Should I Buy Now Or Wait?

[Harold the Helicopter]

Hi,

I have read this forum with great interest for the last year or so (!) but have only just registered; this is my first post.

My story is as follows - we have been living in San Diego for several years and moved back to the UK last summer and now rent a house in East Anglia. We have been renting for over 6 months and have recently managed to negotiate a 15% discount off a house that came onto the market at 330K. Question is, do we go ahead and buy the property now or do we wait until prices really crash?

I am pretty bearish on the housing market and would ideally prefer to wait. However, I have very young kids and so think it's difficult to consider renting for a long time. Plus we also plan to settle here permanently and live in the house for 10-15 years.

Should I buy now and weather the oncoming storm or should I wait? Our mortgage payments would be approx the same as our current rent, but the house we are considering buying is 3x larger than the one we are currently renting.

Any advice very gratefully received.....

[treestump]

Hi,

I have read this forum with great interest for the last year or so (!) but have only just registered; this is my first post.

My story is as follows - we have been living in San Diego for several years and moved back to the UK last summer and now rent a house in East Anglia. We have been renting for over 6 months and have recently managed to negotiate a 15% discount off a house that came onto the market at 330K. Question is, do we go ahead and buy the property now or do we wait until prices really crash?

I am pretty bearish on the housing market and would ideally prefer to wait. However, I have very young kids and so think it's difficult to consider renting for a long time. Plus we also plan to settle here permanently and live in the house for 10-15 years.

Should I buy now and weather the oncoming storm or should I wait? Our mortgage payments would be approx the same as our current rent, but the house we are considering buying is 3x larger than the one we are currently renting.

Any advice very gratefully received.....

<{POST_SNAPBACK}>

Hi there,

For what its worth I think that over 10 to 15 years you probably would see a return on the property although one cannot look into the future I'm afraid.

Qaulity of life for the next 15 years has to be considered too especially with childrens upbringing. If you can afford a break even situation then go for it. Not all property is going to fall flat on its face. There are some people that have used their heads and wont be affected by any big drop in prices. Saying that it wouldnt hurt to try and get a little more leverage on the discount.

Good luck

[m00seb0y2]

Our mortgage payments would be approx the same as our current rent, but the house we are considering buying is 3x larger than the one we are currently renting.

<{POST_SNAPBACK}>

Sounds like an almost unbelievably good deal...

As you plan to stay there long-term, you probably won't be overly affected by any negative equity you may pass through if prices drop further than your negotiated 15% discount.

The only downside may be that your new neighbours in 2-3 years time may pay a lot less. Will that bother you?

You should consider whether the mortgage repayments will still be affordable if IRs rise, but I'm sure you know that.

Best of luck with it...

[Guest wrongmove]

However, I have very young kids and so think it's difficult to consider renting for a long time. Plus we also plan to settle here permanently and live in the house for 10-15 years.

Should I buy now and weather the oncoming storm or should I wait? Our mortgage payments would be approx the same as our current rent, but the house we are considering buying is 3x larger than the one we are currently renting.

<{POST_SNAPBACK}>

Hi HTH. Welcome to HPC. If you have been lurking here for a year, then you can probably guess the views of most posters by now.

I would guess that if nesting, rather than investing is your priority, re the kids, and that your rent is comparable to your mortgage, you don't have much to lose by buying. You can obviously afford the mortgage, at today's interest rates at least, and you are "in it for the log term". I would suggest that you are probably paying a bit over the odds in rent though.

Best of luck with whatever you decide.

[Marina]

Hi,

I have read this forum with great interest for the last year or so (!) but have only just registered; this is my first post.

My story is as follows - we have been living in San Diego for several years and moved back to the UK last summer and now rent a house in East Anglia. We have been renting for over 6 months and have recently managed to negotiate a 15% discount off a house that came onto the market at 330K. Question is, do we go ahead and buy the property now or do we wait until prices really crash?

I am pretty bearish on the housing market and would ideally prefer to wait. However, I have very young kids and so think it's difficult to consider renting for a long time. Plus we also plan to settle here permanently and live in the house for 10-15 years.

Should I buy now and weather the oncoming storm or should I wait? Our mortgage payments would be approx the same as our current rent, but the house we are considering buying is 3x larger than the one we are currently renting.

Any advice very gratefully received.....

<{POST_SNAPBACK}>

Only you know if the original asking price was realistic - so is your 15% discount real? If the vendors were flying a kite in the first place - you know the answer. Personally, and I am thinking about your situation, not preaching the HPC gospel, I'd be inclined to wait 6 months to a year to see which way this thing is really going to go. One thing is certain - if you are buying in East Anglia you are not going to be caught out by a sudden leap in prices. The number of house sales actually completed in the last 3 months of 2004 (Land Registry figures) was 25% less than the last 3 months of 2003. This is consistent with mortgage approvals at a 10 year low. There is only one way prices are going - but people can't accept it - so it takes time to percolate through.

Could always move towards exchange and then hit them for another 30k - if you were a nasty sort of chap. I have to say I think in a falling market vendors need to be prepared for this. They want a cash buyer - YES PLEASE - no chain - but they need to accept the cash buyer has to protect their position. They are buying into a falling market. In the 3 months you take to do the deal prices might fall 5% - that's 15k and you need a bit of protection. So, whack them 30k on the asking price and another 30 when you get to exchange. And do deals on two houses so you really don't give a monkeys.

[Guest Charlie The Tramp]

I am pretty bearish on the housing market and would ideally prefer to wait. However, I have very young kids and so think it's difficult to consider renting for a long time. Plus we also plan to settle here permanently and live in the house for 10-15 years.

Is the mortgage a repayment or interest only?

You should also remember that East Anglia started the current boom in 1998.

I have seen prices treble there since 1998 to the top July 2004.

[zzg113]

we have been living in San Diego for several years and moved back to the UK last summer

Out of curiosity, what made you move back? The ridiculous house prices in San Diego? (which by all accounts are at even higher PE ratios than here)

a house that came onto the market at 330K

What kind of house is it? I presume we're talking family home, 4/5 bed semi-/detached for that kind of money, depending on where it is in E. Anglia.

Our mortgage payments would be approx the same as our current rent, but the house we are considering buying is 3x larger than the one we are currently renting.

That sounds pretty unusual. Currently, across large swathes of the UK, for the same monthly payment you are able to rent a much higher standard of property than you would if you were to buy. How confident are you about servicing the mortgage over the long-term? (ie what's your job security like, what % of your net disposable income would mortgage repayments take up, etc)

[Harold the Helicopter]

Thanks for the interesting replies. I'll try to address some of the point made.

We moved back to the UK for a number of reasons. One of them was that I could see the direction the market was heading in the US and thought it was a good time to sell our house over there (and to see how similar the market in SD is to the UK, click on this link: http://piggington.com/). I also came back for job reasons and because I wanted my kids to be educated in the UK. It's interesting to me that since I have been back, many people have thought that we were mad to come back; most people seem to want to leave the UK. However, I think people don't generally appreciate the downsides to living outside of the UK (particularly in the US). They just don't think about job insecurity, healthcare issues, wild fires (we almost lost our house to one in 2003), earthquakes.....the list goes on. It's the grass is always greener syndrome, I guess. You're right btw about house price multiples over there - must be over 10x I would suspect so much worse than here.

The house we are considering is 5-bed detached, about 3-4 years old. We know that the previous owners paid ~265K for it back in summer 2002 and older versions of it cost around 230K back in March 2001. We will be taking out a 10 year fixed rate mortgage at 4.99% (long term fixes are one of the major positives of the US market) and with the deposit that we have, our mortgage payments will be about the same or maybe just a little more than what we now pay in rent. This is the 4th house we have gone after since Novemeber. My previous tactic of rigidly holding out for 20% off the asking prices has failed as we have lost all of the other houses to other buyers. This is the first house where we have successfully negotiated what I believe is a reasonable discount.

I can stomach losing 30-40K of our equity over time as this is a house primarily for the family and we plan to live in it for many years. We have been renting for 8 months now with half our possessions still in storage and it's becoming increasingly difficult to live like this while waiting for the market to crash. None of us knows how long the market will take to hit bottom and in the meantime, our quality of life is really suffering.

I guess the question is - do people generally think that the market will tank to such an extent that the house will only be worth what it was back in 2001? And if so, how long will it take to get there? If this was to happen by next year then I would wait but the problem is that this may take many years......

[Killer Bunny]

The house we are considering is 5-bed detached, about 3-4 years old. We know that the previous owners paid ~265K for it back in summer 2002 and older versions of it cost around 230K back in March 2001.

<{POST_SNAPBACK}>

HPs should have peaked in 2002 but for BTLers.

My previous tactic of rigidly holding out for 20% off the asking prices has failed as we have lost all of the other houses to other buyers. This is the first house where we have successfully negotiated what I believe is a reasonable discount.

<{POST_SNAPBACK}>

Only because finally sellers are starting to get the message.

I can stomach losing 30-40K of our equity over time

<{POST_SNAPBACK}>

Which equates to some 10-15% of the deal price.

We have been renting for 8 months now with half our possessions still in storage and it's becoming increasingly difficult to live like this while waiting for the market to crash. None of us knows how long the market will take to hit bottom and in the meantime, our quality of life is really suffering.

<{POST_SNAPBACK}>

History shows us it should be 2008 after some 30-40% off from last summer

I guess the question is - do people generally think that the market will tank to such an extent that the house will only be worth what it was back in 2001? And if so, how long will it take to get there?

<{POST_SNAPBACK}>

Yes and v possibly 1999!

That's my opinion and as you say no-one knows but if there's any logic this will happen.

HTH

[DonnieDarker]

To have a repayment mortgage that is equal to your rent you have to be putting down a MASSIVE deposit.

Sounds like you can easily afford it.

You want to live there for 10-15 years so you must like it.

Go for it I say.

[FernandoMorientes]

Thanks for the interesting replies. I'll try to address some of the point made.

We moved back to the UK for a number of reasons. One of them was that I could see the direction the market was heading in the US and thought it was a good time to sell our house over there (and to see how similar the market in SD is to the UK, click on this link: http://piggington.com/). I also came back for job reasons and because I wanted my kids to be educated in the UK. It's interesting to me that since I have been back, many people have thought that we were mad to come back; most people seem to want to leave the UK. However, I think people don't generally appreciate the downsides to living outside of the UK (particularly in the US). They just don't think about job insecurity, healthcare issues, wild fires (we almost lost our house to one in 2003), earthquakes.....the list goes on. It's the grass is always greener syndrome, I guess. You're right btw about house price multiples over there - must be over 10x I would suspect so much worse than here.

The house we are considering is 5-bed detached, about 3-4 years old. We know that the previous owners paid ~265K for it back in summer 2002 and older versions of it cost around 230K back in March 2001. We will be taking out a 10 year fixed rate mortgage at 4.99% (long term fixes are one of the major positives of the US market) and with the deposit that we have, our mortgage payments will be about the same or maybe just a little more than what we now pay in rent. This is the 4th house we have gone after since Novemeber. My previous tactic of rigidly holding out for 20% off the asking prices has failed as we have lost all of the other houses to other buyers. This is the first house where we have successfully negotiated what I believe is a reasonable discount.

I can stomach losing 30-40K of our equity over time as this is a house primarily for the family and we plan to live in it for many years. We have been renting for 8 months now with half our possessions still in storage and it's becoming increasingly difficult to live like this while waiting for the market to crash. None of us knows how long the market will take to hit bottom and in the meantime, our quality of life is really suffering.

I guess the question is - do people generally think that the market will tank to such an extent that the house will only be worth what it was back in 2001? And if so, how long will it take to get there? If this was to happen by next year then I would wait but  the problem is that this may take many years......

<{POST_SNAPBACK}>

Hi

If your able to do so then I would be inclined to wait until a little after the pending general election we may all get a better feel for what is/about to happen then. That said of course No1 priority has to be how you & your family feel so i would be inclined to discuss it with them and see what they think then go with that.

Good luck.

[DonnieDarker]

Hi

If your able to do so then I would be inclined to wait until a little after the pending general election we may all get a better feel for what is/about to happen then. That said of course No1 priority has to be how you & your family feel so i would be inclined to discuss it with them and see what they think then go with that.

Good luck.

<{POST_SNAPBACK}>

Can I reconsider my answer?

Bearing in mind you are putting down a huge deposit you really do have the luxury of waiting should you so choose.

If this is your dream house then go for it. But I'd hedge towards watching the market if I were you. Sounds like you have the collateral to handle a variety of situations.

[London1]

I think that if you are going to stay there for that period of time then you should go for it - when a family is involved you have to look outside the financial box for once and look more at quality of life - you seem to be in as good a position as any to get on the ladder - it's the FTB that gear themselves up to the max that shouldn't jump on yet

[Ignorant Steve]

I think East Anglia is one of the areas that is due a larger than average fall over the next few years.

I would not buy.

[FernandoMorientes]

I think East Anglia is one of the areas that is due a larger than average fall over the next few years.

I would not buy.

<{POST_SNAPBACK}>

I would have to agree with you, I own a cottage in Lincolnshire I let and in the last 5-6 years the price has trippled!

I am not a pro BTL by the way, but I cannot see how prices can go any higher in that part of the world (probably dropped now I would think) more importantly I do not see how people living there can afford to buy?

I find this scenario unjust and hope the prices do come down (in fact I hope they fall flat on their ****) local people will then get a reasonable chance.

[DonnieDarker]

I think East Anglia is one of the areas that is due a larger than average fall over the next few years.

I would not buy.

<{POST_SNAPBACK}>

When I read over 'choppers' 2nd post he mentioned that "quality of life is suffering".

His repayments will be no more than his current rent. Given those two factors I'd say to him that he should go for it IF it is his dream place.

To be honset, quite jealous of him because it sounds like he has a massive deposit and therefore a lot of freedom.

[Bluelady]

If the mortgage payment would equate to the amount of rent you're currently paying and you can get a fix at 4.99% in order to buy a bigger house than you currently rent, it seems a no brainer to me, particularly since you're in it for the long term.

Perceived wisdom is that rental payment should be compared with the cost of interest only mortgages in order to establish value for money, if you'd be paying off the capital for the same money that you're currently paying in rent, you'd be mad to keep on renting.

Maybe it would be a few thousand less than in a few months time but will it still be on the market? Will you still be able to get a fixed rate mortgage at 4.99%? And, if you've lost three houses to other buyers since November, there's a very strong possibility that you'll continue to do.

At the end of the day, the value of your house is only germane when buying or selling so you don't really need to worry about what it will be worth in two, three or five years time if you intend staying in it for ten years or more.

Incidentally, whereabouts in East Anglia is it?

[Casual Observer]

The available deposit must be so large, though, that surely you have to take into account the interest he's getting on it, when making comparisons between rent and mortgage payments?

[London1]

I have to agree with Bluelady - if your rent is the same as your capital repayment mortgage then why stay paying rent to someone else - in 10-15 years i think the pleasure you will have gained wil far outway some drop in the price of the property - you've gotta live somewhere right?

[Casual Observer]

I have to agree with Bluelady - if your rent is the same as your capital repayment mortgage then why stay paying rent to someone else 

<{POST_SNAPBACK}>

Strictly on the financial comparison argument, no! (see my post above) He must be getting several hundred a month in interest on his savings?

[fdk]

Strictly on the financial comparison argument, no! (see my post above) He must be getting several hundred a month in interest on his savings?

<{POST_SNAPBACK}>

I agree. If he were to add this interest earned to his current monthly rent he could probably afford to rent something very similar to the house he wants to buy, get a 2 year rental agreement with a 1 year break clause (they do exist) and have no risk of falling prices to worry about.

[Dee Monic]

I agree. If he were to add this interest earned to his current monthly rent he could probably afford to rent something very similar to the house he wants to buy, get a 2 year rental agreement with a 1 year break clause (they do exist) and have no risk of falling prices to worry about.

<{POST_SNAPBACK}>

Agreed. If he rents somewhere decent unfurnished he could get his stuff out of storage saving the storage costs and settle down better.

[Killer Bunny]

Strictly on the financial comparison argument, no! (see my post above) He must be getting several hundred a month in interest on his savings?

<{POST_SNAPBACK}>

YOU BEAT ME TO IT!

[Harold the Helicopter]

Thanks for all of the replies. Renting a larger house for 1-2 years is still a possibility that we are considering as we haven't decided on the house purchase yet (although we will have to soon). Renting is a very hard sell to the family though; the kids want their own bedrooms etc... Actually it's an even harder sell to the extended family who don't share my pessimistic views on HPI.

I think what's likely to happen is that we will go for it because we do plan to stay in it for a long time and it makes sense for my family.

Having said all of this, we are still waiting for final confirmation that we have the house. We started negotiating from a 20% discount up and at 15%, the vendors are still trying it on a bit. I've just told then that my offer is final and if they don't want to stick with it, they can go out into the market and try and find another chain-free buyer. and try to exchange sometime within the next 6 months. We had offered to complete the purchase by the end of March. Some people are never satisfied.......

[DonnieDarker]

Good luck Chopper.

If you don't mind me asking what kind of % deposit are you putting down.

I am fascinated to know how much you need to put down to make repayments the same as your rent.

WOuldn't ask if it wasn't such an unusual e.g.