Am I crazy for buying a house now?

[magneticmoon]

The back story is I've been trying to buy for years, had several fall through, for different reasons during the process and have found it all really hard and upsetting at times. I've finally found a house - what I would call a decent one. Not very old, a good price compared with other similar properties listed online.

For context I'm a single parent, I work full time in a professional role but there is just me earning. The mortgage will be about a third of my Income. And almost double what I've been paying as rent in a much smaller place, and for a long time.

I was feeling reasonably happy about this, but a friend has commented, thinks I'm mad to even be considering buying now, with what they see as harsh economic times, looming recession. Their view is I'm brave or crazy to consider it.

I know there is a risk. My job is relatively stable and secure but that could change. Something could happen personally or economically.. these are the risks you take in buying. Though I've never bought before. I'm not sure what the alternatives are - staying in a small rental, for however long and then what.

Is it really crazy to buy now, or would you just go for it in my position?

I think that sounds very sensible! All the best

The main thing is can you afford it? I would also discuss with your Financial Advisor taking out some form of income protection, as you're the sole earner.

People love to pretend they are an expert on the market, predicting property crashes recessions etc., the truth is no one really knows, if they did they'd be very rich. You have to do what is right for you - if you're happy to stay there for years it doesn't matter what happens to the market.

If you are comfortable with the repayments, and fix your rate if increases will be problematic, go for it.
You aren't buying "just to make money", you are buying for stability.
FWIW, I bought at "this has to be the top of the market" and sold 5 years later for twice the price (the next house purchase wasn't a success, and we sold 15 years later for £50 (fifty, no thousand) pounds more).

We are trying to buy now. It’s not ideal that this happens to be the right time, but there’s never a perfect time!

The best time to buy a house is 20 years ago. The second best time is now.

Plus there are some good deals to be had now with prices dropping. Just wish we could find something - someone beat us to a house we were excited about just before we viewed it so now impatiently waiting for new listings and reductions.

If you're looking at it as a stable home that you happen to be paying for in installments then the value doesn't really matter. It only matters when you sell and buy somewhere smaller or don't buy again. You can get insurance for things like losing your job or something happening to you.

I don't think there ever is a right time tbh!

If you can afford it, do it!

I don't think it's crazy, we're buying a house currently. Interest rates are not going to fall significantly, and there are plenty of bargains to be had. If you're buying on your own I'd make sure to get the right income protection and/or sickness/life insurance. As long as you'll be happy in the house for a good few years, and have a reasonable deposit. I wouldn't be buying with a 5% deposit at the moment.

P.S. whilst the mortgage payments seem high, at least they are consistent for a set period. Unlike rent which will increase, and you have no control over that.

I'm looking at the moment too and avidly read anything to do with house prices and the wider economy. Most serious commentators are advising the same thing - buy, but don't overpay. Waiting for the bottom of the market means wasting more money on rent and potentially missing out on your dream home. But negotiate a decent price so you're not in negative equity or selling for less than you bought it for if you need to sell in 2-3 years. Steer clear of vendors who are unwilling to accept that it's a buyer's market now.

We bought 6 months ago. Prior to buying we spoke to a financial advisor because we had similar concerns as your friend. He advised us to think first about what we need right now, and think about what the future markets may or may not be doing as a secondary consideration, because nobody knows what will happen 5, 10 years from now - the only thing you really can be certain about is your present circumstances.
If you need a home for you and your family, and a decent, affordable option is available, I would say go for it.
But I second what a PP said about taking out some kind of income protection in case you become unable to work for some reason in the future.

It’s a buyers market and it will remain a buyers market. Really, really research what you want and all the costs.
The market is awash with overpriced, run down properties. Do you know the costs of getting wiring, fencing, a drive, boiler, extension etc etc?
Also, if you over pay 50k, you’ll pay in mortgage repayments over 100k, so you’ll have to earn over 140k to pay it. That’s a lot of months of work.
That’s why it’s important to drive a hard bargain on the purchase price.

OP, people who talk about falling prices are delusional.

It won't happen. Imagine a scenario where house prices dropped 50%, would you rush out to buy one?

Of course you would, and so would everyone else. And what would you have then? A market on fire with buyers rushing to get a house, prices would then shoot up, and be back to where they were within months.

Only a tiny handful of people, who had everything in place, would leverage any advantage from the few weeks that prices had fallen.

The right time to buy is now.

Go for it op; it’s a sellers market right now, ignore the friend,

The great majority of people always say buy now on these threads but it all comes down to individual circumstances. There is no rule that buying now is always best. Your friend is right that we are facing very difficult economic times and that the future is uncertain. House prices are falling and likely to fall more, possible considerably more so you need to negotiate if you do buy.

You say the mortgage will be double your rent. That's a big difference. You have the option of paying low rent and saving lots.

A few questions to ask yourself.
How comfortable are you in the rental? How secure is it likely to be? How much do you like it?
What are your other expenses do you have? Are you paying £££ for childcare? How old are the children; they tend to get more expensive as they get older if you are not paying £££ for childcare. It's a big responsibility to be a single parent as no one else to share the load in most cases.
What sector are you in? How secure is your job likely to be in a recession where unemployment rises?
How old are you and how much longer will you be working?

Personally, from the information in the OP, I would say to wait until the end of the year but it's obviously your choice and you know your circumstances.

@onefinemess -not delusional to talk about house prices falling as that is what they are already doing. You do know that prices have crashed twice in the last 30 years, in 1990 and 2008 right?
If prices do fall by 50% it will obviously be in the constant of major economic problems, a massive recession, huge unemployment and great loss of confidence. Most people won't be in a position to charge out and buy.

Not much to add to the previous posts, apart from to recommend really getting to know the local market so you understand the pricing.

Near us, one town has barely anything for sale and things are being snapped up. 8 miles down the road, in a usually popular town reductions are the order of the day. I suspect much has to do with local estate agent strategies, but I'd think about how to approach negotiations differently in each town

If you do delay buying, don't stop keeping ab eye on the market. Understanding treads is really useful

Thank you. To answer some of the previous posts, my LTV will be around 75%. I have no debts and no other significant costs, am fairly frugal.

And my job is civil service, relatively secure middle level and reasonably transferable to a range of organisations.

If you don't need to buy right now then I say wait (same as I say to my nephew who is ready to buy). At least until interest rates start to show signs of levelling off. Ideally a bit longer than that. You have nothing to loose by waiting. Supply is increasing and prices falling. Continue to strengthen your position by saving as much deposit as possible. Worst case scenario is you have a wider choice of properties at the same prices as today. More likley it will be the case that you find yourself able to buy a better house for less by next spring. Opinions particularly of people who are relatively new entrants to the market should be taken with a pinch of salt imo - as should the opinions of those with large amounts of mortguage debt. House prices have always been cyclical and we are starting a period of correction. Talk to older generations who have been there before and listen to what they think.

100% go for it. There’s never a bad time to get on the property ladder imo. Your mortgage will shrink over time - your rent will only ever increase. I would go for a 5 year fix so you know what rate your paying for a while. Good luck.

I would not go for a five year fix as rates are expected to come down next year.

I’d go for it.

be very careful about not paying over the odds for a house you want though. Walk away if you need to.

and be very wary in particular in offering on houses that need a lot of work. Tradespeople costs have gone up a
LOT and many are really difficult to nail down too.

see about getting income protection insurance incase you get made redundant. That said if you are civil service you will be far more secure than we are.

we bought a few months ago and neither of our jobs is particularly stable, it’s worked out ok so far but it’s about the level of risk you’re comfortable with.

No, I don't think you are mad. Your friends who are saying you are have probably not spent years putting up with manner of annoyances in rented accommodation. They are trying to look after you by making sure you are not going to financially stretch yourself in the midst of the wrong time to buy for 20 years, which is kind, but if they are home owners, they just won't 'get' it.

I have been renting flats for 31 years and this year has pushed me to the brink of I Just Can't Put Up With Other People's Shit anymore. The rental market has spiralled to dire in the last two years and it is only going to get progressively worse over the next few, unless there are some major government incentives put in place to attract potential new landlords. Right now, they are selling up in droves.

If you have a kid and can afford to buy your own house, the financially responsible thing to do is to buy a place so that you can build up equity, and at some point down the line, your child may have some sort of inheritance.

But you really seriously need to dive down into the maths to figure out if you should do it now, or wait a few years. I am terrified of negative equity so have done a bit of work on the sums.

• My OH is 41 and because I cannot work, it is cheaper for us to remove my name from the mortgage; brokers have made this affordable to us by stretching the mortgage to a term of 33 years (we are FTBs with only a 5% deposit)

• Our mortgage costs are going to be scary; we will pay a minimum of 2.2k a month versus our current rent cost of 1600

• What's going to happen to mortgage rates in the near to medium term future is currently a very grey area amongst economists; currently the most expensive mortgages are those with 3 year fixed rate deals, I assume because that is when mortgage lenders think rates will be low enough for them not to make a big profit because they will have dropped

• 2 and 10 year fixed rates are currently the worst deals you can get.

If you have a very small deposit as we do, short term fixed rates are a very real risk to financial stability. If we were to mortgage with a 2 year fix and house prices drop in the area we move to, we wouldn't be able to move to a different mortgage lender after year 2, and we would be stuck on the SVR, which is the rate mortgage lenders charge when your initial discounted fix ends. Currently, SVRs can be twice the discount rate. For us, that means our 465 house goes from costing us 2.2k a month to over 4k a month. When house prices drop and you end up in negative equity, you basically get no choice but to stick with your current lender's SVR because nobody else will offer you a mortgage.

Which leads me on to my next and most important point. Firstly you need to decide what level of risk you can afford to take with mortgage rates. If you absolutely cannot afford to take a risk, go with 5 years, because even if house prices crash, they will probably rebound within that period. Secondly, be militant about where you buy and how much house prices rise in that area .It's no good putting the postcode into Rightmove and seeing 'house prices have risen 9% in SE26 in the last year and 25% since 2019' because it's utter bollocks. People who own £400,000 houses sell their houses to their children for £15,000 to avoid inheritance tax, and the odd one or two 1.5 million land sale in a really low priced area will superficially raise the average price to far higher than the 150k average selling price in the area.

The only way to truly guage sales is to put the postcode and nearby postcodes into a land registry sold prices search. Then calculate their first sold price versus their last and you can get an average percentage per year price rise by dividing the rise by number of years.

I have seen many houses that I like, but when I looked at land registry history, discovered that more than half of them LOST money over the last 10 years. That was far too much of a risk for me.

There are some years when vast falls are normal - a lot of folks lost money from 2008-2013, so ignore those.

My other warning would be to avoid buying a fancy house on a not so fancy street. We looked at an absolutely gorgeous 340k bungalow that the builder himself lived in and it was almost the perfect house, until I said to the OH : it's almost everything we need, but if we buy it and the neighbours turn out to be a nightmare or we want to move abroad, who exactly are we going to sell it to on a street where every other house sells for 150k? Not that we give a shit, but most people who spend that kind of money care about.keeping up appearances, so a gorgeous fancy bungalow on a pretty mediocre street wouldn't appeal to them. Cos whatever would their friends think of them?! I lol - I don't give a shit, but that particular property was only going to be a three year home for us, so was a big financial risk.

Bleh. Wall of text.

It's not good time to buy and right now, you will probably pay more for a mortgage than rent, but the equity in the long term will make the outgoings worthwhile, and it's the right path to go down if you want your kid to have nice money if and when you die.

Forgot to say, the same mortgage would have cost us £700 less a year ago, but I have done my stringent research on the area, and it has risen at 6% a year most years for the last 20, and 9% in a few. Even during the housing market crash, sales rose.

So our 465 house will go up by 131k between when we buy and when our fixed rate ends in 5 years.

It's terribly important if you are worried about money to make sure the street you are moving to is consistently on an upward trend and has been for a very long time.

Inflation figures still over 10%, food inflation 19%.
Don’t bank on interest rates falling anytime in the near future.

Thank you that's a really interesting way to look at it!