Is now really a good time to buy?

[castlesintheair]

A house has just come on the market over the road which would be ideal for us. I'm sick of renting/moving (have done so since DS was born 8 years ago) and we have some equity which is earning 0% interest. DH says interests rates are going to go up and current market 'recovery' is temporary.

Apologies if this has been done recently but would really like to hear what your opinion is?

fruitsticks - excellent point about mortgage multiples.

Imagine what would happen if average wages did not rise at all for ten years (wages are actually falling at the moment in US/UK economies) and the house price/wage multiple fell from 5 x to the old normal 3 x multiple.

Yes that means houses would have to fall another 40% in price to reach equilibrium. The mathematics are cruel but that is what may have to happen. The banks would be bust (again) and huge nummbers of people would be in negative equity and the economy would be in a Depression.

I don't think there are 'safe sectors' anymore I'm presuming you're thinking public sector but there are big cuts coming whoever gets in redundancies, recruitment freezes and pay freezes.

There's another thread on here where someone in a childrens centre said they have been told only to give out 1 yr contracts, I know several NHS jobs have had below inflation pay rises for several years and have been told both to make cuts and freeze recruitment.

Noticed recently you could get quite good rates on a 1 yr fixed rate bond driving past one of the banks/build socs much better than recently

Also salary multiples agree with a beta do the multiples there is still some way to go!

Anyone buying should go for a base rate tracker with a cap if possible. Coventry BS were doing them the other day- I used one for an investment property that I have had for a while but they may have pulled this deal. I think base rates will have to stay low for a while but LIBOR (and SVRs) will rise.

Lagging unemployment will be around for a while and will be a big factor so no need to feel under pressure. Take your time "bottom fishing" and only buy that property that you really really want if the price really really makes sense. I think you have a 12month window atleast. As mortgage rates are creeping up, I would ensure that I have a reserved mortgage (base rate tracker or fixed) and when that expires, reserve another one.

Just had an offer we made accepted on a house today!

Thing is I am absolutely sure that in general house prices have a fair way to go down yet.

IMO there's nothing 'out there' to keep house prices up at these unsustainable multiples. I believe that interest rates which have been artificially held down WILL rise either deliberately to slow down any upward 'lurches' in the economy or via market forces. I think there are a load more job losses to come and perhaps yet another bank to go under.

However, in some areas, like here, houses are going within 2 days to asking price if not more! This is a small microcosm, driven by the catchment of the best performing comp in the county and this is High Season for catchment!

The house we have ahem- 'bought' sold in 2002 for £235k, rose to £415k in Aug 07 and 'should' be worth £325k according to nethouseprices now. There's a new conservatory on it since then so we've paid £336k. As you can see, first home-buyer territory this ain't. Other thing is we don't need a mortgage.

I KNOW full well this house will be 'worth' 300k by this time next year if not less but I don't care as I am sick of renting (6 years of it!), this is a HOME I'm buying, not an ATM and the cash was earning £400 a month in interest which we have to top up with £550 to pay our rent! We will be here either 2 1/2 years til DS2 gets into THE school, then buy just outside catchment (like a lot of folks do!) OR we will stay til DS2 leaves there in 8 years time.

I'm one of those panicking slightly. We sold at top of market and have been in rented for 18 months. Everything on my rightmove saved list has gone under offer in the past two months. I've even started looking at houses I would usually rule out because I'm starting to get worried we've missed the boat - and the really worrying thing is that Sarah Beeny, property godess is now saying we're at the bottom. There is nothing left to buy around here!

Common sense tells me that there should be further falls ahead but the market is all about confidence and if that has returned then the prices will start to creep up again. Although some don't like it, we are never going to have average houses worth 3 times salary again. There are simply too many high earners and cash rich buyers around.

I think average prices will fall BUT average means a combination of a LOT of repossessed 2 bedroom semis in half derelict northern towns as well as fewer but much pricier execs. in Virginia Water. A lot of folks who made serious cash in the boom still have that equity sloshing around.

My hope is that banks not lending more than 3x salary will eventually cause house prices to stabilise. You can be as confident as you want but if the bank won't lend your punters the cash, you won't sell!

I think we're seeing the prudent who decided back in mid 2007 that it was all getting TOO stupid now appearing on the buyers market. They've been saving and saving and now houses have become a lot more affordable, they've pounced. That's what we've done. As I said just now, I don't think the house we've just 'bought' is anywhere near its cheapest but it's now affordable to us which it wasn't 2 years ago.

And for what it's worth, I actually want to slap anyone who refers to this correction as a 'crisis', it isn't if you ever want your children to be able to afford a house of their own!

Agree with faraday - these people are called 'bottom pickers' apparantly

scaredofthegarden- absolutely no need whatsover to panic. This is spring and there is a little pent up demand and not many sellers. But even as someone who bought fairly large at the peak, I am under no illusion that we can have anything but a sideways move for a couple of years. Residential indices are suggesting 20pc or so fall so far but that is because people are trying to avoid selling. But persistent unemployment, slight upward pressure in lending rates, continued restriction in lending and battered confidence point towards continued fall or stabilisation at best. Interesting to note that UK Commercial property has already fallen around 50pc!!! I recognise that residential prices are a bit stickier as people are not forced to mark to market their houses unlike commercial property investors. But even so, it gives you a guide on fundamentals. Was listening to the analysts in the States today agreing that US house prices will continue falling next year.

Also, witness the sell off that we are starting to see in the stock markets after all the talk about green shoots. Things will look a lot bleaker in the autumn, you will see.

So take your time as it doesn't matter if you you miss the first 5pc of recovery? In fact many investors prefer to jump on after seeing the first 5pc of assured recovery, rather than be bottom pickers.

boodluck and take your time, it is your market

Just checked: there is a tiny market in Halifax property futures and the prices are implying that the bottom of the market will be in 2010 but that is just an implied view of the investors in that market but gives you some guide on what people are "betting on"

Much as I like Sarah Beeney (and I would take ALL her advice about doing up houses!) she was not one of those who predicted a crash and I would take her price predictions with as big a pinch of salt as anyone else's. I mean, Halifax/Nationwide et al always said there would never be a crash, either. There are so many people who WANT this to be the bottom, just as they wanted there not to be a crash, that they will find reasons for it, whatever.

And the housing market is really, really not about confidence when it comes to the big trends (not counting seasonal blips - and anyway the recent bounce seems more due to extremely low volumes than confidence) - it's physics! You can be as confident as you like but if you don't have the money to spend you can't spend it.

I know lots of people don't want prices to drop anymore but if it means we can afford to buy a house next year then they can keep on going

Figures for June have come out....house prices, overall, dropped. No matter what the EAs say

The property indices are too noisy to only consider one month's number as a trend! But any way: Halifax HPI (Non seasonally adjusted) came in 1.28% down on the month (-0.5pc seasonally adjusted). The price of an average UK house down £2062 to £158,807. But the National Housing and planning Advice Unit will issue a report today showing the UK?s housing shortage is becoming more severe.

Mortgage rates going up BUT if you consider a house as a, say 15 year asset, then don't buy it based on a cheap 3 or 5 year mortgage.

If mortgage rates climb too quickly then prices will adjust downwards so I say to those getting anxious not to pull the trigger just because they are concerned about mortgage rates going up.

Good point TDiddy it is of course much cheaper overall to borrow say 300,000 at 10% than 600,000 at 5% isn't it? I'm sure I did the maths once and it worked out better.

Who funds/supports the National Housing and planning Advice unit, most of these things seem to be supported by the federation of builders or estate agents or whoever and have a vested interest in keeping houses high and convincing people that they must be given more planning permission in order to keep land values high etc.

I remain unconvinced about the UK housing shortage, I think there is a lack of affordable properties and of properties suitable for families (but this is not what's being built) but there again I have at least 3 single female friends who live in places significantly bigger than my family of 5 (and not all mega earners) I also suspect that there are lots of people who will answer a survey expressing interest in owning a property but in reality have never had any expectation of doing so, plus there are how many people likt the one on the Tv last night who had turned 50,000 pounds in the bank into 2 million of debt gearing. Taxing his income in the same way as mine would also help aspiring property owners and gov debt!

1dilemma- interesting point about vested interest/bias of so many of the reserach and surveys out there. I don't know much about the NHPA actually.

Yes, a repayment mortgage on 300k at 10pc is cheaper than a repayment mortgage of 600k at 5pc.

Housing shortage is an interesting subject. So many people are choosing to live longer with parents in addition to the points that you make so I am not sure how they measure those effects.

So many people buy property because it was (and still is) one of the few assets where you can easily gear so as you say, you can own and control a very large asset with a small deposit ("gearing"). Now that expectations of property growth is low, I was demonstrating to a friend a far easier way to "gear" more liquid tax free. So you could "gear" thge oil price or commodity index or FTSE or something like that with say a 30pc deposit and have a much better expectation of making money in 5 years without the hassle and illiquidity of owming and managing property.

oh hello didn't think there was anyone out there tonight

yes, writing a very boring document. far more interesting musing about the direction of house prices on MN. I don't sleep enough. what is your excuse?