It Won't Crash Until I Buy A Property.

[BrickandMortar]

If OP is happy to buy somewhere he/she plans to live for a good 10-15 years, does it really matter if the property loses 10-15k or likewise increase by that amount?

Why does every house purchase decision should be motivated solely by the money aspect?

What about family life enjoyment? school stability?

Funny enough most of my peers who bought their homes do not really give a monkey if their property is losing x per month - They are not planning to move for a very long time.

[deadman]

You all have a fantastic chance to get on the property ladder right now.

It's really up to you. Do you want to believe a load of doom mongers and never own a house?

All these silly arguments about paying this and that have been going on years. People my mum and dads age used to tell them to stay in a council house. Problem for them is they are still in theirs while my parents own and are debt free.

I know who I'd rather be. You have to face reality. You're going to get kicked up the nuts by banks and governments. Waiting for a silly HPC dream isn't going to change a thing. Either get on the ride or drop out.

Simple.

It worries me nowadays that you're actually serious.

[DownsizingDiva]

Thanks for your kind words, but I wont be in negative equity because I will buy for cash- no mortgage.

Ill then be free to save 25k in 3 years thus negating possible falls.

The maths is very different for a cash buyer than a loan applicant.

Remember that theres always a right time to buy- if the price is right. Id be buying at 40% off peak or not at all.

When no one else is buying in jan/feb then I will be. Im in no rush but id be a fool not to keep my options open...

Parents have cash of their own to stash and inheritance tax is a bind too so there are no simple ways to stash cash and still beat inflation.

I think you'll find quite a few other people have the same idea. (Me for a start!). This, coupled with the very low supply, may unfortunately make it difficult to buy at a reasonable price.

[porca misèria]

I think you'll find quite a few other people have the same idea. (Me for a start!). This, coupled with the very low supply, may unfortunately make it difficult to buy at a reasonable price.

The big crash won't come until after the election. I'd be surprised if this autumn is on the same scale as last year.

Unless the bond market does something interesting in the meantime .

[LuckyOne]

That is why I like it. However i have a feeling our will play out a little more quickly as once the GE is over the new party will want to get the bulk of the pain out of the way in the first 2 years and then try and stabilise thing. I still think you could buy in 3 years time after a 50% from peak fall and still loose 20-30% from that point.

Everyone says our government wont allow it and the Japanese were incompetent but so far we are following their path. They even offer government back loans in the hope of keeping people in their house which are only just blowing up now in this global recession and after a continued slide of the assets that were backed by the original government loan. The only difference I see with Japan is we do not have the luxury of the global economy booming while we sort out our problems.

In short still a great time to be on the sidelines.

The question that I often ask myself is whether the Japanese were really incompetent or whether a deflationary death spiral resulting from the inevitable collapse of a debt fuelled asset price bubble is too powerful for any government / regulator / monetary authority to stop.

The Japanese were slow to react and acted in half measures for a while. As you point out, we are following their path albeit more quickly and forcefully. The question remains whether it is the dose or the medicine that didn't work in Japan.

[Guest happy?]

You all have a fantastic chance to get on the property ladder right now.

It's really up to you. Do you want to believe a load of doom mongers and never own a house?

All these silly arguments about paying this and that have been going on years. People my mum and dads age used to tell them to stay in a council house. Problem for them is they are still in theirs while my parents own and are debt free.

I know who I'd rather be. You have to face reality. You're going to get kicked up the nuts by banks and governments. Waiting for a silly HPC dream isn't going to change a thing. Either get on the ride or drop out.

Simple-minded

Corrected.

[Sybil13]

It is certainly an interesting one .....and hey what would I know......

There are factors in this crash we never had before and I have no way of understanding how these factors will play out.

Is it a 1/3rd of mortgage holders unable to move?

I also feel it is the SIGNIFICANT perceived losses that will stop people trying to sell.....last year they thought they would hold on until this, this year until next ....and the endless ramping in the press about property prices going up and up ....and up 20% by god knows when etc.....etc...none of it helps people touchbase with reality.

So we have QE , we have the government /banks doing all they can to stop repossesions ....we have an election next year...there is a HUGE vested interest in keeping property prices high, BUT , and I do think there is a BUT in there......many believed there would be a dead cat bounce this summer, remember Merryn's :

Stay Away From Property it Has a Lot Further to Fall

The truth is that all real bear markets tend to offer the unwary investor one last opportunity to lose money. The summer of 2009 is probably that opportunity this time round.

There may well be a quite a big pick up in inquiries, transactions and even prices over the next few months. This will be partly down to the fact that, for those who have cash and want to buy at some point, the housing bear market is getting boring – and partly because a lot of property looks cheap relative to its peak price.

But the basic market conditions are still all wrong for recovery

It WAS only a few short months ago that RICS was saying they believed the market had already fallen 30% and that the Nationwide and Halifax indices were wrong.

It WAS only a few short months ago that Rightmove's Director was saying that sellers needed to reduce 25- 30% in order to ascertain if any further falls were needed.

It is incredible how quickly sentiment does change , whether you like Dr Bubb or not its worth taking a look at his images for the next phase the "rug pull" "swing" phase here, pictures do speak a thousand words:

The Psychology of Sentiment

Dr Bubb: Many HPCers are "stuck in the crowd" and influenced heavily by the resurgent mania around them.

(Maybe it is easier for me to be detached from it, living here in Hong Kong - we have our own manias here.)

This will die. And the higher the sentiment swings, the bigger the disappointment and disillusion when it

(eventually) swings back the other way.

When prices are speeding downwards in a few months time, after the rug pull, I will remind people that

the very painful next stage of the crash, would not have been fully possible without the huge surge in false

hopes that we are seeing now.

Some old articles worth re -reading , nothing has changed, nothing .....

Why House Prices Have Further to Fall

Why US House Prices Will Keep Crashing

House Prices Could Fall Another 40% From Here

And finally last week :

BOE Says Recession Will be the Worst in Modern History

Unveiling the economic forecasts, Mr King said that the Bank was doing everything it could to ensure that Britain did not follow in Japan’s path and succumb to a “wasted decade†of economic stagnation.

But he indicated that the financial crisis had been of a scale that rivalled anything previously witnessed in history. “We’ve been through an extraordinary financial crisis,†he said.

“One doesn’t need to ask questions about 'the worst since when’ since it may be hard to find any period in which it was actually worse.â€

Doesn't sound great for house prices does it?

Typed most of this hours ago when topic first posted but was called away so I haven't read what other people have said but having got this far thought I may as well post

[Guest happy?]

Most sensible people feel the market has a way to fall yet - the rally we've seen this year built on very poor foundations.

The decision to buy must be one based on personal circumstances and the willingness to accept further price drops.

From a purely economic standpoint it would be foolish to buy now - but for many people this is not the deciding factor - it is one of several.

[roman holiday]

To survive the bull traps you need to kill the desire to own a house. Repeat to yourself that it is only a pile of bricks and not worth a life-time of debt until the desire fades.

Then you will be in a good position to buy a house, though reluctantly, in a few years time.

Edited August 16, 2009 by roman holiday

[Fergie]

I'm in two minds as well right now. On the one hand, I know there are more drops to come - potentially very significant ones. I also suspect the year or two after next years election will be crucial. It wouldn't surprise me at all if a Tory government took the view that a shake-out was the best thing, and raised IRs. When that happens, that'll be the point we see real falls, imo. So buying right now seems crazy. I'm renting a decent place at a cheap rate. I should wait out another year or two before buying.

OTOH, I've been renting for several years now and really want to settle down. I know the area I want to live in, but can't be arsed doing another move to another rented place. When I move next, I want it to be for a longer term period. And crucially, the kind of flats I've been looking at have begun dropping into my price range. I would need to take a mortgage, but with the deposit I have it would only be about a 60% mortgage and - at current IRs - considerably cheaper than renting. My rental contract runs out at the end of the year and I am very, very tempted to just buy now and have done with it.

I can relatively happily accept that there are falls to come, and not be too bothered. But I can't guarantee I'll still feel like that in 2 years, if I look around and there are vastly better flats in my price range...tough one. That'll be the real killer for me - not whether I've lost money but looking at what I could have bought had I only waited a couple of years.

OTOH again...maybe all this money printing and the rich still being rich will just stoke inflation, and price falls will be so slow and prolonged that it would be better just being in a flat and working on paying a mortgage off.

:angry:

Edited August 16, 2009 by Fergie

[Fergie]

I should also add, where I am the prices are nowhere near as nutty as they are in London/SE. Still nutty, for the area, but the kind of prices people in London would drool over.

[waitingandsaving]

Okay.

But remember this: If you buy and prices fall back (as is VERY likely),

you might get trapped (in negative equity). And that is a far worse thing that Renting,

where you have complete flexibility to move, and at a low cost

When we buy, we intend for it to be with a very hefty deposit, and we intend for it to be somewhere that we'll stay put in!

Our house will be intended for life, not just for HPI... I know that things don't always work out (and we are so grateful we haven't bought yet, as we have experienced great changes of circumstances, and known that if we'd been burdened with a large mortgage we would have been stuffed!) and that we may have to move, but we hope to remain settled - which means that prices won't matter to us directly after that.

Dr Bubb, you're the reason I wound up skulking around here, I was tracking a competition of your stocks and shares against some BTLer guy investing in property over a year on SP ( ) - and your argument won out - so thank you - you've saved us lots of money! We're still holding out, and waiting for the right house to turn up - and that could still be a long wait, but there comes a time when it's not only about money, it's also about freedom and security (if we default on the mortgage, it's our fault, if my LL defaults on his mortgage, when I've been paying to live here, then I'd be mighty p!ssed off...)

[0q0]

A good deal of posts, very constructive answers, sorry I have been unable to post sooner, good reading, thanks.

TLB

[getdoon_weebobby]

I think the next 12-18 months will tell. There's no doubt that prices will continue to fall, and fall hard once this current bounce is out of steam, but whether that will be nominal or real is far from clear in my mind.

Current plan is to stay in cash, stay alert, and possibly buy an acre or two of land (albeit overpriced) as the ultimate inflation hedge.

+1 sensible

[scottbeard]

My house was recently valued by RICS as worth about what I paid for it. I have spent some time agonising over whether to it to avoid losses arising from likely further falls.

Eventually I have come to the decision that:

- I actually don't really know where the UK and global economy is headed (deflation, inflation or both)

- I bought the house solely to live in, and dislike getting side-tracked into regarding it as an investment

- selling a house and moving is the last thing I need in my life at the moment (divorce is enough for one year)

- my job is looking secure

So I am staying put.

In summary - non-financial factors have made the decision for me. I have decided that I am not a property investor, I just have a house that I bought to live in.

I don't know if that really helps, just that ultimately money isn't everything for me. Selling a house I am happy in and can afford quite comfortably seems crazy. I imagine you can run the same argument for buying or renting as you wish.

[str mofo]

wonder how many are in the same boat as me. I cant afford to go on holiday with my family as we have 700 a month rent to pay (along with all the other costs associated with 3 kids), and cant save a penny. I havent been abroad for 7 years and would love to.

I have enough str fund to buy a house outright if I keep looking and bargain hard. Therefore I would be far better owning a home outright and having that 700 a month disposible income to save for my retirement and go on holiday with.

I also have the problem of somewhere to live. All the propertys I see that are worth living in are 800-900 a month= even worse situation than Im in now. I can buy a place then make it to my satifaction for next to nothing- materials and time- ive done it before.

Given that if prices drop I will still own outright and will have 25k savings in 3 years and I could still move to a better house, I am probably wiser buying now than sitting in rented overpriced shit holes unable to save further and unable to spare a grand to go on holiday with.

If I wait another 2 years for prices to drop my str fund is at risk in these shady unstable times, wont be any bigger, and I will have no savings after buying a house (albeit possibly a bigger one than I am able to buy now).

Bah i dont know. If only the rental market wasnt such dross Id be happy...

[0q0]

Is it the old watched pots seldom boil, syndrome? Will most of us capitulate, buy in, then find to our horror that the crash only starts once we've all dropped ourselves in it? Or will the HPC graph/chartism/common sense/fundamental economis and other price fall predictions be proved wrong and we find inflation catches up with property prices and the current prices actually soon seem cheap? I have to admit, I no longer even think I know. They have engaged in an experiment which to me looks pretty frightening and the bounce now almost seems to be confirmation that they are giving us all poison. But what do I know really? And if it does all collapse in a year or two will we then see posts like these below...?

Geeeeeeezus, you bulls really are stupid! Prices were always gonna tank, I warned you to buy when I bought and sell when I sold, but you took that as a signal I meant an eternal bull market! Now you're all stuck with neg equity while me and my mates Vilerius, Gammon and Himish are sold up, booted and suited, and down the pub with our bottle of DP, thanks very much, you guys are dumb!

The QE money is kaput, IRs are heading skywards, property can NOW only go one way. You should've got in and out and made your money like me and Sibbers did. We did tell you!!

Property has to be the safest bet as the recovery set in course by QE and ultra-low IRs builds in momentum. I am expecting 10% yoy hpi now.

I have told you all a dozen times, get out of property now, there is going to be massive hyperdeflation!

I can't sleep. Now all my money will buy is an ex-local authority studio flat in Stonebridge Park... Surely this madness has to end?

"Muwuhahhahahahaha!!" - Prime Minister Gordon Brown, EU President Tony Blair, Treasury Bitch Mervyn King

[MinceBalls]

I cant afford to go on holiday with my family as we have 700 a month rent to pay (along with all the other costs associated with 3 kids), and cant save a penny. I havent been abroad for 7 years and would love to.

I have enough str fund to buy a house outright if I keep looking and bargain hard.

Given that if prices drop I will still own outright and will have 25k savings in 3 years

Your first paragraph was a joke right? If not then re-read what you have written para-phrased above. Seems a little odd to me.

You CAN afford to go on holiday, you CAN afford to take your 3 children away and you CAN afford to go abroad. It's just you CHOOSE not too. You choose to divert all your money into property at the expense of other things which would probably make you and particularly your children happier than waiting around for bricks and mortar at an affordable level.

I suggest you take your kids to somewhere on holiday that will bring them joy, experience, interest and a wealth of knowledge before it’s too late.

[0q0]

Your first paragraph was a joke right? If not then re-read what you have written para-phrased above. Seems a little odd to me.

You CAN afford to go on holiday, you CAN afford to take your 3 children away and you CAN afford to go abroad. It's just you CHOOSE not too. You choose to divert all your money into property at the expense of other things which would probably make you and particularly your children happier than waiting around for bricks and mortar at an affordable level.

I suggest you take your kids to somewhere on holiday that will bring them joy, experience, interest and a wealth of knowledge before it’s too late.

I have to agree that too many of us are property-fixated as if it's all life has to offer, and we're neglecting having good times our selves and our families/chums, while we enslave ourselves either to the debt an over-priced property brings or the looooooong wait for sanity in house prices to even look like it's returning.

I notice that the firms complaining of sluggish property sales don't blame lack of value and insane asking prices - they blame "mortgage availability" ie lack of mortgages. Unbelievable. So if you can't get a £1000 loan for a hi-fi worth £375 then you should blame the finance company for not supporting greedy retailers?! Right, yeah.

[abharrisson]

I laughed when I saw this, and I thought it was a clever way of looking at the issue.

But ... and I dont want to be cruel about this...

If rising prices now are making you MORE LIKELY TO BUY, then you havent thought this situation through properly.

Havent you learned anything from 2007-2008?

Here's my take:

+ Bubbles occur when: easy money hits unthinking speculation

+ "When people are buying without thinking and analysis of what they can afford, prices can go to any height", and that is the most dangerous time to buy, because prices detach from reality

+ As property prices rise (but rents don't), renting becomes even more obviously the smart choice, since the economic benefit of renting rather than buying becomes stronger

Some say, "but I just want a home!"

(Let me say this in an unvarnished way: They are fools, and the worst sort of liars - since they are lying to themselves! If they were willing to rent before, why should the argument in favor buying get stronger when prices rise? They economics in favor of buying are weaker, not stronger. They are lying to themselves, since what they really mean is: "I dont want to miss out on the easy money that I see others making, and what I really want is the psychic pleasure of owning while I'm also making tonnes of easy money, in a passive way. " If they were truly honest about what is motivating them, then they would be easier for them to slap down the silly emotion, and deal with the thoughtless emotional response better. )

Let me hit these types with another brick. A lawyer once said: "I dont want to use myself as a lawyer, since I would then have fool for a client." You dont want to just "go with the emotional flow, and BUY!", since you would then be buying without a good reason.

I laughed when I read that.

[Sybil13]

PLEASE HAVE YOU BOUGHT A HOUSE YET?

[Rain'ard]

Hello all,

I can just see me resigning myself to the bulls' arguments, not that I can understand them, but it looks like any real price retracement downwards could take years, like a slow agonising relationship breakdown (and I know all about those, eh luv).

Will it take years? Will inflation catch up with it?

Will property prices not fall until moi, Le Jinx, buys one? In which case, a whip round would be in order, please. I'll give you my PayPal account - ta.

TLB

My luck is so bad that I am convinced that house prices will dramatically crash to the floor the day after the day I hand in my chegue for my long awaited house purchase. It might be a good idea if everyone made a donation to me tommorow of one grand. I'll go out and buy my house and two days later you will all be rewarded with a 60% discount on your dream house.

[grizzly bear]

I laughed when I saw this, and I thought it was a clever way of looking at the issue.

But ... and I dont want to be cruel about this...

If rising prices now are making you MORE LIKELY TO BUY, then you havent thought this situation through properly.

Havent you learned anything from 2007-2008?

Here's my take:

+ Bubbles occur when: easy money hits unthinking speculation

+ "When people are buying without thinking and analysis of what they can afford, prices can go to any height", and that is the most dangerous time to buy, because prices detach from reality

+ As property prices rise (but rents don't), renting becomes even more obviously the smart choice, since the economic benefit of renting rather than buying becomes stronger

Some say, "but I just want a home!"

(Let me say this in an unvarnished way: They are fools, and the worst sort of liars - since they are lying to themselves! If they were willing to rent before, why should the argument in favor buying get stronger when prices rise? They economics in favor of buying are weaker, not stronger. They are lying to themselves, since what they really mean is: "I dont want to miss out on the easy money that I see others making, and what I really want is the psychic pleasure of owning while I'm also making tonnes of easy money, in a passive way. " If they were truly honest about what is motivating them, then they would be easier for them to slap down the silly emotion, and deal with the thoughtless emotional response better. )

Let me hit these types with another brick. A lawyer once said: "I dont want to use myself as a lawyer, since I would then have fool for a client." You dont want to just "go with the emotional flow, and BUY!", since you would then be buying without a good reason.

I agree with you.... and am lucky to have found a too perfect rental house. But I would like to paint my walls, etc etc (but don't want to overpay for the priviledge) and I am going to get nervous at some point about being in cash.... not yet, but we might not be able to find the right house when the time to be nervous comes...

[scottbeard]

How much for the privilege of painting your walls?

Well I think the value of the flat I rent will drop 250k->200k from now to the bottom, say over 4 years.

That is approx £1000pcm. There is also £1000 interest per month if I purchased. I pay £750pcm rent.

So should I pay £1250 a month extra, over 4 years, just to have the privilege of painting walls?

That is the key question. Some people seem to approach it as "if house prices are about to fall it MUST therefore be a bad time to buy"

The real question is: is what you are buying worth the price? What price no inspections or landlords kicking you out? The answer will be different for everyone.

[repetitive bleats]

I'm starting to think that houses won't crash until the politicians have been able to shift their second/third/fourth homes. Bought often on expenses they see them as one of the perks of the job but were caught out by the sudden downturn and are using tax payers money to prop them up long enough to get rid.