On The Verge Of Buying

[Spoony]

Hi

Those of you that have been here long enough will remember me as being one of the original members of this site in 2001/2 under a different user name that I have never been able to retrieve. Hence now I am Spoony since 2004. I have been a bear all this time, never moving from my view that housing in the UK is fundamentally overvalued even as far back as 2002. It was. But It got worse. It should have crashed in 2005 - it didn't. It should have crashed even more in 2007. It was 18% only and now that crash is being wiped out to 12% down.

I have given up. I started viewing houses just to see what a could get and where I want to buy. Now I'm starting to see houses I like. Theres a repo on right move that has had 50 calls to the estate agents in less than 24 hours. It already has a buyer but they are listing it to see if a better offer is recieved. The market appears to be going mad again and I doubt that now I can make offers below the asking prices.

This is what is leading me to buy:

1. We are still 12% down and closing every month

2. Nobody thought that 0% rates would happen and the effect that it would have on the market now it has.

3. They seem to want to keep it at 0% for a while

4. It is going back up and god knows how many more years it will be before the next one.

5. I am getting older - I have waited nearly 8 years for this crash and I am tired, I have the money it the bank to buy the house mainly without mortgage, I could die tomorrow etc (or soon you never know!), so I want to spend it on the house and at least enjoy it for a few years

6. I have seen a house in a street that rarely comes on the market so want to grab it while I can.

7. I am starting to wonder that with all the government printy, propping up and controlling the banks house prices will not fall again?

I do believe they are overvalued they should be back to 3 x salary but maybe the rates will stay at 0% for 10 years

Any advice/comments would be gratefully recieved. Someone give me sensible reasons why I should not buy. Or do you agree with me?

Edited October 15, 2009 by Spoony

[Midnight rider]

Can I ask what any of this has to do with pouring scorn and hate on scum such as benenfit scroungers, local authority employee's or bankers?

Sheech you'd think this is HPC !

[Executive Sadman]

Hi

Those of you that have been here long enough will remember me as being one of the original members of this site in 2001/2 under a different user name that I have never been able to retrieve. Hence now I am Spoony since 2004. I have been a bear all this time, never moving from my view that housing in the UK is fundamentally overvalued even as far back as 2002. It was. But It got worse. It should have crashed in 2005 - it didn't. It should have crashed even more in 2007. It was 18% only and now that crash is being wiped out to 12% down.

LOL I remember posting an article from 1998 (from the BBC of all sources) saying prices then were unsustainably high (about £68k)

I guess if you want security from being evicted.

If a house as an investment is important to you i would say put your money anywhere but the UK, and continue to rent. I think renting will be cheaper than buying for the forseeable future. I dont believe, even with rates like this, in real terms homes can go higher. I guess nominal they can do if inflation takes off.

[SMAC67]

If you consider house ownership to be on par with car ownership then you will have no worries, if however you see it as an investment then you will be sadly disappointed. The big question is whether or not you need a mortgage, that is where the problem's lie. If you don't need one then your only problem will be the thought that you could have got a similar house cheaper, it will happen. The market is going to be incredibly volatile and some places are going to be wiped out completely.

But you are correct, at some point our currency will become worthless, a year, two, maybe five, but it will disappear, how much warning you will have is not clear. By the same token, owing money on a debt is going to be risky as there will be a real chance of repossession.

Cheap house, small or no debt, then why not, otherwise you will end up playing a very high risk game. The situation of course would be different if we had the same system as the Yanks, but we don't, they can walk away from their property, we have the millstone of outstanding debt.

Also, please note, the recession hasn't even got into 2nd gear yet, so consider your employment situation and income very carefully.

[TwoWolves]

I can see you are ready to settle down. My advise is don't let agents press you that anything is about to be sold, I can tell you from friends experiences a lot of offers are falling through right now because people can't get mortgages. Stay cool headed.

I just sold-up myself to go renting because I believe phase two is imminent with more falls, but that's my call.

[Spoony]

LOL I remember posting an article from 1998 (from the BBC of all sources) saying prices then were unsustainably high (about £68k)

I guess if you want security from being evicted.

If a house as an investment is important to you i would say put your money anywhere but the UK, and continue to rent. I think renting will be cheaper than buying for the forseeable future. I dont believe, even with rates like this, in real terms homes can go higher. I guess nominal they can do if inflation takes off.

Well it depends. Yes its a house to live in. But its also a transfer of cash into property, that cash is sitting in banks earning about 4% right now ( I took out fixed rates and now about to come to an end) Its a scary thought putting almost all my cash cushion into a house. A house ties you down etc. The house may fall dramatically in value later. No my job is not too rosey but the way I see it is that if I was made redundant I have no help from Clown right now. Too much cash.

If I buy a house and spend the cash I have all sorts of help if I was let go - and anyway plenty of less skilled jobs around to do. The mortgage needed would be only about 30K. Besides easier to get a mortgage when in permanent employment. So had better get on with it while I still have a job.

Edited October 16, 2009 by Spoony

[blue skies]

Hey Spoony

I feel your pain, as I rent and have bein waiting 5 years for the big crunch.

Just when you are ready to give up, is the time just before things can change in your favour.

I can tell from your comments "Iam getting older" etc that you have reached the point of justifying buying a house.

I can remember a friend buying at the hight of the boom " they are going up so quick if I dont act now it will cost more and I wil not be able to afford a house at all"

Every single one of us is in the drivers seat of our own destiny, we have freedom to pick from a limited amount of options.

The last thing to be let out of Pandoras Box was hope.

I like to think that the decisions of the resurve banks would be no different if monkeys were pulling the levers. So it is possible that a bad situation becomes worse.

The whole world has maxed out the credit cards and governments are trying to inflate there way out of debit.

I feel happy to rent, and look at buying a house more as a investment. though culture strongly pulls me to home ownership.

In japan there is a riddle

The sword of the sumuri; strength

The peal of the merchant; wealth

The mirrow of self reflection; self motivation

It is considered the last is the most valuable.

To understand oneself is the greatest challange and achievment, I encourage you to post again giving your reasons for and against, rational and emotional.

[housespider]

Hi

Those of you that have been here long enough will remember me as being one of the original members of this site in 2001/2 under a different user name that I have never been able to retrieve. Hence now I am Spoony since 2004. I have been a bear all this time, never moving from my view that housing in the UK is fundamentally overvalued even as far back as 2002. It was. But It got worse. It should have crashed in 2005 - it didn't. It should have crashed even more in 2007. It was 18% only and now that crash is being wiped out to 12% down.

I have given up. I started viewing houses just to see what a could get and where I want to buy. Now I'm starting to see houses I like. Theres a repo on right move that has had 50 calls to the estate agents in less than 24 hours. It already has a buyer but they are listing it to see if a better offer is recieved. The market appears to be going mad again and I doubt that now I can make offers below the asking prices.

This is what is leading me to buy:

1. We are still 12% down and closing every month

2. Nobody thought that 0% rates would happen and the effect that it would have on the market now it has.

3. They seem to want to keep it at 0% for a while

4. It is going back up and god knows how many more years it will be before the next one.

5. I am getting older - I have waited nearly 8 years for this crash and I am tired, I have the money it the bank to buy the house mainly without mortgage, I could die tomorrow etc (or soon you never know!), so I want to spend it on the house and at least enjoy it for a few years

6. I have seen a house in a street that rarely comes on the market so want to grab it while I can.

7. I am starting to wonder that with all the government printy, propping up and controlling the banks house prices will not fall again?

I do believe they are overvalued they should be back to 3 x salary but maybe the rates will stay at 0% for 10 years

Any advice/comments would be gratefully recieved. Someone give me sensible reasons why I should not buy. Or do you agree with me?

Do whatever will give you peace of mind - one cannot put a price on that!

[Frank Hovis]

I sympathise Spoony.

The key question to me is time. I think Blue Skies is right, and the bubble graph below is right, and that all the government / central bank measures are just delaying the inevitable collapse in house prices.

This has however been a very stretched bubble and I think I may be waiting another five years to buy a house at a pittance. I am reasonably happy to wait that long, time is on my side (situation as well as age).

From your post it sounds at though time isn't on your side. If I were in your position I might just buy.

[munners]

I think you should go with your feelings.

If I had listened to half of the stuff mentioned on here I wouldnt have got anywhere. There are a select few that speak so much sense ie Dr B but the vast majority are scare mongerers and wishful thinkers. However the site has a wealth of knowledge and is extremely entertaining. You should pick and choose what you decide to take from it.

The Govt will not let the market fail and have propped it up no end. I think they realise that it was once a man and his dog and now it is a man and his property.

If you buy right and account for a possible 20% drop then you cant go wrong really. Its nice being a home owner.

Good luck. I am slowly thinking like a bull. Why not? Like you say....you only live once.

[Sybil13]

I can see you are ready to settle down. My advise is don't let agents press you that anything is about to be sold, I can tell you from friends experiences a lot of offers are falling through right now because people can't get mortgages. Stay cool headed.

I just sold-up myself to go renting because I believe phase two is imminent with more falls, but that's my call.

Friend told me an agent phoned him yesterday on a property that had gone SSTC and was such a certainty moving dates were booked and seller packed when mortgage broker pulled the plug at the last moment, don't know reason, joke of course is that property has now gone back on £10000 more than before and that was already peak + 10%!! These are difficult times, on the one hand we know that money for lending is in short supply, we know Rightmove themselves have said that they cannot see approvals reaching levels needed to support a stable let alone a rising market for years to come and have said they consider it will take banks ten years to be rebuilt, YET there seems to be one hell of a momentum to HOUSE PRICES ARE GOING UP !

[Bloo Loo]

Friend told me an agent phoned him yesterday on a property that had gone SSTC and was such a certainty moving dates were booked and seller packed when mortgage broker pulled the plug at the last moment, don't know reason, joke of course is that property has now gone back on £10000 more than before and that was already peak + 10%!! These are difficult times, on the one hand we know that money for lending is in short supply, we know Rightmove themselves have said that they cannot see approvals reaching levels needed to support a stable let alone a rising market for years to come and have said they consider it will take banks ten years to be rebuilt, YET there seems to be one hell of a momentum to HOUSE PRICES ARE GOING UP !

my view is that if EAs are all selling 4 or 5 a week...as some reports have ventured...then with only 40,000 approvals and 30,000 cash buyers, there are going to be a lot of broken chains....

[brotherjoe]

There are lots of reasons why house prices should be falling at the moment, like in the vast majority of countries around the western world.

The fact that they are not is no reflection on the state of our country, but a reflection on the heaps of money thrown at it by our government in its cynical attempt to keep the ship afloat until the election

Note their reluctance to control our debts NOW, but use the recovering recession/economy card as a reason to put it off.

They are politicians, their jobs are up for renewal and they want another 5years at the trough, don't be fooled by their agenda.

You've waited since 2001/2, please wait just 6 more months. Its like running a marathon and 'hitting the wall' so don't waste all that effort todate, head down and carry on.

Post election the gloves are off and they can do as they like without risk to their jobs and imo thats the earliest you will see the problems begin.

Of course if your mortgage free or going to use your savings to offset a loan then you can argue that any loss in value is offset by savings in mortgage payments.

Good luck whatever you decide

[Sybil13]

my view is that if EAs are all selling 4 or 5 a week...as some reports have ventured...then with only 40,000 approvals and 30,000 cash buyers, there are going to be a lot of broken chains....

Yes business is BOOMING in Estate Agent La La Land.....

Halifax Estate Agency Sold for £1

Halifax estate agents sold for £1

Lloyds Banking Group has agreed to sell its Halifax estate agency business to LSL Property Services for £1.

The loss-making business has 218 offices, 93 of which are franchise operations.

There are 121 Halifax banking counters located in estate agents, which will close down in early 2010.

Lloyds said that 1,050 employees would be transferred to LSL after the sale and approximately 360 full-time jobs would be cut.

The Halifax brand will not be part of the sale. The branches will be rebranded as one of LSL's existing brands: Your Move, Reeds Rains or Intercounty

[Sybil13]

There are lots of reasons why house prices should be falling at the moment, like in the vast majority of countries around the western world.

The fact that they are not is no reflection on the state of our country, but a reflection on the heaps of money thrown at it by our government in its cynical attempt to keep the ship afloat until the election

Note their reluctance to control our debts NOW, but use the recovering recession/economy card as a reason to put it off.

They are politicians, their jobs are up for renewal and they want another 5years at the trough, don't be fooled by their agenda.

You've waited since 2001/2, please wait just 6 more months. Its like running a marathon and 'hitting the wall' so don't waste all that effort todate, head down and carry on.

Post election the gloves are off and they can do as they like without risk to their jobs and imo thats the earliest you will see the problems begin.

Of course if your mortgage free or going to use your savings to offset a loan then you can argue that any loss in value is offset by savings in mortgage payments.

Good luck whatever you decide

Much quoted by me I know but clearly not only didn't the government listen but neither did the BOE listen to itself!!

BOE Official Warns Darling "Don't try to stop the housing crash."

A top Bank of England official today warned the Government against trying to prevent the housing crash.

In a controversial call, Markets Director Paul Fisher said it would be ‘dangerous’ for policymakers to try to stem the relentless slump in the value of property.......

In testimony to the Treasury Committee, Mr Fisher said: ‘I think the most important thing for the housing market is that prices should be allowed to adjust to a level at which people can afford to buy houses.’

In recent years potential buyers were unable to get onto the property market because ‘houses were just so expensive,’ he went on.

‘We have to allow the housing market to find a new level at which people can afford to enter it.’

Britain has seen one of the deepest property slumps of any advanced nation since the onset of the credit crunch. .......

‘There is a danger that policy intervention in the housing market stops these sorts adjustments from happening.

‘We have to be very careful with policy intervention that we don’t actually make it worse.’

Property prices are still 40 per cent above their historic averages, suggesting further declines are unavoidable, the Organisation for Economic Co-operation and Development said earlier this month.

Analyst Vicky Redwood of Capital Economics said: ‘The housing market correction has to happen and we may as well get it over with sooner rather than later.

It is obviously in the government’s interests to try to delay any adjustment in house prices and get them to fall at a slower pace for political reasons.’

Treasury Committee chairman John McFall said: ‘Policy interventions have to accept there has to be a floor in the market. There can be no artificial stimulus.’...........

[Bobajobbob]

When the last bear turns bull.........

[Mrs Bear]

I can see you are ready to settle down. My advise is don't let agents press you that anything is about to be sold, I can tell you from friends experiences a lot of offers are falling through right now because people can't get mortgages. Stay cool headed.

I just sold-up myself to go renting because I believe phase two is imminent with more falls, but that's my call.

Question in the Times property section today:

"After a long time on the market, we have just had an offer to buy our house. However, our estate agent agent has warned us that a lot of purchasers don't complete. If they were prepared to do so, can we ask the buyers to sign a preliminary "lock-out" agreement?"

Long answer from A Barrister, basically saying that you can ask, but but there's really no incentive for a buyer to sign one.

[Lone_Twin]

I have a lot of sympathy spoony mate. In fact I have just had an offer accepted on a house.

Many of the same reasons as you tbh and in particular the house we found.

I realised it was time to put my money where my mouth is. I am an inflationista and though we may not get to weimar wheelbarrows I think from the govts actions so far we can see that they are quite prepared to wreck the economy to inflate the debt away.

So I've got a modest house on a small mortgage 2x joint income on a 5yr fix which needs some work in a small town (I agree with injin's point about not cities not sticks) in surrey with a direct train to london. Somewhere we can live out the rest of the recession with some security of tenure.

I expect house prices to fall further, for me the greater risk is that this will be mostly real not nominal falls and that interest rates rise and can't be fixed at an afordable level. Of course we have also benefited from the stamp suspension.

Perhaps I will turn out to be just the grease in the wheels fo the market on the way down. But for me this is the best call I can make with what I believe right now.

[Sybil13]

When the last bear turns bull.........

Much quoted again but its a good one .....

Four Reasons Why House Prices Will Keep Falling

.....A lot of lending power has now left the market for good. Almost £300bn of UK mortgage debt was securitised, i.e. packaged up and sold off from bank balance sheets onto the bond markets, between 2005 and 2007.

"That represents more than 90% of the growth in mortgage debt over that period", says CreditSights. And "the world isn't exactly clamouring for British securitised mortgages anymore, and won't be for a long time", says Matthew Lynn on Bloomberg. "With less money coming into the market, there won't be the same kind of demand for houses".

Yet a Rightmove survey at the end of August gave the "encouraging" signal that 78% of respondents reckoned UK house prices won't fall any further this year. And also that "the UK property industry is now seeing a virtuous circle of confidence building upon confidence".

Why's this another worry? Well, as Fidelity's Anthony Bolton explained in the weekend's FT about the stock market, "if everyone is positioned for the market to rise, it means these bullish expectations are already discounted" – i.e. factored into the price. As a result, "the market often moves to make the majority wrong and does the unexpected… so at turning points especially, the correct is the minority view".

And while there are plenty of differences between shares and houses, the principles of crowd behaviour are the same for every asset class. When almost everyone is bullish, get ready for a price fall. The near-8.5% bounce in property prices within the last six months (using Nationwide's figures at least) now looks ripe for a reversal.

Again much quoted but the BBC Economics Editor recently quoted in her article House Prices: Too Good to be True the IMF as saying :

The more fundamental reason why prices might start falling again is that, by most measures, they are still significantly over-valued.

That's the IMF's conclusion in its latest World Economic Outlook, out yesterday. It says the typical housing boom lasts six years and sees house prices in real terms go up by about 50%. Downturns last five years, during which time house prices in real terms fall about 24%.

The IMF folk compare that historical picture with what's happened in individual markets so far. They then go back and run more complex models with measures of affordability and other data. The conclusions are broadly the same: prices in the UK, Spain and Denmark all probably have quite a long way further to fall - in the UK's case

But this is not like previous booms and busts is it?

Taking the Nationwide’s figures, the 1997 to 2007 boom saw prices rise by 147 per cent in real terms. Within that, prices rose 76 per cent between 2001 and 2007

[BernieT]

I sympathise Spoony.

The key question to me is time. I think Blue Skies is right, and the bubble graph below is right, and that all the government / central bank measures are just delaying the inevitable collapse in house prices.

This has however been a very stretched bubble and I think I may be waiting another five years to buy a house at a pittance. I am reasonably happy to wait that long, time is on my side (situation as well as age).

From your post it sounds at though time isn't on your side. If I were in your position I might just buy.

That bull trap is very short on here. Does anyone have any idea what the segments on the Time axis should be?

[Brave New World]

I agree with the marathon ‘wall’ principle entirely…..or is it that I am clinging to it?!

We have waited this long and you only have to see the GE looming to know that the little people are being conned into thinking that the market is back on – you only have to look at the low transactions and number of property stalled at SSTC to know this ain’t a healthy market.

More than anything banks/EAs need volume to make money and with transactions under half what they once were these guys need the return to 100k + transactions a month.

I believe that the govt are in a win win situation at the moment – they garner popular support for the GE in a seemingly resurgent market (to Joe ‘5 Live, BBC News, Daily Express’ man) whilst enabling banks to grab those 20%+ deposits that will act as a good cushion on the next leg down.

And yes perhaps this post is perhaps lined with a degree of hope on my part but this country has not faced up to any of the multitude of challenging macro economic issues that need to be resolved for this country to recover. When we have to, after the next GE then we will see the true test of the housing market recovery.

To jump aboard now (especially if it is a stretch) would seem to place sentiment in the fact the govt will protect the market and therefore the public……..when in actual fact all they have done and are ultimately concerned with is protecting the banks.

[Y-QUERK]

Is it worth waiting for the GE and see if the Torys do anything different or should we just assume they are simply another shower of sh1ts looking after their own?

[the end is a bit nigher]

Friend told me an agent phoned him yesterday on a property that had gone SSTC and was such a certainty moving dates were booked and seller packed when mortgage broker pulled the plug at the last moment, don't know reason, joke of course is that property has now gone back on £10000 more than before and that was already peak + 10%!! These are difficult times, on the one hand we know that money for lending is in short supply, we know Rightmove themselves have said that they cannot see approvals reaching levels needed to support a stable let alone a rising market for years to come and have said they consider it will take banks ten years to be rebuilt, YET there seems to be one hell of a momentum to HOUSE PRICES ARE GOING UP !

I confirm that around here asking prices are peak plus 10%. But then I can also confirm that on a house that was up for sale for £375k the EA recived 2 offers of £260k and £300k. I said I might go to £315k and the EA sounded keen. Spoke to the vendor who told him that he was taking the house off the market.

[Willy Weasel]

Although I think houses are overvalued, I've never stopped looking for one or viewing ones I like. If one I like comes up at a price I can afford then I will buy.

Interestingly, though, I was speaking to an EA this week about a property and when I said I was renting her response was "So why do you want to buy then?"

[Dopamine]

Is it worth waiting for the GE and see if the Torys do anything different or should we just assume they are simply another shower of sh1ts looking after their own?

The latter.