First time buyer - am I doing the right thing by waiting?

[Beautyandthebeast12]

Evening all...

First time buyer here and been trying to get on the property ladder for the last 2 years. It always seems to be the wrong property or bad timing. I nearly bought a flat in 2021 but there were issues with the lease and I decided to pull out as it would have been a money pit and difficult to sell later down the line. Then came the crazy prices of 2022, bidding wars and everything going over asking. I put an offer in on a house but it went to best and final and I couldn't afford to offer any more. The beginning of this year I changed jobs and was on a temporary contract so couldn't apply for a mortgage even if I had seen a property I wanted so decided to take a break from house hunting. I've recently been put on a permanent contract in work so no longer need to worry about the job side of things, but there are literally no houses in the areas that I like at the moment and any that do come up are still being priced at 2022 prices, although they do seem to be sitting on right move for a lot longer than last year. I appreciate nobody has a crystal ball and can predict the future but I'm just curious to hear other people's thoughts, especially first time buyers. Are you holding out to see what happens? Do you think prices will come down even more next year?

I have a healthy deposit but I am buying alone so it makes it a bit harder in terms of what I can afford. I would also like to have some money left over as a safety net so I'm really not keen to spend my entire deposit.

Right?
Also going about 'high powered professionals' /cash buyers when they themselves are not.
Little does PP know some of us here are actually erm 'high powered' professionals who have worked abroad 😂

I'd buy a home. I've never looked at it as an investment, just is it somewhere where I could happily live?

The problem is that house prices don't often drop enough to compensate for the rise in interest rates - they lag.
250K house with 3% interest rate => 355,600 total repayment
A 10% drop in price to 225K with double the interest rate => 434,990 total repayment.

So if you'd waited when rates started to rise, hoping for prices to drop enough to compensate for rate rises you'd mistaken in the short term.

However, 'now' that we're somewhat at 'peak' interest rates - if you hold fast, prices are set to drop even further and you might just get something that's actually cheaper.

But then again depends on the area.

There's no easy answer really.

I've also noticed that many just stay put if the price isn't high enough - unless sale is due to one of the 3 D's (death, divorce, debt). Two of these definitely have an incentive to sell quick and so lower the price lowering the average.

Working out what to buy is a complex process and very area dependent people like OP coming on a forum and asking 'will pries drop next year' are unlikely to get the simple, yes/no answer that they want. It takes a lot of spreadsheets, data and tracking the target market.

Agree absolutely

wow, some of you really can't read?? lol.

do you really find it so hard to imagine reasons why people who would prefer to rent could end up buying something that works against them for years instead?

Oooohh. I think iovebread has a very similar tone to another very angry poster who's been snarking around recently! So much anger towards people who think / do differently. It can't be good for the blood pressure.

We've chosen to buy now, as we can't really wait due to our ages, plus we found a lovely house that we will be really happy in, so it's worth JFDI! We had to get a 20 year mortgage, but hopefully when we remortgage in November 28, we'll have a better LTV, even if prices drop a bit, so can get a better rate than we have now.

It was either buy something we love in our timeframe, or potentially get a S21 notice and have to move quickly into whatever we can find in budget. I know which option we prefer.

It's a whole new world since I last bought, when you could easily get a mortgage, far more quickly and simply than now. Though the type of mortgage I got in 2002 (110%! 😱) was obviously the cause of the later problems!

DH has never owned, so this is totally new to him. 😁

@ChamaChamaChamaChameleon

Ok, so let's say your rent is 1.2K. Over 3 years that's 43.2K. A 10% drop in a 250K house is only 25K, so you get a cheaper house but during the period of waiting you paid 43.2K in rent so that's 18.2K gone. You had to pay it anyway - but because it went to rent and not a mortgage you gain nothing.

Except prices have fallen by 5% already since august last year, and the price drops are only just beginning.

So let's say the average house drops by 20% over 3 years, thats £50k and you've paid 43.k in rent, you're 7k better off already and thats before taking in to account the 3 years of mortgage payments which will be paying a lot of interest to the bank rather than just down paying your mortgage.

Also if your bought at the higher price you'll be paying the interest on that extra £50k for the next 25 years.

The problem is that house prices don't often drop enough to compensate for the rise in interest rates - they lag.
250K house with 3% interest rate => 355,600 total repayment
A 10% drop in price to 225K with double the interest rate => 434,990 total repayment.

But the people who bought at the higher price and lower interest rate will have to remortgage at some point, and will then also end up on the higher rate 🤷‍♀️ you seem to be assuming they'll pay 3% for the whole term and that the later buyer will pay 6% for the whole term.?

Wrong. They'll pay 3% for the term of their fixed rate - which means, by the time they come to re-mortgage they'll have paid off a sizeable amount. Also if the price drops like I stated and they could have afford the higher payments at 6% they'll be able to overpay and have a much better LTV when it's time to re-mortgage. You can get a 5 or 10 year fix.... a lot can happen in that time so you might not necessarily end up on a higher rate.

The only way to really avoid negative equity is buy , truly, at the bottom of the market, so the only way is up. But if you can predict that with certainty, you'll be a millionaire! Plenty will pay for that skill.

We can all throw around as many figures as well like but the fact of the matter is, they are all our assumptions. The major issue with yours though is you spoke about the 'average house' dropping by 20% - which is useless for any individual buyer. The property market in the UK is very regional, in the 'naice' areas we were looking to buy in for example property rarely comes up, when it does it's immediately snapped up and there are lots of cash buyers (foreign, mummy and daddy's money, etc). Still no price drops.

By the way... you know even when people spoke about the post-Covid 'boom' and prices rising year on year a couple of years before that. There are plenty that never experienced that! Family who own houses in the NE have just only see their property values come back to pre-2008 level during the 'post-Covid boom' and now it's dropping again. Others like the ones we bought saw a steady rise since it was last sold in 2001 until the day we bought it, a year ago. No idea what it is now but I don't care since I'm living in it.

All I attempt to illustrate here is possible scenarios for people to take note of. There's another thread going on that has a lot of discussion with excellent points made by PP. Worth a read.

@ChamaChamaChamaChameleon

We can all throw around as many figures as well like but the fact of the matter is, they are all our assumptions. The major issue with yours though is you spoke about the 'average house' dropping by 20% - which is useless for any individual buyer.

So it's ok for you to make up scenarios showing the figures at 10% drop but it's not ok for me to post a different scenario at 20% 🤦‍♀️

Like for like your 10% drop means it's better to buy whereas my 20% drop shows it's better to rent 🤷‍♀️

No one know whether buying now will get a better rate than buying in 2/3 years time but either way they're going to end up on the same rates for the majority of a 25 year mortgage.

I'm a renter with £100k inheritance and I am waiting. I have done the figures to death with different price drops and mortgage rates and mortgage amount paid down vs renting, Which is why I noticed that your 10% drop over 3 years vs renting is very selective.

Did you even read the entire post you quoted from? It was in reply to someone else stating that price alone was the main consideration. The figures were meant to show why interest rates might also be a consideration . They were not meant to be a prediction. You jumped in with your figures, nothing wrong with that... but you spoke about 'average house price'. You seem to be getting the impression that I'm advocating buying, but that is untrue - which would have been obvious if you'd read it in its entirety.

The post you quoted from not only went on to state why waiting might have benefits - it also stated the caveat of predictions depending on specific area. Averages are useless here.

For us - interest rate is half what it is currently, our mortgage is cheaper than rent enabling us to overpay so by the time we renew we will have a much better LTV even our house price drops. Not to mention the salary increases we have gotten since we bought. If interest rates increased again after dropping slightly as they're doing now, many might find that they've been better off buying as we did. It's not inconceivable - even though our rate is half what it is currently, it's still double what our neighbours. buying a year ago, got.

Personally I wouldn't comment on what prices are likely , unlike you, as it's so area dependent. I gave two examples in the previous post. What will prices do in your area? What will they do in OP's area? I don't know. I don't have the data.

You make some valid points. Of course the OP must weigh up the cons of staying in rented, etc, etc

However, your numbers are cherry picked. You have calculated rental costs over 3 years, for example but have simply plucked a 10% fall in house prices out of the air with no reference to time frame or anything else.
If, for example, you use your rental costs but house prices fall 25 or 30% over 3 years, the figures look very different. If you were a FTB living with your parents, ditto.
I have not suggested that renting is an investment (it's a service, as I said). The pp suggested that a house purchase was an investment, ie something that is purchase with the aim of making money. If it falls in value, it is the opposite. Therefore, best to buy your 'investment' lower. Yes, you can think of your 'investment' in a different sense but that isn't the general sense in which it is understood.
Negative equity is a very serious risk for FTB, particularly those without access to family funds to bail them out if things go wrong. Far from being an investment, if a FTB puts down a 10% deposit and values fall 20%, they could potentially find life very challenging if circumstances were to change for the worse. This happened to a lot of people in the early 90s.
There seems to be an assumption, from some posters, that prices will only ever rise and everything will work out fine, just because they are older and bought decades ago. That is not necessarily the case and it would be wrong to assume so.

@ChamaChamaChamaChameleon

Personally I wouldn't comment on what prices are likely , unlike you, as it's so area dependent.

I haven't said how much they will or won't go down! I only gave an example of the alternative figures if your projected 10% was wrong 😂😂

I'm starting to think youre a poster Ive ignored for a long time under a different name as the way you twist stuff is weirdly familiar

Probably not - I haven't been here a long time and have never seen you (although you might regularly NC.)
I also don't twist things - it was you who said
'Except prices have fallen by 5% already since august last year, and the price drops are only just beginning.' That implies you think they will fall more. You also called my 10% drop 'selective' (which doesn't even make any sense).

I don't think anything - like I said, in some areas I was looking at they haven't fallen at all. In others, very much so. All numbers are made up.

But if you think logical points are 'twisting' that's your prerogative. Although in my humble opinion claiming that is a get out of jail free card when you are unable to logically engage any further.

If you like the house you're living in can you place an offer to your landlord to see if he or she is willing to sell?

It is if prices crash and you end up in negative equity and unable to sell the property.

...and also assuming that all this has somehow happened before, part of a "normal" cycle? Since 2008 nothing has been normal, the cheap debt experiment is a once in history mess, the house price drops required to get us back to "normal" will be very large.

I'd never wait, personally.

Get on the ladder, much better to pay a mortgage than rent.

@Beautyandthebeast12 the good news is that although circumstances have prevented you from buying in the last couple of years, that’s not necessarily a bad thing as you will probably get a property for a lower price in 2024 than you would have paid in 22, for example. Though granted the mortgage rate would have been significantly lower in 22 which would have helped with affordability, especially if you had taken a 5 year Fixed rate.

There are definitely positives to being a FTB now rather than back in 22. Generally speaking (though it varies by area) prices appear to have dropped about 5% over the last 12 months and are still falling. Most Economists seem to be predicting the eventual fall will be about 10% so that’s not insignificant. Some people think they will fall further, like our friend @CrashyTime above.

How far prices will have fallen in your particular area between 2022 -24, no one on here can say. In some parts of the country, prices are stagnating rather than falling so as mentioned before, it’s very area dependent. All you can do is keep a close watch on Righmove. Observe how long properties stay on the market in the area that interests you and what they eventually sell for (there is a function to see Sold prices). Become an expert on your local market & use that expertise to get the best deal you can in 2024.

An investment isn’t just about making a financial profit. A more general definition is about being committed and making something stronger and better. In the case of property it’s about creating a home that you can fashion/decorate as you want and that you can’t be kicked out of on a whim.

There’s nothing wrong with renting, but if you don’t want to live with someone else’s taste or in a bland box and want to commit to living somewhere for a few years, creating a space for yourself, then committing to a mortgage is an investment.

People cant afford mortgages. It isnt a ladder any more, a debt ladder yes, but who wants to climb on that?

https://www.bbc.co.uk/programmes/m001rbqb

If you don`t pay the debt on the house you will still be kicked out, and plenty of people bought bland boxes for far too much debt.

Of course lots of people can afford a mortgage. Some people buy houses outright.

Everyone? No. But that's the same with everything.

I'm glad I ignored people telling me to 'wait for a crash' years ago.

If your situation is good, go for it.

Similar situation. I'm still looking, have an offer pending at the moment but where I live prices haven't dropped at all, but there are hardly any houses coming onto the market. I'm very much in 'cheap' (lol) ftb territory and there just always feels like there is an endless supply of fairly desperate ftb so struggling to get anywhere. I'm not really worried about house prices dropping, as I'm looking for something for the long term, interest rates though have had a real impact on what I can afford to borrow which is limiting.

You can’t be kicked out on a whim, I said. Do you just not want people to buy houses? I’m not really sure why I engage with you as you don’t seem to have a very coherent point of view, but I will bite one last time and explain why, because of my great age, I am much less excitable than you about interest rates and house prices.
House prices are ridiculously high, I agree, but it’s hardly a recent phenomenon. When I bought my first house, interest rates were about where they are now and, admittedly, I was on a relatively good salary. I could afford the house, but not much furniture for a while. Nine years later, we (I had a husband and baby by then) sold it for nearly three times what I had paid for it. Mind you, my salary had more or less kept up too. Interest rates were lower, but not ultra low. The house we’re in now was a fixer upper, so more difficult to calculate, but were we to sell it would be for more than double what we paid for it, and a healthy multiple of our total spent on it. But that is less interesting to me than the fact that I am in a home that I like and that I’ve been able to do what I want with for more than 15 years. That’s what I call an investment. And if people now can afford to buy, even if they end up in somewhere smaller than they’d like for longer than they’d like, it’s still worth it. And the Government should build more social housing.