Would you buy now or wait to see what the market does?

[noautumnglow]

We're currently in rental after selling my house a couple of years ago and our purchase falling through. We've viewed the most perfect house in a lovely location and really want it. But are concerned about ending up in negative equity as house prices are falling currently.

There's no rush for us, except our age ( late 40's so mortgage term will be affected) plus we don't want to miss out on this house! The house has been on the market since August and they haven't dropped the price yet.

Trying to time the market is a fool’s game. People have been waiting for the market to crash since time began. And they regret it even if they won’t admit it. It’s always a good time to buy, especially if it’s going to be your home.

Negative equity is only really important if you need to sell or remortgage. Can you get the mortgage over a longer term to minimise any impact of house price reductions? I've just bought, fully aware that prices might fall but with a 10 year fixed term and no plan to move any time soon I don't really care. If it's the perfect house why wait?

I’d go ahead and buy the house you love!

If you’ve got the proceeds from a previous sale presumably you’ll have a lower LTV and less risk of negative equity anyway

Why have you only just seen the house if it's been on the market since August?
If they haven't dropped the price and it hasn't sold then it's overpriced and you may find the vendors unwilling to take an offer

It's highly likely that the price of your potential purchase would fall if you buy now. However, that it not the same as being in negative equity. Surely, if you are not FTB's you have a healthy deposit? I guess it depends on this relative to house price falls as to whether you would actually be in negative equity.

Anyway, if you really love the house and it is in your perfect location, you need to weigh this up against the above. Clearly, no one else wants to buy anywhere near the current price point. Could you put in a low offer, depending on what it is worth to you, and see what they say? They may become more realistic in a while even if they decline now.

I am trying to buy, also having sold and in rented, but there is little coming on the market in my area and the properties IMHO are still over priced, as is evidenced by them staying on the market a long time and having reductions and STILL not budging. If you can afford the repayments at these mortgage interest rates and love the house I would absolutely do what I could to buy it. I would start with a cheeky offer though as it IS a falling market.

Thanks all. I know what the pp stating only fools wait for a falling market mean. But houses around me are suddenly falling in price drastically in a way I've never seen before.

I don't have a large deposit unfortunately as I had to buy my ex husband out of the last house I owned, so we only have £25k deposit so could only afford £250k max. The house is on the market for £259, 950. In my opinion it's worth about £235/240k in the current market but that's irrelevant I know, it depends what the vendor is prepared to accept!

Reason I've only just seen the house when it's been on the market since August is that I've only just got to the point where I feel comfortable enough to purchase a property with DP so we've only just started house hunting.

I know what the pp means about trying to time the market but it is different now, with large falls taking place rapidly in lots of places such as you have described. No one wants to end up in negative equity and, if you only have a small deposit, it's a risk.

If you offered 235K that would be less than 10% off which is within the realm of normal in normal markets, particularly for houses that haven't sold in 6 months. In a falling market, you could offer 12% off or more. You could always offer it in an email, explain that you have no property to sell and can move quickly. Then, it's up to them. As I said, even if they say, no now, they may feel differently in a couple of months and come back to you.

Prices have dropped massively, they won’t keep going down. I think they’ll start rising in March as they usually do in Spring.

This is the perfect time to scoop up a bargain as everyone who didn’t sell last year is currently desperate and lower priced.

What makes you think prices will start rising in 2 months? The fall in prices only started a few months ago. Historically, peak to trough takes 2 or 3 years and then another 2 or 3 years at trough. Even in 2008, when the BOE lowered rates to zero and kept them there, prices continued to fall for some time.

There is no reason to think that things will 'pick up' in Spring. Interest rates will remain at similar rates, base rates will continue to rise (BOE can't cut to zero now), inflation is still high, most people have had significant real terms pay cuts, more stealth tax rises after April, sentiment is negative. It seems much more likely that more sellers will come on the market from Spring onwards thinking 'things pick up in Spring' giving buyers more choice and ability to negotiate downwards.

View the house and offer what you can afford to. If it’s been on the market a while they may accept a lower offer - all depends on their need to sell. I think it’s impossible to time
the market. We are currently buying a house and chances are value will fall but equally so would the value of the house we are selling. We have a decent sized deposit so not worried about negative equity and not planning on moving again for some time anyway. Good luck

I think there is more optimism in the economic outlook than there was before Christmas so I also think that prices may start to recover in the spring. Property is never a bad investment so I would try and negotiate a bargain now rather than wait.

I would wait, the market is slowly correcting itself like used car prices are at the moment because of the covid bubble, sellers seem to think they're house will sell for same price as next doors did last year, but cost of living crisis and mortgage rates are through the roof now, almost every new listing near me is a reduced one or a "unexpectedly back on the market" one

I would offer what you can afford & be prepared to be turned down and then find another house. Those who are holding out for unrealistic prices probably won't budge , some who genuinely want to move may. I would offer on what you like at what you can afford rather than waiting for some property crash which may never happen.

You might find this helpful:

He seems to give sensible, realistic advice for buyers and sellers.

You say you are currently renting. How much are you paying per month? What will your mortgage repayments be?

if you wait a year, you may have paid (for example) £12000 (12 x£1000) per month rent. if your mortgage costs £6000, and the house drops by £6000 in that period, then you even.(clumsy maths, but I hope you can see what I’m getting at).

I am also renting after selling my flat in December and started viewing houses.

I am definitely not going to offer asking price on anything in this market and likely will go for 5% or 10% under depending on the condition of the property.

There are quite a few houses where I am looking that have been on the market for a while. The feedback from estate agents is that the market is fairly quiet.

I think also if you are renting you need to time your purchase so that you can still rent while the buying process takes place but also don't end up having to pay rent and mortgage for too long when you give notice.

I have set myself a top budget in term of how much I can offer and will not move from that. The sellers can always say no if they do not agree with the offer.

Go for it asap as someone else will and you’ll regret it for life when prices don’t come down like you want and nothing competes with that house?

So long as you can afford to be pushed into negative equity for a while if there is a housing market decline, and provided you are comfortable with your job security or your re-employability and will be able to pay the mortgage even if interest rates go somewhat higher then I would say to go for it.

Finding a house that you really love is not a common thing. That is what money is for. Just do not offer more than you can afford.

Chuckle. Negative equity is not a thing. Or rather, it is only a thing under very specific circumstances, which are actually extremely rare. If you bought now, and it turned out to be the peak, and shortly afterwards you absolutely had to sell, and in that time the economy had worsened such that nobody else could afford to or wanted to match what you'd paid, then sure, in theory you could end up with less capital than you'd started with. But even then, if your intention was to sell up and buy an alternative property, you'd actually still be OK in that scenario. So it's only if you had to sell and weren't looking to buy, that you'd facing losing your £25k. How likely is all of that? What people mean when they talk about being in negative equity is "if I needed to sell, I fear I might get less than I paid for it". But very, very few people actually do. And for those that do, there's normally a reason to do with a life-altering change in circumstances which means that losing £25k is the least of their problems.

People remember the recessions of the 80s, but forget that they were caused by closures of collieries and steelworks and factories in towns where there was only one employer. Those communities faced the double whammy of everyone losing their jobs, all at the same time, and being unable to cover their mortgages at the same time as nobody else being able to afford to buy their homes off them. The 2023 recession may turn out to be bad, but it won't be as localised and the pain will be spread more widely across the whole country.

The chances of nobody wanting or being able to afford a home that is genuinely lovely, in a nation of 67 millions is ... pretty much zero.

All points are valid. Buying now is good. Waiting to see what the market does is also good.

Just be careful you know how your mortgage is being calculated. One of my friends is a banker and he said a lot of the UK Banks had to reassess their mortgages about 10 years ago at the request of the FRC as they had changed mortgage softwares so many times they didn't accurately know the value of customers mortgages (due to different systems calculating things differently). This led to negative equity arising unnecessarily for some customers. They later agreed to pay amounts they overcharged back to customers, but the unsaid agreement is that they do not know exactly how much the mortgages are worth. Understand who you are signing a mortgage with and run your due diligence as this will be one of the largest investments you make!

Looking at the state of the US & Chinese economies, whose chickens will come home to roost this year, I'd wait a few months or even a year to make a killing. We aren't about to come out of recession, we're just entering it and it will be harder and more painful than those before because the figures now dwarf those of the sub-prime crash.
That said, expensive areas just freeze still in my experience. So it's budget & location dependent.

For a perfect house that's unusual (IE not one in a row of identical terraces that come up for sale every few months or similar) and you can afford it, just buy it now. Life is too short for what ifs.

Perhaps consider: would I feel worse if someone else buys it, or if I bought it and next year it's theoretical value was £25k less than I paid?