm still thinking about what to do... I think I need to give it more time, I'm not the best at making the right decision!!!! (You'd think at 37 I'd get better at it)! Its quite confusing at the moment and no-one seems to know what is going to happen. I agree with previous comments made by others that mortgages should be 3-3.5 x salary and I also worry about my son - what chance have our children got a owning their own home? I also feel really sorry for my neighbour who bought his house which needed to be fully modernised at the height of prices, a 3 bed in the same condition sold for 115 and he paid over 130 for a 2 bed and spent thousands modernising it. I agree house prices should drop but not at such a rate that people are literally going to have mortgages for 20-40% more than their house is worth.... I dread to think whether his house will eventually be repossessed and be vacant next to mine before its sold off at auction for next to nothing to one of these property developers who will have a high rent on it and I will have an everchanging rota of new neighbours in. A house down the road is rented out at high rent and its literally been ruined and has new occupants every 2-3 months - there is no community anymore and it's sad because it could be someone's permanent home. I really don't want to rent mine out as I feel it should be someone's home (and I actually like my neighbours too)!!

loftyman

hi,hope nobody minds some advice from a first tme poster but i have experince and knowledge of the housing market as a long time owner and as a btl landlord.i purchased my current house in 91 when prices had been stagnant for 2 years and falling for 18 months prior to that.we paid £50,500 last year it hit a high of 240,000,its still would fetch 210,000.we came into a bequest in 1997 and used it to buy a house in a run down part of cardiff for 28.000. even today its worth 110,000 and we make 100pw in rent.so my advice is dont sell unless your trading up,give up holidays sell the car and buy a bike,sell the kids into slavery,work 2 jobs or even 3 at min wage but keep that mortgauge paid or at least enough of it to keep the bank happy.ive done all of the above,except the kids bit but only because i didnt have any to sell.. prices will go up again and probably reach new highs within 5 years .people need somewhere to live and we still have a chornic housing shortage in the uk i sold a house 18 months ago that we had purchased 3 years before,i intend to buy another with the profit when the price stops falling and has levelled out for 3 months if you have spare cash i advise you to do the same.let everyone else panic and sell sell sell ride out the storm and the sun will shine again on the housing market.o and by the way im no monypots i work in the building sector doing a manual job and get less than avarage wage most weeks, but i did 3 jobs during the last recesson.and the one before,during the 3 day week i was working 7 days.most under 40 year olds have had it easy all their working lives and dont know how to bail themselves out of trouble.

limotek

There is definately a Credit Crunch, however I do believe that the Media exagurates the point and scares the public and as always the media are good at making something worse than it is!!

DirectDebacle

mummyfrugal wrote: »

I'm still thinking about what to do... I think I need to give it more time......

Yes you do need to give it more time and careful thought. I get the feeling you are rather letting your heart rule your head at the moment. Buying your first home or selling to buy another are not decisions to be taken rashly even in the good times. These are not good times and so even more care should be taken. It is agreed that you are not a speculator, BTLr, get rich quick merchant or anything other than someone who wants to make a sensible decision on whether to move or not.

My main (but not only) criteria for buying anything is simply 'can I afford it'. House purchase is no exception. It is not that relevant to me that if I bought a house next week it was worth 10% less the following week. I still need a roof over my head and buying is preferable to renting for many reasons. For a start it isn't dead money. Every mortgage payment you make means you own a few more of the bricks. People quite happily spend thousands on brand new cars and don't care that in 10 years it is likely to be more or less worthless or lose thousands trading in every few years for a newer model. Not likely to happen to a house and after 20 years or so you will more than likely own it and see that in real terms it has been a good investment to boot.

There is the crux of the matter. Can you make the payments every month without fail. If you can, falling prices and negative equity are not an issue. Neither is rampant inflation in house prices either. House prices are only really relevant to the ordinary homeowner if you are buying one or selling one. You are considering doing both at a time when the market conditions are not favourable for doing either. But that doesn't mean you shouldn't do it, it just makes the whole process trickier.

Really examine your motives for wanting to move and compare them to good reasons for not moving. If neither one really outweighs the other than I would stay put for the moment. If on the other hand there is a significant imbalance one way or the other, then you have in part made your decision. If that imbalance tells you to move then you are left with the practicalities which are in many ways easier to deal with than the emotive issues.

That being the case, have you a mortgage agreed and in place, do you have a deposit and enough money to cover the moving and legal fees etc. If not then at the moment you can't move (if we dismiss the renting option). If you have then you need to make a positive decision to move. Put your house on the market at a price you think is achievable and look at places you may consider buying. If you have an offer on your place then you will be in a good position to haggle hard over any house you might like to buy. I think for those buying and selling at this time for reasons of choice and not duress there are good deals to be made. It is not really a buyers or a sellers market at the moment, just a difficult one.

Not sure if any of this helps you or not. Only you can make this decision, so let your head make it.

mean_momma

codger wrote: »

"wishful thinking" unquote is now rampant, viz: 90% of all current viewings, of which there are pretty damn view anyway, are by people who, it turns out, haven't actually sold their own home anyway.

Pity there isn't a website that could match up the wishful thinkers. Just think of how much we could all save on stamp duty and related commissions if we could sell our properties swiftly for a relative pittance, whilst simultaneously buying the replacement home for an equal pittance. The crunch could be blamed.......!

DirectDebacle

mean_momma wrote: »

Pity there isn't a website that could match up the wishful thinkers. Just think of how much we could all save on stamp duty and related commissions if we could sell our properties swiftly for a relative pittance, whilst simultaneously buying the replacement home for an equal pittance. The crunch could be blamed.......!

A website is unnecessary. You can already do this at a property auction.

Yoshua

The demand for houses isn't about what we want. It isn't about wishful thinking. It's about the availability of credit – the actual ability of people who want houses to buy houses. And the current lack of availability of credit – there are many fewer mortgage products out there than before, and the remaining ones are pretty pricey - means there is very little demand for houses.
That's why mortgage approvals are at record lows. And that's why house prices have fallen 20% in the last year. It is also why they are going to keep falling, fast. Not long now and that lack of demand is going to be met by a huge flood of supply on to the market. And this will be no ordinary supply. It will be desperate supply. The unemployment numbers are beginning to tick up and as we move into recession, they are going to soar. And as the newly unemployed move into default on their mortgages, so their houses will move on to the market.