Is it a Good Time to Buy a House?

[Guvernator]

Just a question for all the clever financial bods on PH. I am currently in a fortunate position of owning a house which only has about 35% LTV of it's mortgage left to go. I was fortunate enough to buy it before the house prices went ballistic. I've also been taking advantage of the low interest rates and overpaying for quite a few years too.

I bought the house when I was single and now that I am married and thinking about starting a family we'd like to sell up and move to a bigger house in a nicer area. However this of course will mean putting all the equity I have on the current property down as a deposit on the new house and borrowing a sh*t load more on top to boot so my question is, is up-sizing to a bigger house really such a great idea at the moment considering the current financial sh*tstorm we are in or should we just sit tight where we are and ride it out?

[Sarnie]

Guvernator said:

Just a question for all the clever financial bods on PH. I am currently in a fortunate position of owning a house which only has about 35% LTV of it's mortgage left to go. I was fortunate enough to buy it before the house prices went ballistic. I've also been taking advantage of the low interest rates and overpaying for quite a few years too.

I bought the house when I was single and now that I am married and thinking about starting a family we'd like to sell up and move to a bigger house in a nicer area. However this of course will mean putting all the equity I have on the current property down as a deposit on the new house and borrowing a sh*t load more on top to boot so my question is, is up-sizing to a bigger house really such a great idea at the moment considering the current financial sh*tstorm we are in or should we just sit tight where we are and ride it out?

Mortgages are never going to be cheaper than they are now........

[mx stu]

Guvernator said:

Just a question for all the clever financial bods on PH. I am currently in a fortunate position of owning a house which only has about 35% LTV of it's mortgage left to go. I was fortunate enough to buy it before the house prices went ballistic. I've also been taking advantage of the low interest rates and overpaying for quite a few years too.

I bought the house when I was single and now that I am married and thinking about starting a family we'd like to sell up and move to a bigger house in a nicer area. However this of course will mean putting all the equity I have on the current property down as a deposit on the new house and borrowing a sh*t load more on top to boot so my question is, is up-sizing to a bigger house really such a great idea at the moment considering the current financial sh*tstorm we are in or should we just sit tight where we are and ride it out?

We're in the process of up-sizing (well when someone puts an offer in ours we will be!) to a house that'll comfortably be able to fit us in for the next 15 years. My opinion is that we'll take out a 5 year fixed mortgage and pay no attention to what else is going on - property crashes, interest rates going through the roof etc until at least 4.5 years time at which point the kids will be at school and hopefully my wife will be back at work.

At the end of the day if you're happy in your house and you can afford it whatever else is going on in the property world doesn't matter.

[Guvernator]

I agree that mortgage rates are low now but how long will they stay that way? mx stu you make a good point and I am trying to view this in the same way as you in that this isn't an investment opportunity for me but rather the place I intend to live for the next 10-15 years so in that respects you are right.

However if we take out a large mortagage then interest rates go through the roof and house prices crash it will be a bit unsettling. There is also the factor that if house prices are going to drop it might be better for us to hang on as we'll be able to get more house for our money.

Does anyone forsee a reasonable drop in house prices? People have being saying for years that they are too high and the current financial troubles will force a re-adjustment but it has yet to materialise, at least in the SE. The worst that seems to have happened is prices have stayed constant, will we see the massive drops like we saw in the 90's?

[e8_pack]

Lots of house price history at propertysnake.com. I've been saving and watching prices for the last 12 months and almost everything I have been watching has dropped apx 10k, this is around the 250k mark, most houses have been on for over a year with some popping up again with different agents.

We went to set one house that had been up for 315 initially, was 275 when we viewed and we were the first people to look at it! Been on for over 12 months! Heard that story every quite often.

[Sarnie]

Guvernator said:

I agree that mortgage rates are low now but how long will they stay that way? mx stu you make a good point and I am trying to view this in the same way as you in that this isn't an investment opportunity for me but rather the place I intend to live for the next 10-15 years so in that respects you are right.

However if we take out a large mortagage then interest rates go through the roof and house prices crash it will be a bit unsettling. There is also the factor that if house prices are going to drop it might be better for us to hang on as we'll be able to get more house for our money.

Does anyone forsee a reasonable drop in house prices? People have being saying for years that they are too high and the current financial troubles will force a re-adjustment but it has yet to materialise, at least in the SE. The worst that seems to have happened is prices have stayed constant, will we see the massive drops like we saw in the 90's?

Your over thinking it in my opinion.

Rates are low, they are only going to get higher and are likely to never return to current levels once the base rate gets back to 4-5%.

If your intending to live in it for the next 10-15 then what difference does it make what the value of the house does over that period? It's irrelevant.

If your worried about interest rate hikes then take out a long term fixed rate; no more worrying.

Your about 4 years too late to be waiting for house prices to crash in my opinion, especially if you are in the SE.

[Guvernator]

Again good points although I'm not sure on the house price crash comment. House prices didn't really crash at all in the SE, they merely stopped going up for a few years but there are many people saying that this financial crisis will get much worse before it gets better so a crash\price adjustment may still be on the cards.

E8 makes a good point, I've been looking at houses for 3-4 months now and it seems like the same houses are up for sale for ages but people are reluctant to lower prices to get a sale. Perhaps it's because they have been programmed to believe that house prices "only go up" for the last decade so find a drop hard to stomach, perhaps they have too much money\debt tied up in the house and need to realise a certain amount. Whatever the reason, we seem to be in a strange situation where houses aren't shifting but the market isn't adjusting down to compensate\stimulate demand either

To be honest I'd sell my house for less to achieve a quick sale if the people selling the houses in the rungs above where willing to do the same as I think the housing market is overpriced and a price adjustment is long overdue. Not an easy thing to say as a homeowner myself but I am a realist, whether it will actually happen is the 6 million dollar question.

As for interest rates, again lots of people are forcasting a return to 5-6% at some point in the next 3-4 years but can we forsee it getting higher? At 5-6% I could still afford the mortagage but if they were to rise to 13% like they did 2 decades ago I think I along with a huge number of other people would struggle.

[jonny70]

Sarnie said:

Your over thinking it in my opinion.

Rates are low, they are only going to get higher and are likely to never return to current levels once the base rate gets back to 4-5%.

I

I doubt rents will rise significantly, Housing benefit has been or is being lowered this will put downward pressure on rents, and i donth think its possible for rents to jump from say 500 p/m to 800 p/m in the short term , will not be vialbel

[uuf361]

It is a difficult question to answer as houses are the single biggest expense most people make in their lifetime and every one is in a different position so always down to personal circumstances I think.

For me, I started looking at houses at the beginning of the year and wanted something different accepting they don't come along very often.......have now found one, and my house was put on the market for a realistic selling price and achieved 100% of that price within 4 weeks of going on the market despite a similar property in the same road now having been on the market at a higher price for over 6 months.

I'm buying as somewhere to live rather than for its appreciation as it'll be my home. I've factored in a rise to about to about 5% interest rates which would be painful but on a fee free deal I'll hopefully be able to switch/fix if they start to rise rapidly but am not overly concerned.....

For me it means going from what is a hugely comfortable 19% LTV to a 57% which I appreciate still isn't high in comparison to a lot, and assuming no windfalls come my way (which unfortunately I know will happen) then it wouldn't be paid of until retirement but I've decided it's the right thing for me....

Edited by uuf361 on Thursday 1st November 07:58

[chris7676]

Sarnie said:

If your intending to live in it for the next 10-15 then what difference does it make what the value of the house does over that period? It's irrelevant.

It makes a big difference if you buy at sky high levels and it won't be there in 10-15 years. It's called a capital loss, opposite of capital gains that nearly every official source expects in such period.

Sarnie said:

If your worried about interest rate hikes then take out a long term fixed rate; no more worrying.

You can't fix it for more than 7-10 years, can you?

[Sarnie]

chris7676 said:

You can't fix it for more than 7-10 years, can you?

It's all relative. Even if prices were high now and then lower in 15 years time when you move on, the same will have happened to the property your purchasing. People need to get out of the thinking that if they buy a house now, then in X amount of years it will have gone up by Y thousands.

The key factor is the cost to change between the two properties which is unlikely to change whether house prices have gone up or down.

With regards to fixed rates, not sure how much of a longer term fixed rate you'd want than 10 years? Thats almost half the time of the standard mortgage term....

[Guvernator]

^^^ Exactly this. While I am not looking at this house as an investment, the last thing I'd want to happen is for house prices to tank as soon as I bought it. Lot's of people who bought at the top of the price curve in the early 90's just before the crash took 10+ years plus to recover from negative equity. While it shouldn't make a difference if it's a house for living in and not an investment, I think in reality no one would be comfortable owing a huge amount of money on an asset which isn't worth as much especially if the economic outlook is uncertain.

Some of the foremost guys who vocally predicted the current economic crisis about 5-6 years ago are now saying the worst is yet to come and 2013 could be a real stinker. While I am keen to move and start our life in our new house, I am also trying to do as much research as possible to avoid making a mistake as I can't afford to gamble the future financial stability of my family on a Dr Pepper style "what's the worse that can happen"? decision. I guess no one has a crystal ball, just trying to gauge what the confidence of fellow PH'ers is in the housing market, could there really be a house price crash in the foreseeable future?

[jonny70]

If you can wait a year and see what happens, prices are definitely not going to go up (unless certain parts of London) , at Best they will stay the same and more likely fall.

[cossy400]

As you ve said 2013 "could be a stinker", stepson and GF did as much research as poss when they bought at the beginning of this yr.

And so far in the 9 months they ve lived there, the 3 houses on the same street have not dropped there prices nor have they sold.

Now the house they bought was 130k the other 3 range from 135-155k. They like you are thinking fixed for 5 yrs, but that was mainly due to 1st house and wanting to know where they were money wise.

If it was me id buy again now.

[jdw1234]

I bought a house in August (South East).

This means that houses will definately crash by a vast amount!

:-)

[chris7676]

A lot would depend on the location.
If you are buying in the London area (particularly the "Prime London") you are likely to be buying at the historic peak and at the one of the most expensive markets in the world. It's either a safe haven or a bubble, depending which terminology you prefer. Just bear that in mind...

[chris7676]

jonny70 said:

Sarnie said:

Your over thinking it in my opinion.

Rates are low, they are only going to get higher and are likely to never return to current levels once the base rate gets back to 4-5%.

I

I doubt rents will rise significantly, Housing benefit has been or is being lowered this will put downward pressure on rents, and i donth think its possible for rents to jump from say 500 p/m to 800 p/m in the short term , will not be vialbel

Interest rates, NOT rents.
Indeed not much seems sustainable in these times of "economic surrealism".

[Guvernator]

Hmmm so the general consensus seems to be wait a bit? While drops have occurred in other parts of the country, prices haven't really dropped in most areas of London (the decentish one's at any rate) only stagnated. Either this stagnation will continue or we will see a drop at some point.

Nothing is moving quickly at the moment anyway it seems bar a few exceptions so I may not have too much choice especially as Autumn\Winter is usually a very slow season for house sales. I might hang on for a few more months till the new year to see if the doomongers are right.

[Sarnie]

From todays HPI;

"Commenting on the figures, Robert Gardner, Nationwide's Chief Economist, said:
“UK house prices increased by 0.6% in October, more than offsetting the 0.4% decline recorded the previous month. Monthly price changes have failed to establish a strong trend in either direction over the past six months, with three months of increases and three months of price declines since May 2012.

“The annual pace of change continues to display a picture of relative stability, with house prices down just 0.9% compared to October 2011. This maintains the pattern that has been evident since late 2010, with annual price growth remaining in a narrow band between +1.5% and -1.5% on all but two occasions over the past two years.”

[Guvernator]

Yep, I read that report which basically confirms that we've gone through a period of stagnation on house prices, however no one bar a few brave souls seem to want to predict what will happen next.

Personally I don't think we'll see a return to massive house price rises any time soon, I mean just how high can they go? They are too high for most people to afford already so I can only see two scenarios for the foreseeable future.

1) The stagnation continues for the next few years. In this case I'd probably still buy\move as stagnation wouldn't worry me.

2) A price re-adjustment or crash, this would worry me and I wouldn't want to buy in that kind of environment until house prices had settled\stopped falling.