Page 3 | If I don’t need a mortgage, should I buy a house this year, or wait and hope prices drop

Colourmylifewith · 2023-05-04T09:06:20+00:00

I’m really undecided. I don’t need to sell and won’t need a mortgage (for the right price) I’m in the north and just can’t decide if now is a good time. The house I would be able to get would be smallish, prob terrace or semi with a small garden, but it would be a home for us, would it be unreasonable to buy at the moment? I just don’t want to buy at a bad time and think if prices drop I could maybe get something slightly bigger? Any help appreciated

Original poster

Colourmylifewith · 04/05/2023 16:50

GasPanic · 04/05/2023 15:45

Problem is a lot of people in the market weren't born when the last serious crash happened (mid 1990s).

There was a bit of a correction in 2008, but generally the market was propped up by the government.

I think generally politicians feel a falling market is extremely bad for their re-election prospects. So given the chance of the market falling, or stuffing a few billion into mad schemes like Help to Buy, the government will always find the cash.

However, maybe one day, and maybe not too far away, prices will fall so much even the government can't or is unwilling to pony up the cash to stop them.

House prices do always go up (eventually) but there can be a long wait for you to recover your money. Round my way some houses that were selling for 170k before the 2007 crash took until 2018 to recover their value in purchase terms (and are probably only now starting to recover in real terms). So yes, a buyer will probably recover their money eventually, but it could take a long time. Of course if you factor in rental costs over the same period, that probably more than cancels out the real terms part.

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I’m finding different perspectives really helpful, just hearing what others think it would do is useful!

OP posts:

Walldoorwindow · 04/05/2023 18:30

AliceOlive · 04/05/2023 14:59

@Walldoorwindow I bought in 2007 and was never, ever gutted. I bought the house to live in it, not to turn around and sell. I sold that house in 2020 (before the boom). So I bought in a high priced market, sold in a regular priced one and still made a nice profit.

I bought immediately, again before the boom. This house now would easily sell for 15% more than I paid. It will fluctuate, but I have no intent to sell any time soon and have a very low fixed interest rate.

I’d be avoiding these high Interest rates if I were looking now, but OP has cash. She’s not exactly in the same category as someone borrowing to buy. The UK is in a housing crisis; supply is not likely to meet demand again any time soon. The OP should consider that above all. She sounds like she’s currently renting; throwing away cash she could be putting into a home.

It's great for you that you are pleased with your decision. But if prices do fall by a further 10% - which is perfectly likely and less than in 2008 - then a typical property, currently priced at around 300k, will be 30k cheaper next year. Factor in a 25 year mortgage at 5% and that's a £52k loss. £52k! In no other situation would anyone be suggesting not to worry too much about £52k. No one is suggesting that the OP abstains from buying long term. The question is whether to buy right now this minute vs in a few months or a year.

I think some people fail to understand the meaning of demand in the phrase supply and demand. It's not determined (just) by people desperately wanting houses. If they can't afford them then prices go down anyway - and with inflation still positive, interest rates still going up and house prices still historically very high, affordability could definitely be an issue going forward.

Walldoorwindow · 04/05/2023 18:44

OP, have you gone to the nationwide house price index and searched for your postcode? How have prices changed there in each of the last few quarters? This could give a sense of whether your local market has bottomed out yet.

Ignore newspaper headlines and the people quoting them: they reported house price increases in February and March which were eventually contradicted by government data. One headline said that my area was the only one in the country where prices had not fallen at all. When I checked, they had fallen for three consecutive quarters, by a total of 6%.

perhaps, rather than asking whether to wait to buy, a more productive conversation to be having here would be about what is the optimal waiting strategy. I've been trying to figure out what my own approach might be. I think I might wait for three consecutive months of price rises before buying (government statistics only) OR a total rise of, say 2%. whatever happens first. But I'm very open to other people's thoughts on that.

itsgettingweird · 04/05/2023 18:51

If you're a cash buyer.

Can you buy now and then if prices drop sell your current home (it won't have equity obviously) and buy somewhere bigger.

Would you be in a position them to cash buy again or get a small mortgage?

Original poster

Colourmylifewith · 04/05/2023 18:57

Walldoorwindow · 04/05/2023 18:44

OP, have you gone to the nationwide house price index and searched for your postcode? How have prices changed there in each of the last few quarters? This could give a sense of whether your local market has bottomed out yet.

Ignore newspaper headlines and the people quoting them: they reported house price increases in February and March which were eventually contradicted by government data. One headline said that my area was the only one in the country where prices had not fallen at all. When I checked, they had fallen for three consecutive quarters, by a total of 6%.

perhaps, rather than asking whether to wait to buy, a more productive conversation to be having here would be about what is the optimal waiting strategy. I've been trying to figure out what my own approach might be. I think I might wait for three consecutive months of price rises before buying (government statistics only) OR a total rise of, say 2%. whatever happens first. But I'm very open to other people's thoughts on that.

This is amazing advice, I think if I apply a strategy like yours I will feel like I’ve made a solid basis for a decision and it might help me stop flip flopping around about it all! Thank you

OP posts:

Postapocalypticcowgirl · 04/05/2023 19:00

The national picture doesn't necessarily tell you what's happening in your local area. And it can vary between different parts of the market- I'm at the lower end and prices are definitely stagnating/dropping, but not quickly, and they are still a lot higher than 2019 prices.

In another part of the country, or even at a different price point, things could be different.

If you're not desperate to move, I'd keep an eye on the market and see if anything comes on that you really like!

Original poster

Colourmylifewith · 04/05/2023 19:00

itsgettingweird · 04/05/2023 18:51

If you're a cash buyer.

Can you buy now and then if prices drop sell your current home (it won't have equity obviously) and buy somewhere bigger.

Would you be in a position them to cash buy again or get a small mortgage?

I think the problem is I don’t foresee being able to get much of a mortgage in the future, I massively changed careers/income/ job security after DCs so although I’m really glad I have the funds to buy, it’s the only amount I will have certainly in the next few years

OP posts:

Dodgeitornot · 04/05/2023 19:16

I think threads like this really sum up the problem well. First and foremost property is investment not a home. Until this attitude changes, the problem will stay.

AliceOlive · 04/05/2023 19:24

Colourmylifewith · 04/05/2023 19:00

I think the problem is I don’t foresee being able to get much of a mortgage in the future, I massively changed careers/income/ job security after DCs so although I’m really glad I have the funds to buy, it’s the only amount I will have certainly in the next few years

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This is a good reason to buy now, while you are certain exactly what your money will allow you to buy. You don’t know what the future will look like.

FirstnameSuesecondnamePerb · 04/05/2023 19:25

If you want to buy a decent home, waiting for prices to drop is a fools game.
If they do, people will just stay put and there will be chuff all houses to buy!
I'd crack on.

Original poster

Colourmylifewith · 04/05/2023 20:32

Postapocalypticcowgirl · 04/05/2023 19:00

The national picture doesn't necessarily tell you what's happening in your local area. And it can vary between different parts of the market- I'm at the lower end and prices are definitely stagnating/dropping, but not quickly, and they are still a lot higher than 2019 prices.

In another part of the country, or even at a different price point, things could be different.

If you're not desperate to move, I'd keep an eye on the market and see if anything comes on that you really like!

I need to do a bit more research, it’s a cheap part of the country but I havnt noticed the prices reducing as of yet, maybe they won’t!! You’re right tho, I’m ok where I am, so can just keep looking maybe

OP posts:

Original poster

Colourmylifewith · 04/05/2023 20:33

Dodgeitornot · 04/05/2023 19:16

I think threads like this really sum up the problem well. First and foremost property is investment not a home. Until this attitude changes, the problem will stay.

I know, wish I’d applied this when I sold my first home many years ago instead of continuing to rent it out!!!

OP posts:

Batalax · 04/05/2023 20:34

bibliomania · 04/05/2023 10:26

If you're renting in the meantime, the rent you pay over the next year or so may well outweigh any financial gain from waiting (if there is one).

I was going to say this.

Templetonrat · 04/05/2023 20:40

North west town here and the higher end properties are not selling and are being reduced. Lots of medium priced properties selling quicker. So depends on area I think!

BarrelOfOtters · 04/05/2023 20:57

Have you thought about enquiring about a mortgage. It sounds like you have lots of equity so a relatively small mortgage, which can have small repayments, could see you with a better house. And yes, any benefit of waiting is likely to be wiped out by renting. And house buyin* is such a long process, I’d start it sooner rather than later.

AliceOlive · 04/05/2023 22:30

Walldoorwindow · 04/05/2023 18:30

It's great for you that you are pleased with your decision. But if prices do fall by a further 10% - which is perfectly likely and less than in 2008 - then a typical property, currently priced at around 300k, will be 30k cheaper next year. Factor in a 25 year mortgage at 5% and that's a £52k loss. £52k! In no other situation would anyone be suggesting not to worry too much about £52k. No one is suggesting that the OP abstains from buying long term. The question is whether to buy right now this minute vs in a few months or a year.

I think some people fail to understand the meaning of demand in the phrase supply and demand. It's not determined (just) by people desperately wanting houses. If they can't afford them then prices go down anyway - and with inflation still positive, interest rates still going up and house prices still historically very high, affordability could definitely be an issue going forward.

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I don’t understand your calculation, maybe you can explain. It seems like you are assuming unknown factors and ones that don’t apply to the OP.

First, any theoretical house the OP wants to buy won’t just sit there until the market drops, someone else will buy it. So no, it won’t be cheaper when the market drops, it will be just be gone.

OP doesn’t need a mortgage so she will not be paying mortgage interest. The only calculation we should do then is the difference between the interest she could earn by investing the money another way, vs the appreciation of the value of the house.

We can’t accurately calculate gains or losses until the OP sells the theoretical house.

You also need to factor in the amount she’s spending to live in and maintain a home she doesn’t own.

There are also soft factors like the likelihood that she will invest her money rather than spending it, if she doesn’t put it in a non-liquid investment.

AliceOlive · 04/05/2023 23:04

I’m also mildly entertained at this phrase: “It's great for you that you are pleased with your decision. “, which is a fact based on my actual ROI, being followed by the words “But if…” and some guesswork about what may happen.

You conjectured that you would have been unhappy if you’d bought in 2007 when in fact you don’t know what might have happened had you done so. (Was there a reason you could have and didn’t?)

Actual life experience outweighs guesswork.
And many believe a bird in hand in better than a guess about how many more might be lurking around the corner.

LemonSwan · 04/05/2023 23:09

I bought in the middle of brexit vote, half the market pulled out. Prices slowed then went up again. Then we had COVID. They skyrocketed more. Then recession and energy prices etc. Slowed but still up a not inconsiderable amount.

I would say just look. If you see a house you love then absolutely buy it. It’s harder than you think finding the right house let alone the price or the market. You will know if it’s right.

Freetodowhatiwant · 04/05/2023 23:12

I wouldn’t delay buying if you really want to buy, but you mentioned waiting in case a drop meant you can afford something bigger. If I wanted something bigger than I can afford as a cash buyer I personally would get a small mortgage to afford that bigger place.

LemonSwan · 04/05/2023 23:14

In no other situation would anyone be suggesting not to worry too much about £52k

And no of course. No one would want to spend 52k extra on a car or a printer. But houses are all unique. Even on a standard semi; Every street, every garden, the condition, any additions, the nearby school, the neighbours etc. It all makes a house unique. Would I balk about spending 52k extra on a house because I want it to win it over someone else. Absolutely not. Because it’s not just a infinitely replicable inanimate object - it’s your home.

AliceOlive · 04/05/2023 23:24

LemonSwan · 04/05/2023 23:14

In no other situation would anyone be suggesting not to worry too much about £52k

And no of course. No one would want to spend 52k extra on a car or a printer. But houses are all unique. Even on a standard semi; Every street, every garden, the condition, any additions, the nearby school, the neighbours etc. It all makes a house unique. Would I balk about spending 52k extra on a house because I want it to win it over someone else. Absolutely not. Because it’s not just a infinitely replicable inanimate object - it’s your home.

Agreed, houses aren’t just a commodity.

And that projection was 52K spread over 25 years on a mortgage the OP doesn’t need or intend to obtain.

Based on the logic and numbers being used, OP would pay 30K more over 25 years.
Would you pay 1.2 extra annually to live in a house you loved for 25 years?

Is it even conceivable that if you stayed in a house 25 years and took care of it properly, you’d have to worry about selling it for less than you paid? If so, we all have bigger problems.

LemonSwan · 04/05/2023 23:32

AliceOlive · 04/05/2023 23:24

Agreed, houses aren’t just a commodity.

And that projection was 52K spread over 25 years on a mortgage the OP doesn’t need or intend to obtain.

Based on the logic and numbers being used, OP would pay 30K more over 25 years.
Would you pay 1.2 extra annually to live in a house you loved for 25 years?

Is it even conceivable that if you stayed in a house 25 years and took care of it properly, you’d have to worry about selling it for less than you paid? If so, we all have bigger problems.

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Yes I did 🤣 a year and a half ago. Calculated what I thought would be the highest estimate of actual worth. Then threw £30k and some extra to get an odd number to absolutely guarantee as best I could I would get this house. I fucking love it. Technically am sure we overpaid but no regrets. And am I spending double that again on doing it up. Yes, because it’s my home.

I am pretty sure OP hasn’t even looked properly. Because 80% of houses are shit. 15% acceptable and only 5% worthy of actually falling in love with. We search for a year. Full time. It’s not easy finding the right house even if you have an unlimited budget.

CheersForThatEh · 04/05/2023 23:34

Are you a cash buyer? If so spread your money out into different banks as I think banks only protect up to 85k if they go bust.

AliceOlive · 04/05/2023 23:45

@LemonSwan I totally understand. We did similar then have the sellers an extra $20K when they got a little squeamish. Never mind adding a patio, new carpet, ripping out a bathroom, refinishing floors, tile on another floor. And we haven’t even got the kitchen on the radar yet. I plan to spend most of the rest of my life in this house. It’s already worth considerably more than we paid, because we bought it without it ever being advertised.

I do subscribe to the “the house you live in is not an asset” school of thought, despite having come out well in the past.

Assets grow in value, they don’t consume all of your emotional, physical and financial resources. 🤣

Worth every bit for a house you love.

LemonSwan · 04/05/2023 23:59

AliceOlive · 04/05/2023 23:45

@LemonSwan I totally understand. We did similar then have the sellers an extra $20K when they got a little squeamish. Never mind adding a patio, new carpet, ripping out a bathroom, refinishing floors, tile on another floor. And we haven’t even got the kitchen on the radar yet. I plan to spend most of the rest of my life in this house. It’s already worth considerably more than we paid, because we bought it without it ever being advertised.

I do subscribe to the “the house you live in is not an asset” school of thought, despite having come out well in the past.

Assets grow in value, they don’t consume all of your emotional, physical and financial resources. 🤣

Worth every bit for a house you love.

Yes totally agree!

they don’t consume all of your emotional, physical and financial resources.

Haha never a truer word said! I am actually doing my kitchen this year. I have spent 1.5 years in a house with no kitchen; just a travel hob, sink and air fryer with a baby 🤣 That’s how much I love this house. And the house is beautiful in its bones, but that’s only half of it. It has this really warm energy. That sounds totally woo. I never had it in my first house. It’s just something I can’t describe.

I honestly have no idea how much this house is worth. To me it’s priceless, and am sure to the right someone else it would be also. But it’s so unique I really have no idea until I sell it what it’s worth. It has some negatives people would absolutely hate, and other plus points which are near impossible to get.

I do see it as an asset - If I am dead 🤣