House value dropped - what happens now?

[MagicalTrevor]

I'm a bit confused about moving house when in negative equity.

We bought our house at, what we now discover to be the peak of the market. We didn't max out the mortgage and we were fairly sensible a out what we bought. The payments are comfortable and not a problem at all.

So let's say we wanted to move house. The amount we owe is more than the value of the house and we don't have 'house buying' levels of savings to get us back to a neutral equity level. What happens in this situation, I'm afraid I'm a bit confused about it all and would appreciate some guidance.

Cheers

[ringram]

Exactly the issue in the US. People cant move.
Or they can but end up locking in their losses.
If you have to move and have done your sums you may need to rent and pay off the debt.
Im sure someone else will advise.

[MagicalTrevor]

ringram said:

Exactly the issue in the US. People cant move.
Or they can but end up locking in their losses.
If you have to move and have done your sums you may need to rent and pay off the debt.
Im sure someone else will advise.

It's just frustrating that we did 'the right thing' in having a deposit where others were maxing out their mortgages and putting no deposit down

[bogie]

you have to wait until youve saved up the difference and take the hit, or the market goes up and you are back "in profit"

..thats just how it is with buying and selling "assets" of any type whether it be shares or houses

only you decide when to buy and sell, and whether you take a loss, or you wait and take a gain.......

[Sarnie]

MagicalTrevor said:

ringram said:

Exactly the issue in the US. People cant move.
Or they can but end up locking in their losses.
If you have to move and have done your sums you may need to rent and pay off the debt.
Im sure someone else will advise.

It's just frustrating that we did 'the right thing' in having a deposit where others were maxing out their mortgages and putting no deposit down

But those who put no depsoits down, are in a far worse position that you now.................

[Deva Link]

MagicalTrevor said:

We didn't max out the mortgage and we were fairly sensible a out what we bought.

...and we don't have 'house buying' levels of savings to get us back to a neutral equity level.

Unless you've been very unlucky those statements don't make sense (unless you bought a new build flat somewhere).

You didn't max out the mortgage yet you're stil "house buying" levels of savings away from being neutral? How much has your house dropped in value?


Without savings you can't buy another property - if you wanted to buy another you'd need a bigger loan than you paid for it so it could also include your current losses. And that ain't going to happen at the moment.

[MagicalTrevor]

The house dropped 25%!

Basically; developer built the street (3 bed houses) and was renting and selling them as time went buy. He's now struggling with cash-flow (so I believe) and has therefore dropped the price of the final house in his portfolio just to get shot.

I imagine he'll still make a profit on the final house and doesn't care that it devalues the entire street. There is nothing I can do about that, his house, up to him what he sells for.

So we now have a house that the developer himself has devalued lower than the Market average and has screwed us over.

If it was just a drop inline with the market then we could deal with that and move on.

[ringram]

Yep if you use leverage to buy an asset then you need to be prepared to take the good with the bad.
Over the long term houses should track inflation broadly. Given negative house price inflation its not surprising where things are at presently. However if you don't need to move and can hang on for a few more years it should eventually come good.

[Tino]

Harsh, I guess waiting till the house is sold is not an option? It could set precedent, but if they are priced correctly, the property should sell.
What do you believe the market drop is?

[Deva Link]

MagicalTrevor said:

So we now have a house that the developer himself has devalued lower than the Market average and has screwed us over.

It's always been very difficult for an owner to resell until a development is fully sold - even if it's not about the price, developers offer incentives that private sellers can't compete with.

You just have to sit it out until the final house is sold and then the prices should normalise.

[MagicalTrevor]

Cheers everyone.

We don't NEED to move, we'd simply like it if we could. Looks like we'll just have to hang tight. As I said, the mortgage is comfortable so the house isn't a burden at all.

I guess we should just simply look to reduce the negative equity as much as possible?

[Deva Link]

MagicalTrevor said:

I guess we should just simply look to reduce the negative equity as much as possible?

Overpaying the mortgage while interest rates are low makes a lot of sense.

[Pickled Piper]

Deva Link said:

MagicalTrevor said:

I guess we should just simply look to reduce the negative equity as much as possible?

Overpaying the mortgage while interest rates are low makes a lot of sense.

Yep, as above. Check your mortgage terms and conditions. Then use the opportunity to overpay the mortgage now while rates are still low.

pp

[groak]

MagicalTrevor said:

The house dropped 25%!

Basically; developer built the street (3 bed houses) and was renting and selling them as time went buy. He's now struggling with cash-flow (so I believe) and has therefore dropped the price of the final house in his portfolio just to get shot.

I imagine he'll still make a profit on the final house and doesn't care that it devalues the entire street. There is nothing I can do about that, his house, up to him what he sells for.

So we now have a house that the developer himself has devalued lower than the Market average and has screwed us over.

If it was just a drop inline with the market then we could deal with that and move on.

You could be worrying about nothing. The developer has basically created 'forced sale' conditions by reducing price artificially to generate a fast sale. That doesn't mean your house is worth what he has to take to get rid of it quick, unless you need to get rid of yours quick too (which you don't).

[MagicalTrevor]

groak said:

MagicalTrevor said:

The house dropped 25%!

Basically; developer built the street (3 bed houses) and was renting and selling them as time went buy. He's now struggling with cash-flow (so I believe) and has therefore dropped the price of the final house in his portfolio just to get shot.

I imagine he'll still make a profit on the final house and doesn't care that it devalues the entire street. There is nothing I can do about that, his house, up to him what he sells for.

So we now have a house that the developer himself has devalued lower than the Market average and has screwed us over.

If it was just a drop inline with the market then we could deal with that and move on.

You could be worrying about nothing. The developer has basically created 'forced sale' conditions by reducing price artificially to generate a fast sale. That doesn't mean your house is worth what he has to take to get rid of it quick, unless you need to get rid of yours quick too (which you don't).

I personally think that the true market is between 10% - 12% less than what we paid. I'm just worried that him selling this house for 25% less then he's setting the value of the other houses down there as well. Other people aren't going to appreciate that it was a 'forced sale' and they're not going to want to pay more for what they perceive as the same house in the same circumstances.

[Deva Link]

MagicalTrevor said:

.... they're not going to want to pay more for what they perceive as the same house in the same circumstances.

..depends what else is available nearby. I don't think you can look as narrowly as the immediate property unless it's a large estate and there's a very large turnover of them.

[ringram]

Nobody has lost anything yet. Pure speculation... Hmm isnt that was got us into this mess!?

[walm]

MagicalTrevor said:

I personally think that the true market is between 10% - 12% less than what we paid. I'm just worried that him selling this house for 25% less then he's setting the value of the other houses down there as well. Other people aren't going to appreciate that it was a 'forced sale' and they're not going to want to pay more for what they perceive as the same house in the same circumstances.

You won't know the "true" value until you try to sell your house.
The value of anything is neatly defined by what someone is willing to pay for it.

Your developer says -25%, you say -10-12% - all speculation.
Wait until it sells and then you will know.

There might be a bidding war.
No one might buy it for years and then it goes for -50%.

If you want to move put your house on the market and see who will buy it but it is a fair assumption that if the exact same house is at -25% then your -10-12% is somewhat optimistic (for selling RIGHT NOW).

You could always rent your place out and move somewhere else and rent yourself while you wait for the somewhat artificial -25% scenario to change.

[Edited for crap grammar.]

Edited by walm on Thursday 25th November 16:48

[don4l]

Paying a little extra off the mortgage can have a huge effect later on.
My 25 year mortgage got paid off in 15 years. The last few years have been fantastic.


House prices go up and down. However, in the long term prices go up. So, if you are prepared to sit it out, then you won't lose anything.

Don
--

[Welshbeef]

don4l said:

Paying a little extra off the mortgage can have a huge effect later on.
My 25 year mortgage got paid off in 15 years. The last few years have been fantastic.


House prices go up and down. However, in the long term prices go up. So, if you are prepared to sit it out, then you won't lose anything.

Don
--

overpayments provided if they totally affordable is what you should be doing in nearly all situations.
It wipes years off the term can save you tens of thousands of pounds in interest.

I've always overpaid as much as permitted by the provider and also of what is affordable.

Also IF you want it does give you the option later in life to upgrade to a bigger house all within the same original term overpayments dependant.

Also offset is the way to go - sure it's possible to get it overall cheaper if you sho around and do all the money moving constantly but for me there is little in it plus I don't have time to do all that.