does buying at the top or bottom of a market really matter?

LillyJ

boinging wrote: »

The point I'm making is £225K was a hell of a lot of money 25 years ago!

I know it was. That was why I made the point about income being important. It was also in reply to neverdespairgirl's post about her parents buying a £450k house in the last crash, which was also a huge amount of money!

I know my parents were lucky (not all luck, hard work was involved!) to have high incomes, but there are people on high incomes still now!

setmefree2

LittleMissAspie wrote: »

No the house that sold in 2006 is the one I'm renting right now. I've never bought or sold a house, I hope to be a FTB when prices come within our reach. I used it as my example because I have numbers for it, I know how much it cost and I know how much I'm renting it for. Real-life numbers.

I'm sorry then. I didn't understand your post.;) I hope everything works out for you, I'm sure you'll find a lovely first home.:D and well done on the deposit saving.

simcla

!!!!!!, for your viewpoint to be 100% accurate, the following needs to occur, 1) You can accurately predict the peak of a market, 2) you need to be able to predict the trough of the market and 3) The property(s) you want to buy are available at the trough of the market. If I could accurately predict the peaks and troughs of markets I would make enough money on the stock market not to be on MSE, but I do agree that if you have the ability (or luck) to do this then that would give you the best financial return on property investment.

neverdespairgirl

LillyJ wrote: »

=
And some mid 20's couples (like me!) can afford 3/4 bed houses. If I had borrowed the amount halifax lent us I could have afforded a 5 bed round here. Admittedly my parents were in the home counties so it would be difficult now but like I said if you have a good income then it would be fine.

There is still an affordability issue, though.

My parents married in 1974, when they were 27 and 25. My mother was a teacher, my Dad a barrister (newly qualified) and they could afford a nice 3 bed maisonette with a garden in Blackheath, a great place to live in SE London. 3 years after that, they bought a 3 bed semi, just before I was born, and my father was then the sole earner, and had only been fully qualified for 4 years.

When they were in their early 30s, they bought a larger, 5 bed Victorian Semi, in Blackheath, and upgraded for the last time to their 6 bed, 4 reception, 4 bath house in 1994.

OH and I are both barristers, both 30 years old, and both doing well in professional terms. We couldn't match their purchases, though, at the same ages, although there are 2 of us earning, rather than one, were it not for the inheritance OH recieved when his parents died so horribly young.

Yes, there are people earning nicely, but they can't buy what their parents could in similar jobs at similar ages.

PasturesNew

As the prices fall, unemployment is also expected to rise.

Can you guarantee you will still have a job in 3 years' time? Maybe you're very certain, but many people can't be certain.

If prices are falling for the foreseeable future, it therefore makes financial sense to not buy if you don't have to, enabling you to see how far they will fall and build on your deposit; with a larger deposit, when you decide to buy, you might find you have access to cheaper mortgages. Say 0.25% or 0.5% less.

If there is any doubt about the longevity of your employment opportunities, it makes more sense to rent right now as you might be entitled to benefits if you're laid off (if you have a mortgage they pay interest only after about 9 months I think it is, and/or you will have to pay an extra £50+ per month to buy yourself an insurance policy and hope the small print in that still covers you).

It's not just price today/price tomorrow. It's a load of other things too which are often overlooked.

PasturesNew

My parents married in 1960. Mum was already a single mother (drunk husband had deserted her), living in a 2-bed council house. Two more of us followed and 10 years later my dad thought house prices would take off as the Govt announced they'd start charging VAT on building land.

Dad worked full-time as an electronics engineer; mum worked part-time in a canteen, so she was home by the time we got home from school.

Dad was doing well enough, QA Manager of an international electronics company in Cambridge, earning about £1800. We had a car (cost him £40 and he hand-painted it using an attachment on the vacuum). We went on a 2-week caravan holiday every year (staying in small private campsites in damp caravans with chemical loos, or single caravans parked in the corner of a farmer's field). We even had a TV as dad was clever enough to make us one out of spare parts.

So life was fine. But then dad wanted to buy a house. He found one at £4,200 and struggled to get a mortgage at all. They wouldn't take any notice of mum's earnings, just his. 2.5x salary back then - and he'd been in his job for 15 years. Then he was gazumped but the other buyer pulled out. We moved into that house in 1970.

The next few years were rocky, things were tight. Then 10 years later dad got laid off, he'd been in his job 25 years by then and sat for 2 years on the dole, unable to get anything. Eventually, he got a job selling train tickets and sweeping the platform. He stayed there until he retired after 10 years' employment.

He never had a credit card. Never borrowed a penny in his life apart from that one mortgage. We didn't have uPVC double glazing; no fitted carpets; no automatic washing machine; no central heating; no conservatory; no foreign holidays. He was frugal. The kitchen would be painted in whatever colour paint somebody happened to give him. They grew all their own vegetables as it was a large garden with good peat soil and mum was by then working at a seed company so got them cheap.

They then sold their house in 1995 for £90,000, moved and bought a retirement house for £75,000 in an area that has seen phenomenal growth. That house would now be worth £250k or so, if anything was selling there (but it's not).

So it's taken them from 1970 to 2008 to go from £4k to £250k. 38 years. Yet some houses have literally risen in value that much in 6 months in the last few years. Crazy prices.

If house prices had only ever risen at a reasonable and proportional rate in line with everyday prices and/or inflation would anything be any different? Not really. He'd have been quite happy selling the house in 1995 at the same relative price that he bought it for in 1970. That would appeal to his sense of fairness, that somebody "like him" had been able to buy the house like he did in similar circumstances.

Now all the houses round there are snapped up by young professional couples on their second/third house purchase for about £300k.

Council houses disappeared, squeezing out a lot of people. House prices took off in a lot of areas as you needed to become a high earning couple.

Where has this left the people in the middle? Leading nomadic lives on ASTs with high rents.

Not good ... not good at all.

If you must buy, buy as low as you can. Now is a golden window of opportunity to wait.

LillyJ

PasturesNew wrote: »

So it's taken them from 1970 to 2008 to go from £4k to £250k. 38 years. Yet some houses have literally risen in value that much in 6 months in the last few years. Crazy prices.

.

I agree with the sentiments of your post. However I have to question the fact that any houses really rose by 64x their value over 6 months?!

WTF?_2

simcla wrote: »

!!!!!!, for your viewpoint to be 100% accurate, the following needs to occur, 1) You can accurately predict the peak of a market, 2) you need to be able to predict the trough of the market and 3) The property(s) you want to buy are available at the trough of the market. If I could accurately predict the peaks and troughs of markets I would make enough money on the stock market not to be on MSE, but I do agree that if you have the ability (or luck) to do this then that would give you the best financial return on property invesstment.

As I've repeatedly said, never mind the STR stuff. I gave that as an example of the most financially optimal way to buy and stated clearly that it depends on calling the market right and your own personal circumstances permitting it.

The point I'm making is that buying at the top of the market DOES matter. You have claimed that it all evens out over the course of time - it DOESN'T.

You don't have to be a genius or an expert at predicting market cycles to know that the market has just peaked. Anyone buying now on the basis that over the long term it won't make any difference is kidding themselves. Overpaying is overpaying and money overspent now is gone for good. Since a house buyer will typically be borrowing cash then every pound you overpay now is at least two pounds wasted in the long term.

PasturesNew

I won't buy when prices start rising.
I will buy when the £increase in houses is larger than what I am earning in interest on my savings. At the moment I would have to spend 75-100% of my savings to buy a house I wanted. By the time it happens I hope to spend 60-80% of my savings.

I will need to build a spreadsheet that tells me when to buy. I expect to start looking one year before I buy, so when I see the right house I will KNOW it's the right one. You can only know "the one" by viewing a lot of pigs first. If you see the perfect one first, you won't know until you've viewed the pigs, by which time it might have gone.

For me, buying at the top means spending most of my savings.
Buying at the bottom means spending LESS money, a smaller proportion of the savings ... that have GROWN further over that waiting time.

Perspective:

Buy now at £200k. £0 left over.
Save for 5 years
Buy same house at £150k. Savings grown by £50k. £100k left over.

Easy maths!

PasturesNew

LillyJ wrote: »

I agree with the sentiments of your post. However I have to question the fact that any houses really rose by 64x their value over 6 months?!

I meant to convey that some houses rose by £250k over recent months, allbeit that those houses might have started off at a higher price. Not that any house rose 64x over that period.

Apologies for poor writing.

I meant: it took my dad 38 years to "make" £250k. Some people have "made" £250k in the year 2007.