Is a recession a good time to buy?

Mickey666

So what's your housing history then?

Crashy_Time

https://tradingeconomics.com/united-kingdom/mortgage-approvals

Crashy_Time

Mickey666 said:

Crashy_Time said:

RelievedSheff said:

There is no right or wrong time to buy a property if it is going to be a long term home.

The tail end of the biggest bubble in history and the start of a major recession is the wrong time, whatever kind of home it is going to be.

So what's your alternative?  Rent somewhere to live instead (and probably pay someone else's mortgage)?

I took out my first mortgage mortgage back in the early 80s recession, another in the late 80s and then another in the early 90s recession.  Fortunately I paid it off early so by the 2008 recession I cared even less about recessions and was able to retire early.    To rent the house I now own would probably be around £3k/month yet I've never paid more than £640/month for any of my mortgages, even when they were at 15% interest.

Glad I didn't wait to buy and waste money on renting instead

That doesn`t help someone looking at jumping straight into negative equity now though does it?

sst1234

Crashy_Time said:

https://tradingeconomics.com/united-kingdom/mortgage-approvals

So when is a good time to buy? What conditions would persuade you to buy?

Young_Turk

Mickey666 said:

steve866 said:

I don’t think there is any general ‘good time to buy’ whether we are in a boom or recession. A recession *could* well be a good time to buy if you managed to time the market and buy at a discount. From your original post, if your job is secure I wouldn’t hold back from proceeding given that you love the property and you think you’ll be able to get a good discount on it. 

I'd go further and say that ANYTIME is a good time to buy.  You need somewhere to live and the only other option is to waste money renting.  Buying decisions need to be considered over 25-30 years not the next six months.  Over 25-30 years buying is a no-brainer, and that's even without considering the retirement planning advantages of having 'free' housing when the mortgage is paid off.

If markets are efficient then you can't predict whether now is a good or bad time to buy. There are definitely bad times to buy. During 2008 prices fell more than enough to compensate for rent payments, for example. But if prices are efficient, then this couldn't be anticipated. So I think you could modify your claim to "ANYTIME can be expected to be a good time to buy" though it will not always actually turn out to be good, at least for the medium term (5-10 years), but will almost certainly be good, possibly very good, in the long term (25-30 years).
It's easier to make the case that it's always a good time to invest in the stock market. It's more plausible that stock markets are efficient. They are traded continuously, so you always know what the price is, and you can "short sell" if you think they are over-valued - if a lot of traders short a stock it's price will fall. There is no mechanism to "short" property, so there are more likely to be bubbles in property. It's also much easier to invest in the stock market. Most employees do so every month, in well-diversified funds.
There is no possibility of diversifying in property, as you just buy a single house or flat in a single location. Sometimes you gain, sometimes you lose. For example I bought in London zone 2 just before HTB was introduced and sold for 37% more about 2 years later. Property increased a lot in most areas, but I was probably lucky to choose that area. I moved to London zone 6 and sold for about 12% more after 18 months. Now 4 years later in Hove I am probably going to sell my flat for 5-7% less than I paid, despite prices rises of around 5% in the area. Apparently house prices have risen but flats are about the same, but now flats without gardens (such as mine!) are doing especially badly.
Your statement that "the only other option is to waste money renting" is one-sided. I was considering renting when I moved from London to Hove. If I had done so, I would have "wasted" a bit more on rent than I instead "wasted" on mortgage interest and maintenance fees. But the bigger factor would have been earning positive investment returns on my money that was tied up in my depreciating flat (a diversified portfolio has done very well in 4-5 years, far outperformed property), which would have outweighed the "wasted" rent.
I think there is a similar observation to be made about your point on having a free house when you retire. Does it matter if you retire, mortgage free or renting but with the same amount of money invested elsewhere? Especially considering that when you retire you may want to sell anyway?

Young_Turk

Aaghh321 said:

Couldn't agree more. When I move into my new place I'll be saving £00's a month in mortgage over rent costs and have a nice garden to spend any future lockdowns in. Even if I lose my job my emergency savings will last about 50% longer.

This is an interesting perspective. I assumed that the lockdown made some people realise how nice it was to have a garden in general. I didn't think anyone expected there to be another lockdown and certainly not multiple future lockdowns!

zv13424

As someone who has jointly spent £20k in rent in the last 2 years I don’t feel now is a bad time to buy for us.
Out mortgage payments are going to be £250 less a month, we have no intention of selling quickly to make a profit - for us it’s a “forever home” or at the least a 10 year+ property.  

Negative equity didn’t really enter my head as we found a property we can easily afford and avoid continuing to throw money at our rented property.

Mickey666

Yes, that’s the bizarre thing - a mortgage can be cheaper than renting!  Negative equity is really not an issue as long as you can continue to pay the mortgage.  Sounds like you’re looking for a home, in which case a mortgage is the way to go and your equity will start to build.  After a few years you’ll have sufficient equity that any future mortgages will be in no danger of falling into negative equity.    It’s only property speculators who need to worry about things like negative equity.

Crashy_Time

zv13424 said:

As someone who has jointly spent £20k in rent in the last 2 years I don’t feel now is a bad time to buy for us.
Out mortgage payments are going to be £250 less a month, we have no intention of selling quickly to make a profit - for us it’s a “forever home” or at the least a 10 year+ property.  

Negative equity didn’t really enter my head as we found a property we can easily afford and avoid continuing to throw money at our rented property.

What happens if interest rates are forced up from record lows? (I think the BOE would certainly need to have their hand forced by a crisis to raise rates, but I think the FED is increasingly uncomfortable with super low rates)

Angela_D_3

Crashy_Time said:

zv13424 said:

As someone who has jointly spent £20k in rent in the last 2 years I don’t feel now is a bad time to buy for us.
Out mortgage payments are going to be £250 less a month, we have no intention of selling quickly to make a profit - for us it’s a “forever home” or at the least a 10 year+ property.  

Negative equity didn’t really enter my head as we found a property we can easily afford and avoid continuing to throw money at our rented property.

What happens if interest rates are forced up from record lows? (I think the BOE would certainly need to have their hand forced by a crisis to raise rates, but I think the FED is increasingly uncomfortable with super low rates)

You think ?   You don't know though do you, none of us knows what goes through their frankly biazzar minds and decission making processes.   The one thing I do KNOW though is debt forces people to go to work.   Feeling invested stops people from thinking !!!!!! this the worlds gone mad I'm taking my (house deposit) savings and going to actual live instead.   That's the last thing the government wants on mass.  They will do simply anything to keep the fear installed