If house prices crash will this make it a good time for first time buyers?

angiekaren

If the price of housing drops - will this be a good thing for those that don't already own property but are looking to do so?

dolce_vita

angiekaren wrote: »

If the price of housing drops - will this be a good thing for those that don't already own property but are looking to do so?

No. It will be terrible.

Imagine being able to buy a house for 120k when you could have paid 200k for it 12 months earlier.
You would be less wealthy because your house would be "worth" 80k less :rolleyes:



But seriously, if you have got a good deposit say (>20%) and you have a secure income to pay the mortgage of course it would be good.

As a recent BBC report highlighted, very few people benefit from massive house price inflation, either financially or socially.

A major correction would be better for everyone in the long term.

Guy_Montag

Yes, assuming they can access credit, but it will be a slow drawn out process that will almost certainly lead to a recession*, which may make keeping a job harder, which may, in turn, discourage people from borrowing large sums.

So it's not cut & dried, but on balance it's good for FTBers & for those that wish to move up the ladder, while it's bad for people downsizing & the Treasury.

*Drops in house prices tend to be followed by recession. However, it is not entirely clear whether the recession is in the offing anyway & causes the fall in house prices, despite only showing up after prices have dropped; or whether the drop in house prices is the cause of a recession.

alwaysonthego_2

It has been reported that house prices in our area have risen by 9%

carpetbelly

If the price of housing drops it will be easier in terms of getting the money from lenders who are tightening their belts...

angiekaren wrote: »

If the price of housing drops

That's a big if though... Who know's what's going to happen. I mean, some people think crash, some people think slight downturn, others think that it's levelled off for a bit and some think it is a blip and will rise again at some point.

I wish I knew, I could make a killing

angiekaren

Oh yes i know its not a definate thing and that financial markets can never be 100% perdicted. Thanks for the sarcasm also lol ;o) But as someone with no mortage/property experience I think it was a valid question - sometimes things that look good can have hidden pitfalls.

I think the housing market in london has fallen by a very small percent in the last month - i read something about this somewhere.... linked to lower city bonuses!

carpetbelly

angiekaren wrote: »

Thanks for the sarcasm also lol ;o)

sorry, that's just the way I am... My misses sometimes gets a little miffed with it

angiekaren

did no one ever tell you sarcasm is the lowest form of wit?! ;o) hehe!

Dithering_Dad

angiekaren wrote: »

did no one ever tell you sarcasm is the lowest form of wit?! ;o) hehe!

The whole quote goes "Sarcasm is the lowest form of wit, but the highest form of intelligence".

carpetbelly

I've got to go with DD on this one, mainly as I don't want to put myself down

PasturesNew

With the credit crunch and lenders tightening on their lending criteria, you might find the following random example + speculation helpful:

You currently earn £25k/year. Houses in your area cost £130k. You have no deposit. You can find lenders who will lend you 5x your salary, but you're not quite earning enough

Roll it forward 2 years:

You still earn £25k. Houses have dropped by 20%, so now that £130k house "only" costs £104k. Great .... at 5x salary you can afford it! BUT .... lenders now INSIST you have a 10% deposit (so you will need to have saved £10,400) .. AND ... they will now only lend you 3.75x salary. So the figures are now: £104,000-£10,400 deposit = £93,750 required on mortgage. £25k x 3.75 = £93,750.

Result! SAVE ... SAVE .... SAVE.