If you feel up to a rant, read on!!
I'm a first time buyer caught right in the middle of the frustration three-way tug-of-war that is balancing seller, market and banks.
We've been saving hard for a few years, and have middle five-figures as a deposit. I've got a good, secure (yes, really, really secure!) job, and earn, again, mid five figures.
At the moment we're looking at houses priced at around £230k, those which have had their price lowered have generally had around 5-10k scraped off their maximum valuation since listing. Houses which are £190k now are well below what we need, space wise, spec wise, and just generally would be a poor purchase in the long term for a family as we would soon grow out of them.
Here's the frustration:
1. Two years ago, these are the properties we would have been going for (might have regretted the purchase, but we're in it for the long term and a home is a home). And I could easily have got the mortgage, But now....
2. Max mortgage I can get: 75%, makes around £160k (add my deposit to that for absolute max final price).
3. Low interest rates won't last over term of mortgage, and traditionally have gone up after recessions. So there is no way that I'd want to go higher than that anyway, given the risks associated with high interest rates once the fixed-rate ends in 2-5 years.
As far as I can see, being a first time buyer, with a large deposit, I am a dream-come-true for many sellers at the moment. And it's not that i'm being a Jerk and trying to spot the bottom of the market - far better to have somewhere nice to call a home, and so be it if you have -ve equity for a while, so long as you don't need to sell.
And I don't thing that there are any magic buyers who have suddenly appeared above my bracket, my home bracket, based on where I live, my earnings, my job and basically, where I think I should be living and would like to live (i can't afford a castle, but I can do better than a slum!).
Am I therefore correct in summising that as the cash available to buyers has decreased, the properties which I would have been buying last year, are still the properties I will be interested in buying this year, therefore, with everyone being generally in the same boat, If I could raise £230k easily last year, and can only raise £190k this year, if the seller wants the prioperty to sell, it has to go for £190k. (Yes, this is obvious, but I don't think everyone has cottoned on to what this actually means for house prices....)
Why is this an issue? Because, as human nature dictates (no-one likes loosing money, even if they have been in a home for 25 years, and the gains were only ever on paper), sellers aren't budging on prices much, and houses aren't selling, and they're complaining that the market is stagnant. The point is that the market isn't really stagnant because people aren't buying, I think that there are lots of people like me who want to buy, we just can't afford to. And it's not a case of what I'm prepared to pay - If I could pay £230k I would, but I can't, and it's not because I can't afford a large mortgage, it's because the bank won't give me one for reasons outwith my physical ability to pay (i.e. the Global Economic Crisis), You can't buy a house for more than the maximum you can borrow, and this scales up to the heard as much as the individual.
And then there's the issue of the slide in house prices, which again doesn't tell the whole story. Prices in my area have gone down by 8% in the last year, but sales have slumped by 75%. You can only base average sale price statistics on homes that actually sell, the massive glut in our area at the moment says, therefore, that the practical drop in prices is more than this, as a home on the market now, if it sells in six months for 10% less, is surely, with hindsight, worth that at the moment! If only you could somehow scale price drops to sales volume vs homes on the market - there must be some statistical correction that could be applied?
Arrrgggghhh - It's so frustrating. Please people - I want to buy your house, and last year I would have given you 230k and been happy! This year I can only give you £190k, that's the way it is - and your house hasn't sold in six months! Why? Because no-one can raise the capital from the bank to give you the asking price at the moment. Those that could aren't first time buyers, and they're all in the same boat you are, or stuck in chains, So if you don't accept the price people can afford to pay, we're going no-where! I'm sick and tired of estate agents treating me like a shark, trying to get a cheap house without accepting the reality that they are unaffordable at the moment for almost everyone (you'd have thought the shortage of 'for sale' signs in the depots would be a clue to them!)
Obviously, at the end of the day, you can't have a house you can't afford, but the market has to scale to the new reality of what people can afford - when is that going to happen!
This all seems so obvious, but I don't see any signs of it. Sellers have entrenched, and buyers can't reach them!