House Price Crash!

Bestthingsinlifearefree

meanmachine wrote:

John, don't worry about my finances. Like you, I'm a money saver, so I've done the sums.

I also keep a close eye on the area where I'm ultimately looking to buy. Prices aren't going up.

If they do start to, and the rises seem sustained, then I'll buy. To not do so would be a money losing exercise.

The problem with the wait & see / sit on the side lines approach Mean Machine is that by the time prices start rising and by the time you are confident that these price rises are sustained, you will be paying potentially at the top of the market again.

e.g if prices rise 1% next month you will think it a rogue result, if they rise 1% the month after you will think its a blip, if they rise 1% the month after that you will think maybe its a trend, if they rise 1% the month after that you will think surely they will fall back and so on and so on until by month 12 or so you will be convinced that these rises are permanent but by then prices would have gone up by 15% or so and by waiting and seeing you have missed the boat again.

If you are looking for a good time to buy its when there is a bit of uncertainty in the market and sellers may be spooked in to negotiate on prices.

Once we are all confident prices are rising and its sustained......by then its a sellers market and you will be getting gazumped again by other FTB offering above the asking price.

.......are the agonising dilemma of the nervous FTB scared to buy and scared not to buy....

Fifer

Ember999, rozee has already replied to you, but to say it again: in the long term, you are correct. In the short term, I.E. right now you are definately not. If it costs more in interest to 'rent' the money from the bank (in the form of a mortgage) than it does to rent the property from a landlord, then unless property prices are rising (which they're not right now) you are better off renting.

The problem with this short term analysis is that it requires the ability to switch quickly from renting to owning and vice versa and assumes no barriers to doing that. In reality, there are many such barriers. You would have to factor in (on the renting side) retained deposits, minimum rental periods, moving costs an the cost of any non-transferable personalising (or the notional value you put on not being able to live with your own taste in decor, carpets, garden design, etc). On the other side, the barriers to short term switching are more substantial; mortgage fees, legal fees, stamp duty, EA fees and again, the cost of non-transferable personalising. All of this means that, in reality there is no such thing as a viable short term in this context.

There's little wrong with meanmachine and others taking a punt on how the market will go and it's easier for FTBs than others to do so, but once you choose one route or the other, you are at the mercy of the economic fates as many people have found, some to their benefit and others not. I do know though, that this is a long game (for the reasons stated above) and I'm not aware of many periods where investing in housing over anything close to the term of a typical mortgage has led to a loss. I agree however, that picking the right entry point is advantageous, though nothing like an exact science.

meanmachine_2

I can't believe a moneysaver on here is advising someone that buying into a falling market is a sensible thing to do.

bestthings is saying that, if I wait for a consistent pattern of rises to emerge, then I'll have missed the boat; if I don't buy now, then i've missed the boat, if I wait now and see prices continue to fall then i'll have missed the boat.

What bestthings MEANS is that, unless FTBers like me are suckered into paying massively over the odds for a bunch of bricks they'll miss my commission.

Yeah, I can live with that.

Anyway, why should I buy now? It's cold and wet outside, and only the dregs are left on the market. Everyone's waiting till spring. If property has gone up by then, so what? I'll have saved the difference. If they've dropped or stayed flat, then I can add a little bit more to my deposit.

Rave

Fifer wrote:

There's little wrong with meanmachine and others taking a punt on how the market will go and it's easier for FTBs than others to do so, but once you choose one route or the other, you are at the mercy of the economic fates as many people have found, some to their benefit and others not. I do know though, that this is a long game (for the reasons stated above) and I'm not aware of many periods where investing in housing over anything close to the term of a typical mortgage has led to a loss. I agree however, that picking the right entry point is advantageous, though nothing like an exact science.

Oh sure, I agree. If I can at some point buy a house I like at a price I can afford, I won't then go back to watching the market with a view to 'sell-to-rent' at the top of the next peak. Way too much hassle;).

However, I think that unless potential FTBs have a big deposit or a very safe, very well paying job, they're way better off renting than buying at this point in time. Anyone taking a mortgage at a large multiple of their wage is taking a very real and serious risk of negative equity and quite possibly bankruptcy as far as I'm concerned. If there is a house price crash, it could quite possibly cause a recession, which could in turn cause job losses etc. I happened to a lto of people in the early 90s. That's why I take exception when people come out with the tired old 'you're always better off buying' line. FTBers who are stretching themselves financially are taking a palpable (albeit unquanitifiable) risk that they could lose everything and even go bankrupt.

To people who are looking to move 'sideways' or just get a slightly larger (or smaller) house, overall house prices are fairly irrelevant assuming they have a decent amount of equity in their current house- and I wouldn't try and discourage them from moving.

Fifer

That's fair and is why I would never suggest that anyone overstretch themselves in any market, rising or falling.

deemy2004

The chancellor is going to raise taxes and pull some tens of billions out of housholders hands.. this WILL depress the housing market ! :cool:

Look the elections over ! We were bribed into letting labour in and most of us fell for the lies told to us about economic growth.. Were going to be hit hard and hit swiftly in the pocket so that the budget deficit is brought under control. This suggests a tough 2 years and declining house prices for 2 years, in prepartion for a recovery in the lead up to the NEXT election... That is Gordies prime objective now - To ENSURE he becomes prime minister and to do so he needs to ensure the economy is growing and house prices are rising in some 3-4 years time. Hence deliver the pain now, knowing that the electorate will have forgotten or forgiven when the boom times return.

nelly_2

deemy2004 wrote:

The chancellor is going to raise taxes and pull some tens of billions out of housholders hands.. this WILL depress the housing market ! :cool:

Look the elections over ! We were bribed into letting labour in and most of us fell for the lies told to us about economic growth.. Were going to be hit hard and hit swiftly in the pocket so that the budget deficit is brought under control. This suggests a tough 2 years and declining house prices for 2 years, in prepartion for a recovery in the lead up to the NEXT election... That is Gordies prime objective now - To ENSURE he becomes prime minister and to do so he needs to ensure the economy is growing and house prices are rising in some 3-4 years time. Hence deliver the pain now, knowing that the electorate will have forgotten or forgiven when the boom times return.

Unfortunately yor opinion of how naive and thick the people of this country are is absolutely correct. Although I thinking its getting less so thats why no one votes anymore.

Woby_Tide

meanmachine wrote:

John, don't worry about my finances. Like you, I'm a money saver, so I've done the sums.

I also keep a close eye on the area where I'm ultimately looking to buy. Prices aren't going up.

If they do start to, and the rises seem sustained, then I'll buy. To not do so would be a money losing exercise.

Intrigued how you now say you would potentially buy at 'current' prices if the trends were suggesting prices were rising. Yet a couple of posts later you quote what I thought had been your view for a while that you won't pay over the odds for a pile of bricks. If the price is rising or not surely the pile of bricks is still overpriced due to the rises of the last few years. I know you'll have more savings in teh interim but would have thought the prices were still outstripping your perceived value of the property?

meanmachine_2

Houses are ludicrously overvalued now.

But I never underestimate the British public's ability to throw ever greater amounts of money at their bricks - making them even more ludicrously overpriced in the future.

Just look at Ireland. 10 times the average wage in some areas.

Woby_Tide

Fair play, just a bold change of direction in your views, was assuming you'd just continue renting/saving and work on theory that savings over the mortgage term would instead be your 'equity' in future.