A question for potential FTB's

nelly_2

This is the better one of all the house price type threads, I have seen yet on here.

Some one said, if you have a big deposit the negative equity will be soaked up by that so its not a real problem... hmmm... let me think...

YEAH IT'S A PROBLEM

Why should I be happy to work hard and see all that dissapear???

The situation is this, houses are NOT good value for money, so why buy one?

On the other hand I cant think of anything in this country that is good value for money.

edit added
Actually when things get too expensive people do different things , look at smokers for example, fags are ridiculously overpriced so people are ,stopping, cutting down or bringing them in from abroad.

Thats what happened in housing now people have virtualy stopped buying.

Pal

You missed my point entirely.

I was saying that the only people who should consider buying at the moment are those with large deposits and who are not planning to move for a long time. These people can afford to risk periods of negative equity, and either house prices will eventually rise with time, or they could eventually pay off their mortgage without house price increases. They simply pay off the mortgage over time based on the amount that they agreed to pay for the house in the first place plus the mortgage interest.

I agree that from a monetary point of view noone would wish to see their house value drop by the amount of the deposit they put down, but in practice the individual has already spent the deposit on a house. It is no longer their money - they own a house instead which can both rise and fall in value. If they are concerned about their house value dropping by the amount of the deposit then they are obviously looking at selling in the shorter term, and so do not fit into the long term owner group that I was discussing: They shouldn't have bought in the first place (IMHO).
Personally I agree that house prices are not good value for FTBs at the moment, but that isn't to say that no-one should buy. It is all about balancing financial risks against the need for a home. Anyone without a large deposit who may wish to sell in the short term is risking a lot in my opinion.

John_M_Business

wibble68 wrote:

Confident words.

But answer me this.

When was the last time that any housing market boomed, stagnated for 2 years and then took off again?

As far as I'm aware every housing market bubble has ended in a crash or produced a long drawn out recession.

The damage has already been done.

Wishful thinking will not be enough to prop up the housing market.

I think this actually highlights the problem. I don't think that we should be looking backwards here... what has happened in the past was in very different circumstances: high interest rates (about 2-3 TIMES the current ones) AND rising unemployment. These were the main factors that caused the massive drop in the Nineties (particularly the first factor). They are not present at the moment. We are in the longest period of economic stability that we've EVER been in.

Unfortunately, with tunnel vision in place, it's quite easy to just concentrate on House Prices and Historical House Prices as the only means of evaluating where we're going to go - "They went up, so they MUST come down" - without recognising that the environment is very different.

Even the London Bombings haven't affected prices in London (which I thought they would)! Even the press have stopped talking about dropping prices - because they aren't (or, at least, not with any significance).

trevbob

This argument sounds remarkably similar to the dot-com share views being punted about a few years ago "but its a new economy... the old rules don't apply!"

The London bombings are a relatively small localised event on a global or even national economy & most people don't have the job liquidity to move elsewhere even if they want. Oil prices are a different matter.

meanmachine_2

John_M_Business wrote:

They are not present at the moment. We are in the longest period of economic stability that we've EVER been in.

.

If you're right, then yes, house prices are sustainable at their current very high level - and the recent uptick from the Halifax (Aug) would suggest this.

But if, in fact, the last 8 years have simply been one long boom, as debt levels suggest they might be, then you could be heading for one long bust.

I'm still unconvinced on both fronts.

Ah, if only I had a crystal ball that worked. Wouldn't life be easy, and dull...

How did your flat sale go John? Are you now mortgage free and enjoying the country?

margaretclare

A few posts on here have cheered me up.

There are people who are planning to buy for a reason that I can relate to - they need a home, they're tired of living in a flat with noisy neighbours having 'domestics' (LOL - I sympathise!) or, for some other reason, they want a house they can call a *home*.

I can relate to all of that. What I find hard to understand is what I see on other boards and in other threads - people banging on about 'gotta get on to the housing ladder', and asking how big a mortgage they can get when they're already many thousands in debt, not yet qualified in chosen occupation, want to live with girl-friend but are worried what might happen if the relationship doesn't work out - can girl-friend take the lot?

There are too many 'what if's in scenarios like these. Too risky. A house is a long-term commitment. I should know. I've been up and down that 'ladder' a few times. I lost a home in 1971 through over-commitment, taking on a secured loan as well as a mortgage. We were lucky - I got a job with housing included, then were able to get a 100% council mortgage (yes, the councils used to offer mortgages!) for a wreck of an old cottage. I've been lucky...

Can sympathise with any would-be FTB who wants a house as a home. But not if someone feels, or is being pressurised into, the need to 'get on to the ladder' for no good reason.

BTW my friends are trying to sell a nice flat in Southend, are having no luck, it's a nice 5-year old flat, ideal for a couple or a career person, close to the railway for commuters into the City....

Aunty Margaret

FaTB

meanmachine wrote:

Anyway, I thought this was for potential FTBers. Why the usual suspects have piled in I've no idea.

Unless they're starting to brick it....

Thanks Meanmachine you hit the nail on the head I wanted the FTBer's reasoning behind buying now, NOT the views of desperate EA's and vendors.

John_M_Business

trevbob wrote:

This argument sounds remarkably similar to the dot-com share views being punted about a few years ago "but its a new economy... the old rules don't apply!"

The irony is, of course, that it was not that the dotcom boom was a mistake, it's just that investors were too impatient.

The dotcom boom is happening - both in terms of commerce as much as communications - and it is reshaping the way in which businesses transact and do business.

Take a look at this site... look at the shopping bits: virtually all the references are for websites!!

My argument is that the rules still do apply, but you need to take them all into account, not just what has historically happened to house prices without looking at the factors that caused the 'bust'. I think if you look at my comments I'm asking for a more comprehensive approach to this discussion.

John_M_Business

meanmachine wrote:

How did your flat sale go John? Are you now mortgage free and enjoying the country?

Sitting on an offer that's just under the previous one we accepted. Considering it, but probably going to reject it after the weekend. Still getting about a viewing a day - there's no hurry, the country can wait - there's good interest out there and it's September.

Whatever is discussed won't really affect me - house prices in my area have just risen slightly. Once I do sell I'll still have the same views about the market... even if a drop would actually suit me.

I have still to find these desperate EAs and Vendors... but I can find many people desperate for a fall in the marketplace.

John_M_Business

FaTB wrote:

Thanks Meanmachine you hit the nail on the head I wanted the FTBer's reasoning behind buying now, NOT the views of desperate EA's and vendors.

I can't speak for everyone, but the reason why I posted to this thread was due to the rather sweepingly presumptive (and already wrong!!) initial statement on the very first post.

Anyway, I'll stop posting on this thread now - to let you get on with the original discussion at hand... why ARE first time buyers buying? Why hasn't the market plummeted yet? What can this all mean?