Dream house

[threefiftysix]

Hi everyone.

We have been viewing houses for a year now. Probably seen about 40 odd houses. We have found one last week and had an offer accepted on a house we absolutely love. It's perfect for us.

It's a bit further than the station than what is ideal but needs no work doing which is a massive plus as I really don't enjoy renovating and nor does dh.

However I'm starting to get really nervous with all this doom and gloom about rate rises. We will be able to afford rate hikes but I'm more worried about a housing crash and then feeling regretful that we should have waited. We are literally putting our live savings into this house - would be gutted for it to fall in value significantly.

Any thoughts?

Hi OP,

It's your dream house, it's going to be your home rather than an investment and you can cope with any rate increases. Buy the house and enjoy it.

The housing market will always go up and down, but in the longer term, the value of a property will always eventually increase.

If you're living in a property and don't plan on selling it, all you need to worry about it whether you can afford the repayments.

This is a very personal view but I don't believe in putting your life on hold to try and get maximum benefit from the housing market. There are so many variables, I just don't think it's worth it. You might not be able to find the right house next time, the mortgage deals might be shitty, and of course you'll be shelling out for rent for all of that time - and that's money that could be going towards paying off a mortgage.

If you have found a house you love, and you can afford it - including stress testing - then I wouldn't think twice. I would move now.

I bought a house at the top of the market in 2007 just before it all crashed. I am sure I was probably in negative equity for a while but it didn't occur to me and I didn't ever consider whether I might be. Fast-forward to now and I'm selling - the value has increased by around 40%. And I bought this house in a bidding war and had to pay top dollar for it. And yet I'm still going to make a profit - let alone considering the money I've paid off my mortgage in those years.

I've just bought what might be my forever home (I've got a ton of other threads explaining our very unusual circumstances!) We bought last year in a bidding war, and probably paid close to top dollar again. But we love it, and there was nothing else like it. I'm still delighted with our purchase and I don't really care if the market crashes. In the long term the property will increase in value anyway, but in the meantime we get to enjoy a beautiful home that we love.

Other people might have very different views though and there isn't a "right" answer. It really does depend on your priorities, whether you plan on moving, and what you feel comfortable with.

If a house price fall of 20% would ruin you, or you need 2 incomes to pay for a mortgage at 8%, then most likely it’s a bit risky.
This housing/economic cycle could go in any direction, but anticipate it could take 8 to 10 years to play out.

Interest rates are always going to go up and down, there will never be a perfect time to buy a house.

It will only be an issue if you’re planning on selling your house in the next few years when the value of your house might be what you’ve paid for it or lower (might also not be the case) or if you live in an area that will massively lose its value (unlikely). People will always buy houses and historically houses are good investments in the long run. But it’s also your home and it sounds like somewhere you want to stay long term so I’d advise enjoy making it your home instead of worrying about its value when you’re not selling it.

We're in a worse position than you. We've just bought a house that needs total renovation, priced 7 months ago. Renovation costs are astronomical. Then we need to sell ours mid 2024 which is predicted to be near bottom of the market. It's irritating but it's a big move and will be, after renovation, our dream home. It's not nice to buy and later sell in a falling market but it's our home, not a commodity or asset.

BUT we can afford it and will (hopefully) be in the new home 20+ years so I'm not sweating it too much.

We’re in a similar situation and have gone for it.

A new build dream home at the top of our budget. But it will be our forever home. A few more years waiting for things to stabilise means more years spent in our old mallard house, not benefiting from the bigger garden and additional bathrooms etc.
I regret not buying bigger and better last time so have just gone for it.

Good luck

In the last major house price crash (1989) it took 10 years just for prices to recover IGNORING inflation!

So if your plans are stable for 20 years and your eyes are wide open to all risks, then go ahead.

You need to live somewhere and if you don’t currently own a place you’ll be paying rent, which is guaranteed to not make you any profit. How long do you expect to live there? If it’s your dream home, you’ll be there long enough for prices to recover, even if they do drop a bit at first.

If it's your forever home you will see highs and lows throughout your lifetime as I have done since first buying a home years ago. As long as you cost in the probable rising cost of your mortgage, go for it.

If you pay 20K in rent and the house you want is 40K less then you will have gained.

But assuming you are buying another house whenever you sell yours, whether it’s 5 years, 10 or 20, you’ll be buying in the same market you’re selling in. So what you lose on your existing house, you’ll save on the next one.

Since the market generally moves together (obviously there are some exceptions) I dont see all the fear about house price movement. If your house is worth 20% less in 5 years so will the one you’re buying .

it actually favours upsizers too as the gaps between price brackets shrink. 20% of a 700k house is a bigger real fall than 20% of a 500k house.

so why panic?

Thank you everyone for the comment.

Sorry to drip feed - another couple of relevant points. We are taking out a v small mortgage on it (20% LTV) so repayments are manageable even if rates go up significantly.

However with rental yields being so low, renting isn't costing us anything at the moment. In fact the money we are earning in the bank (the cash deposit) more than covers the rent we are paying and in fact the house we are renting is even more perfect than the 'dream house' as it's 1 min from my sons school and 3 mins from the station. We couldn't afford to buy the house we are renting.

Not sure if the above makes sense - I guess it shows how ridiculous the housing market is at the moment.

The reason for buying is because I feel nervous not being on the properly ladder and worry about price rises when we can afford to buy now.

@GreenestValley

I would normally agree but there have been so many regional variances that I'm not sure anymore. We sold our London flat last year and made zero profit on it having bought 8 years ago. If we had bought a house back then in the area we currently live in we would have made an absolutely huge profit.

We are keeping a very close eye on rates as we will need to remortgage next year, but the way I’m looking at it, most people who rent are also going to get hit by these rate increases as well. I’d rather cut back and scrimp and save to still be in my own house than someone else’s. We have no intention of selling so price fluctuations don’t bother us. It’s going to be expensive, we know that, but a lot of people are in the same boat one way or another.

We’re hopefully move soon. We have a much higher LTV. I’m not overly worried because it’s a house that we’re going to live in for 20-30 years. We might lose out in the short term by higher interest rates but everyone loses out at something. I’ve lost out to those that went to uni in the 90s but I’ve done better than both my brothers who have higher student loans than me. But they benefited from being able to really use the help to buy ISA and not lifetime ISA. You win some, you lose some. This is what you call your dream home. It’s a home, not an investment. It’s likely that over the period you have your dream home that you will see an increase in price.

Your rental at the minute is great and that’s working for you. How secure is it? If the landlord needs to sell, what else is comparable? What is market rate and is your current rent a lot lower than that? If you want to wait it out, that’s fine. It’s a risk either way. All you can do is make the best decision for you at the time.