Advice for second time buyers in the current climate

molouwh1777

Hi all, I'm looking for some advice on next steps... kind of a "what would you do"... Current situation is that my husband and I, aged 35 and 39, bought our current house in 2013 for 167.5k. It's a 2 bed terrace in a desirable area for young families. We currently have 70k of our mortgage left to pay. We know we have outgrown this house, not in size as much as layout (our upstairs is only accessible via the lounge and we'd like our son who's now 15 to have a little more privacy). Tangible improvements we've made our a single story brick extension and a brick office/garden building.

Property prices where we are (south coast of England) are high at the moment and we're very aware that we're currently in a fortunate position to have a relatively small balance outstanding on our current mortgage. The "next house" in this area is around the 400-450k mark (still all needing some work), and houses like ours are currently up for around 290k I know I want to move, so have to swallow that a larger mortgage is inevitable, but would welcome thoughts on timing. Sit it out for prices to drop or just go... is it all relative if we're selling anyway in that if prices drop, the value of ours will too?

EssexHebridean

We're in the south Eastern bit of East Anglia - and are seeing a slow drop in house prices now. Flat prices have been holding fairly steady, but we're beginning to see signs that this will start changing pretty soon. I think it's safe to say that  there is going to be a drop across the board - but the question is how much of a drop (I'm not buying the idea that "some" have been putting out there that it will be a huge one) and whether it affects properties across the board of types, or some less than others.  what I will say is that it seems as though FTBs are staying put either with Mum & Dad or in rented right at the moment. 

Zerforax

In theory, if prices are dropping by 10% then the fall in a larger property from say £450k to £405k compared to £290k down by 29k would be in your favour but it's probably splitting hairs and no two properties are identical or alike.

I think you're right to assume if everything is falling then it lessens the impact on you.

The more difficult thing may be trying to find a buyer or completing a chain as there are less buyers overall.

But you know why you want to move to a bigger property so that has value too as it impacts your life. I don't think you can just wait forever for ideal conditions when life/time will keep moving on!

If I was a first time buyer (not selling a property) then I would probably be trying to wait it out a bit.

molouwh1777

Thanks so much for your replies, it really does help to have some objective opinions. The points made re FTBs are really useful to consider as we always thought we’d sell quite quickly when the time came (our house is very much a FTB home). I think we’ll proceed with looking and getting ours valued and on the market and see what interest there is (if any!).

TBagpuss

I agree that a % drop will mean that the actual cash needed for a bigger property will drop by more than the actual cash received for a smaller one, but that assumes that all houses rise or fall by the same percentage and that prices will continue to drop.
Personally I would probably go for now - no one knows exactly what will happen next and if you wait for the perfect time you could end up with your son off to uni before you get around to moving!   Not to mention, your ages may mean that you can borrow less in another year, which may not be an issue if you are not looking to max out your borrowing capacity, but is worth bearing in mind. 

I do wonder whether 'starter homes' may fall more than bigger properties as first time buyers are maybe likely to be younger and to feel the impact of the cost of living rises more and sooner, which could mean that your home would lose a bigger proportion of it's current value than a larger house .  More small landlords trying to sell up might also have a similar effect 

mi-key

If all prices dropped overnight by the same percentage everywhere then it would make sense to wait ( assuming there isn't a particular house you have set your heart on ). Prices seem to be either staying stagnant, or only dropping a small percent ( less than 1% ) per month though in general.

Normally with increases or drops, it seems that larger family  homes are the first to go up and last to go down, cheap starter homes or flats normally see the biggest and quickest changes as they sell to a completely different market that is effected a lot more by the economy

In reality it only really makes a big difference if you are moving from a very cheap house to a very expensive one.  In your case the difference isn't going to end up being that much.

You could wait 6 months or a year and find out the price of yours has dropped by 10% and the larger houses have hardly moved, or vice versa, so it's a gamble

patchyX2

I'm in the same position as you OP, almost the exact same figures too.

I flip from staying put to moving on a daily basis! I really can't make my mind up.

I'm fortunate to have a bit of cash saved up as well, so as long as house prices aren't increasing by more than my savings interest rate (which they're not currently), then I'm financially better off staying put.

As others have pointed out, generally prices coming down works out better for the those upsizing as well. 

On the other hand, I don't want to miss the boat if house prices start rising again, nor do I want to put my life on hold waiting around (although in fairness I don't need to move, it would just be nice). 

dimbo61

You have to look at affordability  as well.
25 year mortgage as trying to get longer with state retirement at 68 might be difficult. 
Lending criteria  has got tougher  due to mortgage rate increases.
If you want to move start looking at properties  you might want to buy and prepare your home for sale.
Tidy garden, repaint walls, fix any issues !

JM68

I think the general consensus is that prices will fall further/stagnate at best.  The return of higher (normal) interest rates mean everyone who needs a mortgage to buy (i.e. most FTBs and second steppers) have much less purchasing power.

However, not all vendors accept that either quickly or at all, so there will be less on the market as some seek to 'sit it out' and some of those who do list do so at prices that don't reflect the new reality. 

One issue this typically creates is that choice for your onward move becomes limited.  If there are several on (and at prices you would be willing to make a decent offer on) then it sounds like you should get yours on.  If not, it may be worth holding off a little bit longer. 

Would add that there have been threads in various online forums I have read recently that suggest quite a few vendors plan to time their listing for the 'spring bounce'.  Not sure there will be much a price bounce but stock levels and choice may improve.

molouwh1777

Thanks all so much for your comments - great to get a bit of objectivity in the mix! We have decided to go for it, and get ours ready for the market. We've enquired about a couple of properties but (and know knows if it's the EA or vendor), have been told that we can't even view until ours is on the market. Not sure if that is common and excuse my naivety if it is - this will be our first selling experience. 

EssexHebridean

We didn't hit any problems with viewing before ours was on the market - but that  may be area dependent and related to how the market is in your area. I would say the one thing to be wary of if you DO view at this point is that is pretty much guarantees you will find "the one for you" and then be stuck either being able to offer but knowing you could lose it any time, or with the vendors not even being willing to entertain offers until such time as you get an offer on the one you are selling. With hindsight, I'd probably have left even much in the way of idle RM browsing until further down the process!