House buying risks

IamWood

Crashy_Time said:

IamWood said:

The lesson I've learned from my father: buy a house to live as soon as I can.

How much did your father pay for his house can I ask?

I know. It was £9000 as I was told. Today's price for a similar house in that area would be over £600K. It was in Oxford.

Crashy_Time

IamWood said:

Crashy_Time said:

IamWood said:

The lesson I've learned from my father: buy a house to live as soon as I can.

How much did your father pay for his house can I ask?

I know. It was £9000 as I was told. Today's price for a similar house in that area would be over £600K. It was in Oxford.

Oxford is one of the biggest bubbles in the country now unfortunately.

Crashy_Time

How are things progressing OP, what has your son decided to do?

Getting_greyer

Crashy_Time said:

Salemicus said:

> The Black Swan that bursts the bubble will be a stock market/credit market event IMO

Yes, something sort of financial crisis would probably hurt house prices.

Of course, we already had one of those. Tell me, if you'd bought at the peak, just prior to the 2007-8 financial crisis, and held until now, would you have made money, or lost money?

Time in the market >> timing the market.

You shouldn`t try to "make money" from a highly illiquid asset IMO, especially one that is designed for living in and not as an investment vehicle because you would have to downsize AND time the market to actually make any money. Most recent buyers are hoping to UPSIZE not downsize. The 2007 bubble was pumped back up with zero interest rates and massive money printing, but they can`t drop interest rates again and the amount of money printing required now, after a never in living memory deflationary event, is actually threatening to RAISE mortgage rates. The mistake you are making is in thinking that the next "Black Swan" will be the same as the last one.

Are you mixing up deflation and decreasing inflation again?

SpiderLegs

Getting_greyer said:

Crashy_Time said:

Salemicus said:

> The Black Swan that bursts the bubble will be a stock market/credit market event IMO

Yes, something sort of financial crisis would probably hurt house prices.

Of course, we already had one of those. Tell me, if you'd bought at the peak, just prior to the 2007-8 financial crisis, and held until now, would you have made money, or lost money?

Time in the market >> timing the market.

You shouldn`t try to "make money" from a highly illiquid asset IMO, especially one that is designed for living in and not as an investment vehicle because you would have to downsize AND time the market to actually make any money. Most recent buyers are hoping to UPSIZE not downsize. The 2007 bubble was pumped back up with zero interest rates and massive money printing, but they can`t drop interest rates again and the amount of money printing required now, after a never in living memory deflationary event, is actually threatening to RAISE mortgage rates. The mistake you are making is in thinking that the next "Black Swan" will be the same as the last one.

Are you mixing up deflation and decreasing inflation again?

I don’t think we’ve had an explanation for what this deflationary event was, and tbh I don’t expect we will ever get one.

Keswick1uk

Crashy_Time said:

How are things progressing OP, what has your son decided to do?

He's looking at the market and the villages close by to work out his next step. Deciding areas he'd like to live and those with kerb appeal for resale. Plus areas where you can navigate without it being like a dodgems at the weekends. And where the buses run close ish too.

Apparantly, many more instructions are appearing daily on his rightmove searches - were 2 or 3 a day and now up to 10, so he's watching what is happening generally too. He's started to look at sold prices as well, as they get released on net prices (something like that). 

He's secured another years rent with no increase, so that's a temporary win too. He's found out he's likely to be able to borrow circa 162k.

So not much further on but he's content doing his thing.

getmore4less

Once you are into buying going periodic is often the best option rather that a long fixed term on a rental.

Keswick1uk

Ahh he's on a rolling contract. She just hasn't put it up this year. He's not re signed or anything. 

He had expected her to as it didn't go up last year as pandemic hit and she seemed happy he was still paying, as many tenants had worries due to furlough or worse. So he thought she would do it this April, but she hasn't.

Getting_greyer

I guess the main risk to having a house is being unable to pay the mortgage, getting kicked out and applying for bankruptcy.  
The lesser risk is that at some point the mortgage payment becomes relatively more expensive so you have less disposable cash for other things.  
There's plenty of people that have had that happen to them, but there's also plenty that have had opportunity to onward purchase really nice places.  

I dunno, just wing it like most people I guess.

MobileSaver

Getting_greyer said:

I guess the main risk to having a house is being unable to pay the mortgage, getting kicked out and applying for bankruptcy. 

The risk is absolutely tiny though; in the last fifty years the worst it has ever been is 0.26% of homeowners being repossessed.

Of course, if you cannot afford to pay a mortgage then you probably cannot afford to pay rent either so you'd still be kicked out of your home regardless of whether owning or renting.

Getting_greyer said:

The lesser risk is that at some point the mortgage payment becomes relatively more expensive so you have less disposable cash for other things. 

Again, if mortgages goes up then rents will too so you will have less disposable cash regardless of whether owning or renting.

The bottom line is that if things go pear-shaped a typical homeowner will generally have many more options than a renter to stay in their own home.