Were there many STRs before/during the last crash?

born_again_saver · 29 March 2008 at 5:15PM

I've read about a number of people selling their homes recently to return to rented accommodation. In many cases this is intentional to avoid the worst of any house price slump/crash, perhaps with a view to picking up a bargain as prices drop. Sometimes it's unintentional, as a result of a purchase falling through and having to rent at short notice.

I just wondered if much of this "selling to rent"/STR behaviour was seen during 1989-1991? If so, how did these people do out of it? Or is it something fairly new this time around? If large numbers of people STR, what kind of effect will this have now and in the next few years?

Kez100 · 29 March 2008 at 5:17PM

We sold mid crash in 1991. I don't know of anyone who sold to rent but we did come into the market after the main falls.

PasturesNew · 29 March 2008 at 5:21PM

Who knows. We didn't have the internet in those days.
Anybody with thoughts etc was pretty much working alone, so there'd certainly be less of them.

I am an STR this time round, I did it purely from my own thoughts and decisions. It was only after I'd done it that I found out that there seemed to be a lot of people doing it and a phrase was coined for it.

My reasons to STR were not to pick up a bargain, but to get out of what I had as it wasn't right for me and I didn't want to be stuck with it for what I saw would be the next 6-7 years.

WTF?_2 · 29 March 2008 at 5:26PM

born_again_saver wrote: »

I've read about a number of people selling their homes recently to return to rented accommodation. In many cases this is intentional to avoid the worst of any house price slump/crash, perhaps with a view to picking up a bargain as prices drop. Sometimes it's unintentional, as a result of a purchase falling through and having to rent at short notice.

I just wondered if much of this "selling to rent"/STR behaviour was seen during 1989-1991? If so, how did these people do out of it? Or is it something fairly new this time around? If large numbers of people STR, what kind of effect will this have now and in the next few years?

I don't think that there was anything like the sort of information dissemination back then, like there is these days thanks to the internet.

All that people knew is that prices started to drop and kept on dropping. Most didn't have easy access to information on why it was all happening or have the chance to hear warnings in advance.

This time around we at least have the chance to read about it in places like this forum - except of course that thanks to the whining of the very vocal "house prices only ever go up brigade" on these boards, there has been an effort to ghettoise all house price crash discussion to a single thread.

That really lets MSEers down as they come here to get the best perspective. If you read back you'll see that plenty of people have been warning other MSE readers about the unfolding housing/economic train wreck for at least the last six or seven months.

It's probably too late to get the absolute max out of your house by selling up and cashing in now (there are a couple of threads here from people having difficulty shifting their houses in the new market reality) but you can still benefit from the advice given by people with a bit of perspective who know that the market is set to take a steep and probably long lasting tumble.

Anyway, I think a few more people this time around will be clued into Selling To Rent and will probably have done quite nicely by flogging off their house near the peak, banking the cash and living off the interest either rent free or with heavily subsidised rents. Give it another 18 months or so and they can start to think about buying back in and getting a lot more for their money. In some cases, maybe even getting a place mortgage free.

I would say that the freedom of information offered by the internet could well make for a shorter but sharper crash. But that's just a guess. If the government foolishly tries to go the path of Japan and bail everyone out we could be looking at a downturn lasting more than a decade. And the Federal Reserve in the USA is definitely going that way ... :eek:

Davesnave · 29 March 2008 at 5:30PM

We are STRing, but it is a mixture of not finding the right place (we need something specific) and a realisation that things will be better for us in a year or so. If the right place was there we'd buy it, and we expect to buy inside the crash because life's too short.

bluejake · 29 March 2008 at 5:47PM

!!!!!!? wrote: »

This time around we at least have the chance to read about it in places like this forum - except of course that thanks to the whining of the very vocal "house prices only ever go up brigade" on these boards, there has been an effort to ghettoise all house price crash discussion to a single thread.

:eek:

I agree entirely. The whole point of these boards is to stop people falling into the traps that other people fall into for lack of knowledge. That the housing buying part of the board has been hijacked by those with a vested interest does a disservice to those that come here for advice and the reputation of the MSE himself. It is incredible that people have not been allowed to post that house prices can fall, they can only start threads about house price rises, when this is of such fundamental importance to the decisions people make. It may very well be too late now for many people.

devils_advocate · 29 March 2008 at 6:09PM

As I recall, (and since I'm therefore aged my memory's not too good!) there was not the gap between the rental cost and mortgage costs in those days (The reason that people rented, rather than bought, is that morgages were really difficult to get in those days! (2,5 time joint income MAX, with a 10% deposit if you were really lucky, normally 15-20% deposit. And taht was for firsdt time buyers). Pre crash, there was the same "I must get myself on the ladder because house prices are going up so fast, if I delay they'll be completely unaffordable" The cause of the crash was that prices were too high relative to everything else, but the tipping point was the mad rush to buy before double MIRAS was abolished. After that date, pices stagnated, then those who had to sell, had to sell for whatever they could get. Also because of the unwise buying decisions made by some people, the repossessions started to mount, setting the prices for the rest of the market.

So, to eventually answer your question, no I didn't hear of anyone selling to rent before the last crash. What's different this time is that a significant minority have forecast this crash for a few years, and therefore have taken steps to protect themselves for when the crash comes. The last crash as I recall was less forseen, and, IMHO, will be seen in hindsight to have been less deep than the current one will be.

And no, I haven't sold to rent, and I can't be bothered doing so.

PasturesNew · 29 March 2008 at 6:17PM

devils_advocate wrote: »

And no, I haven't sold to rent, and I can't be bothered doing so.

To be honest, if I were in a house/area I liked and the cost wasn't crippling me to the point of bankruptcy, I'd be of this thinking.

I wouldn't care if house prices were falling or by how much. I'd have my corner of England and be done with it.

The value of my house would be irrelevant if I liked what I had.

Selling/moving might bring into the equation a lifetime of regret if I had a lot of selling stress, waiting stress, buying stress and if the house I ended up with wasn't as good in the end as the house I'd sold.

Remember: Be careful what you wish for, you might get it!

Not being bothered ... is a damned good reason to stay put for many.

EdInvestor · 29 March 2008 at 7:13PM

The size of the private rented sector before the last crash was negligible because rent controls had not been lifted, so there were no BTLs.Most people were desperate to buy because the standard of rented accommodation was appallingly low and the rents high.

No comparison with the position now.

The main reasons for the last crash were the ratcheting up of interest rates ( to 15%!) and the rise of unemployment due to an economic recession.

Gorgeous_George · 29 March 2008 at 7:15PM

I was a FTBer in 1985 and had no problem getting a 100% mortgage.

GG

chappers · 29 March 2008 at 7:19PM

bluejake wrote: »

I agree entirely. The whole point of these boards is to stop people falling into the traps that other people fall into for lack of knowledge. That the housing buying part of the board has been hijacked by those with a vested interest does a disservice to those that come here for advice and the reputation of the MSE himself. It is incredible that people have not been allowed to post that house prices can fall, they can only start threads about house price rises, when this is of such fundamental importance to the decisions people make. It may very well be too late now for many people.

Thats tosh, who says you can't make posts about falling house prices.what is going to happen to the housing market is subjective and amatter of opinion, and even at a high finance level no one is or could ever be sure what is actually going to happen, if people want advice on factual details to do with housing then there isn't anywhere better to come than here.
If you ask a question that doesn't have a difinitive answer than expect to get responses from both sides of the fence you are then at liberty to take whichever advice you like, very few people on here give their opinions without backing it up with the reasons they have them.

devils_advocate wrote:

and, IMHO, will be seen in hindsight to have been less deep than the current one will be.

Just out of interest why do you think that will be because I feel the opposite because of the reasons given by EdInvestor

EdInvestor wrote:

The main reasons for the last crash were the ratcheting up of interest rates ( to 15%!) and the rise of unemployment due to an economic recession.

Were there many STRs before/during the last crash?

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