Are Any Of The Long Time Bears Actually Looking For A House

[MississippiJohnHurt]

I was just wondering if any of the long time bears on here are still actively look for houses ?

I for one have stopped...did 3 viewings this year and was shocked at how bad they were, gave up after that. The record asking prices and the fact that people are clinging on to these asking prices, for me, makes it pointless or impossible to continue looking.

We have given up for at least 2 years after we tried to buy our rented place and were told by the landlord (boomer or thereabouts) that we were 80k apart - that is despite offering him an extremely generous 15% off the price he tried and failed to sell at in 2006. The place needed significant cosmetic work doing too.

So we took our mortgage in principle and had a look at what we could buy: answer was a number of 2 and a half bed ex council houses in the crap part of our town.

For the same price as the interest on the mortgage we have taken a rental on a 5 bed victorian cottage with large garden, very nicely done out, double garage. Etc etc. It is in the countryside outside of the town we wanted to live in but could also have got a decent nice 4 bed rental in town on comparable rates.

For comparison - wife and I are both 32, one child, live in a fairly desirable Essex suburb in tube zone 6 (it's hardly Henley or Richmond or whatever - just a nice market town). I now earn in top 1 or 2% of UK, wife doesn't work. No debt, very good savings. We don't expect a mansion - a nice 3 bed semi with a decent garden would be fine, but we're certainly not going to be tying ourselves to a 25 year mortgage and spending our hard earned savings to get something like I described above - I work hard enough for that to very quickly become embittering....

So have given up for now - leave the boomers to sell houses to each other (and the occasional mug of my age who can borrow sufficient money from a boomer).

And I wasn't even that bearish in the first place ! But when we looked at the cold facts of our situation, it was just completely obvious that staying out of the market was the thing to do. And given that we don't want to move our little one around too much, we will keep that view for 2 years at least before reviewing. Can't really see the downside risks to this view. Still a huge amount of denial out there about how much we've moved on since the halcyon days of Phil and Kirsty, and flipping rental flats.

[Goat]

At no point since I have been in a financial position to buy have prices been anything but delusional so to be honest I've never started looking.

[dances with sheeple]

Might as well chuck in my position.....

Not viewed a house since late 2004. We've got a kid on the way so I might get pressure in the near future but the other half has been thoroughly briefed and appears to be 100% onside. My job seems secure and we are in a nice rental let by someone who actually fixes stuff when something goes wrong. I know, it's amazing. Not only are things fixed almost immediately but last time we had an apology to go with it!

So, barring any disasters we should be OK for a couple years. I think it is just a case of riding out those up and down moments. Read Halifax up 0.5% this morning - oh no that's bad. Got in car to go home, switched on radio, Spain downgraded three notches by Fitch. Smiling again!

If it wasn't for the wife & kid(s) I'd be in it until the bitter end on principle. Hopefully I'll manage another couple of years yet. All depends on the staying power of 'er in doors.

(edited for spelling)

Not uncommon, I have never had many problems with landlords, one guy even came round to my new rental flat and handed me a tenner, because I had that amount paid into the gas meter. Not always, but often IMO the Rigsby image is used by people who have a VI in getting you into mortgage serfdom i.e they have a house to sell, or a loan to make.

Edited June 8, 2012 by dances with sheeple

[Hat]

Interesting. So for the sake of argument let's say you sold at £95,000, which Nationwide says was the average house price then.

Had you kept your £95,000 house, you would now have one worth about £170,000, so a £75,000 capital gain. Over those 11 years, if you had been paying only the interest on a £95,000 mortgage, you'd have laid out say 3.5% of that a year for eleven years. If you had rented the same average house, you'd have laid out a similar 3.5% of its steadily increasing price (averaging about £130,000) over that period. So the interest-only mortgage would have cost £36,575 to serve, whereas the rent would have been continually adjusted and would have been £50,050. The difference is £13,000 in favour of owning.

So roughly you'd be £88,000 up at this point from owning versus renting. There is a cost of maintenance involved with owning, of course, but rentals tend not to be maintained in my experience, and if the landlord has had to spend anything s/he tends to steal the deposit to fund it when you move on, so I've ignored that. I've also ignored the fact that typically as you get older you need more house to accommodate children, i.e. the gain from ownership is probably a bit understated.

I don't know what amount of cash you had invested in 2001, but in order to be better off now after 11 years of renting, you must have started off with about £17,000, and have about £90,000 net now, right?

I realise Estate Agents aren't known for their maths, but this is ridiculous. Let's ignore over a decade of repair costs and all selling/buying expenses shall we?

OK, using your figures, I start with £95k from my house sale. I invest it and it increases fivefold to £475k. I miss out on my £75k capital gain on the house and spend £50k in rent. I think that makes me up by about £350k.

And BTW, unless you bought your first house in 1986 aged 86, you have seen nothing like this before.

You see that red trend line in the Nationwide graphs? The long-term slope of that line is zero. Not 2.9% as it was at the start of this year, not 2.8% as it is now. 0%.

There is a long way to go yet - Your £600k flat still has to at least halve in value in real terms. What is more, if the government cannot hold off the deflation, most of that will come from sharp nominal falls. If however the government manages to recapitalise the banks as the defaults occur, then you could be looking at a slow crash as in Japan- in this case you would also need to factor in decades of foregone returns in alternative assets (in a similar way to how I have done in the calculation above.)

Whichever way you cut it, a buy and hold strategy on a property such as yours is a terrible financial decision. I only hope you will be able to console yourself in the future with the stupendous imaginary returns you will be making on your decimated level of capital. All the best.

[TheCountOfNowhere]

I realise Estate Agents aren't known for their maths, but this is ridiculous. Let's ignore over a decade of repair costs and all selling/buying expenses shall we?

OK, using your figures, I start with £95k from my house sale. I invest it and it increases fivefold to £475k. I miss out on my £75k capital gain on the house and spend £50k in rent. I think that makes me up by about £350k.

And BTW, unless you bought your first house in 1986 aged 86, you have seen nothing like this before.

You see that red trend line in the Nationwide graphs? The long-term slope of that line is zero. Not 2.9% as it was at the start of this year, not 2.8% as it is now. 0%.

There is a long way to go yet - Your £600k flat still has to at least halve in value in real terms. What is more, if the government cannot hold off the deflation, most of that will come from sharp nominal falls. If however the government manages to recapitalise the banks as the defaults occur, then you could be looking at a slow crash as in Japan- in this case you would also need to factor in decades of foregone returns in alternative assets (in a similar way to how I have done in the calculation above.)

Whichever way you cut it, a buy and hold strategy on a property such as yours is a terrible financial decision. I only hope you will be able to console yourself in the future with the stupendous imaginary returns you will be making on your decimated level of capital. All the best.

Q.E.D.

[Seen It All Before]

I realise Estate Agents aren't known for their maths, but this is ridiculous.

Er, everyone who disagrees with you is not an estate agent, dude.

Let's ignore over a decade of repair costs and all selling/buying expenses shall we?

We should certainly ignore selling / buying expenses, because in the example given there, wouldn't have been any. As for repair costs, well, what's a reasonable amount on a £95k house? Maybe a few hundred a year? In fact, you could probably get away with nil or nearly. I have seen houses offered that had had no maintenance done in 45 years and the asking price was the within 2 or 3 per cent the same as the one round the corner that had been well kept. Condition of a house has basically no bearing on its price as far as I can see.

OK, using your figures, I start with £95k from my house sale.

No. Using the dates from the post I was responding to, the poster indicated he had sold in 2001. The money from the sale of the house would be the net equity after costs, not the gross sale price.

I invest it and it increases fivefold to £475k. I miss out on my £75k capital gain on the house and spend £50k in rent. I think that makes me up by about £350k.

See above. Moreover, if you were making £40,000 a year in investment returns, it couldn't all be tax-sheltered anyway; it would have attracted income tax at 40% assuming the OP was also earning, as seems likely. So even if he started with £95k in cash, what he would now have would be closer to £230k. The only way you could get a net fivefold return would be if you started out with a small sum and sheltered the whole lot in ISAs and the like.

And BTW, unless you bought your first house in 1986 aged 86, you have seen nothing like this before.

I was 23, in fact, and compared to 1989 - 1992, this is a breeze. Back then I was on £24,000 a year. On a £72,000 repayment mortgage my monthly repayments hit £950. That was before rates, utilities, service charges, or insurance. At one point, I worked out that my disposable income was two-thirds of one per cent of the gross. The mortgage payments on my current flat aren't even a third of that and it's worth ten times as much.

You see that red trend line in the Nationwide graphs?

No.

There is a long way to go yet - Your £600k flat still has to at least halve in value in real terms.

You see....I've been hearing this for 11 years, usually from people who want my flat now for what I paid 14 years ago. It's like Vince Cable predicting 17 of the last 3 recessions. A stopped clock is eventually right twice a day I suppose, but it hasn't happened yet. If it did, I'd still have equity in the flat because the mortgage is about a third of the current value. If it halved in value, I'd sell it and buy a bigger flat.

Whichever way you cut it, a buy and hold strategy on a property such as yours is a terrible financial decision.

Well, maybe. The way I cut it is that over the last 14 years it has appreciated from £245,000 to around £600,000 and for the last 7 has paid me about £7,000 a year net of all costs.

The fact is that any event apocalyptic enough to wipe out that £400,000 would take everything else down with it. For one thing, you'd likely find that property only sells for cash. If its price has halved, no lender will lend on it in case it halves again. So the deposit becomes the price. But you haven't got the cash for a deposit now, and neither will you have cash for the whole asking price after this crash you think you want. A crash on that scale will drive you out of the market just as surely as current prices have.

Most of all, though, It is simply delusional for any renter who is still in denial after all this time to mistake themselves for a shrewd financial wizard. Nobody like that is going to step in, have the last laugh and profit triumphantly from their ill-judged decision to exit the market 10 years ago or whatever. If prices halve, the crashers will hang back thinking they're going to halve again. And then they won't. Or something.

Anyone who did exactly the wrong thing back then is absolutely guaranteed to keep on doing the wrong thing now: they have a track record of hopelessly poor judgement.

[Goat]

Er, everyone who disagrees with you is not an estate agent, dude.

No, just the ones who have 15 posts to their name.

And the ones who say dude of course.

[The Masked Tulip]

And the ones who say dude of course.

[Game_Over]

I'm a long term bear and I was looking for a nice bowl of porridge

but someone had already eaten it!

[dances with sheeple]

Er, everyone who disagrees with you is not an estate agent, dude.

We should certainly ignore selling / buying expenses, because in the example given there, wouldn't have been any. As for repair costs, well, what's a reasonable amount on a £95k house? Maybe a few hundred a year? In fact, you could probably get away with nil or nearly. I have seen houses offered that had had no maintenance done in 45 years and the asking price was the within 2 or 3 per cent the same as the one round the corner that had been well kept. Condition of a house has basically no bearing on its price as far as I can see.

No. Using the dates from the post I was responding to, the poster indicated he had sold in 2001. The money from the sale of the house would be the net equity after costs, not the gross sale price.

See above. Moreover, if you were making £40,000 a year in investment returns, it couldn't all be tax-sheltered anyway; it would have attracted income tax at 40% assuming the OP was also earning, as seems likely. So even if he started with £95k in cash, what he would now have would be closer to £230k. The only way you could get a net fivefold return would be if you started out with a small sum and sheltered the whole lot in ISAs and the like.

I was 23, in fact, and compared to 1989 - 1992, this is a breeze. Back then I was on £24,000 a year. On a £72,000 repayment mortgage my monthly repayments hit £950. That was before rates, utilities, service charges, or insurance. At one point, I worked out that my disposable income was two-thirds of one per cent of the gross. The mortgage payments on my current flat aren't even a third of that and it's worth ten times as much.

No.

You see....I've been hearing this for 11 years, usually from people who want my flat now for what I paid 14 years ago. It's like Vince Cable predicting 17 of the last 3 recessions. A stopped clock is eventually right twice a day I suppose, but it hasn't happened yet. If it did, I'd still have equity in the flat because the mortgage is about a third of the current value. If it halved in value, I'd sell it and buy a bigger flat.

Well, maybe. The way I cut it is that over the last 14 years it has appreciated from £245,000 to around £600,000 and for the last 7 has paid me about £7,000 a year net of all costs.

The fact is that any event apocalyptic enough to wipe out that £400,000 would take everything else down with it. For one thing, you'd likely find that property only sells for cash. If its price has halved, no lender will lend on it in case it halves again. So the deposit becomes the price. But you haven't got the cash for a deposit now, and neither will you have cash for the whole asking price after this crash you think you want. A crash on that scale will drive you out of the market just as surely as current prices have.

Most of all, though, It is simply delusional for any renter who is still in denial after all this time to mistake themselves for a shrewd financial wizard. Nobody like that is going to step in, have the last laugh and profit triumphantly from their ill-judged decision to exit the market 10 years ago or whatever. If prices halve, the crashers will hang back thinking they're going to halve again. And then they won't. Or something.

Anyone who did exactly the wrong thing back then is absolutely guaranteed to keep on doing the wrong thing now: they have a track record of hopelessly poor judgement.

No, life went on during and after WW2, so you not getting your fantasy price would be just you not getting your fantasy price, houses will continue to change hands at the new lower prices. Banks will be supported, price fantasists wont IMO, otherwise QE would be given out as House Purhase Tokens? Volumes have shrunk massively, so it is logical to say that not everyone who thinks they can get 600k can actually get 600k? So your flat is not really "worth" 600k? because you would have difficulty realising that price? People who post on here with access to cash are going to be picking up cheap or properly priced housing in the future. Don`t be angry about this, just accept and embrace it, you will be happier in the long run.

Edited June 8, 2012 by dances with sheeple

[MRMX9]

You see....I've been hearing this for 11 years, usually from people who want my flat now for what I paid 14 years ago. It's like Vince Cable predicting 17 of the last 3 recessions. A stopped clock is eventually right twice a day I suppose, but it hasn't happened yet. If it did, I'd still have equity in the flat because the mortgage is about a third of the current value. If it halved in value, I'd sell it and buy a bigger flat.

Well, maybe. The way I cut it is that over the last 14 years it has appreciated from £245,000 to around £600,000 and for the last 7 has paid me about £7,000 a year net of all costs.

The fact is that any event apocalyptic enough to wipe out that £400,000 would take everything else down with it. For one thing, you'd likely find that property only sells for cash. If its price has halved, no lender will lend on it in case it halves again. So the deposit becomes the price. But you haven't got the cash for a deposit now, and neither will you have cash for the whole asking price after this crash you think you want. A crash on that scale will drive you out of the market just as surely as current prices have.

Most of all, though, It is simply delusional for any renter who is still in denial after all this time to mistake themselves for a shrewd financial wizard. Nobody like that is going to step in, have the last laugh and profit triumphantly from their ill-judged decision to exit the market 10 years ago or whatever. If prices halve, the crashers will hang back thinking they're going to halve again. And then they won't. Or something.

Anyone who did exactly the wrong thing back then is absolutely guaranteed to keep on doing the wrong thing now: they have a track record of hopelessly poor judgement.

I own a house in Ireland - I inherited it at no cost to me. Since 2007 property prices in that county have fallen on average by 40%. The world carries on, people go to work and pay their bills and yes life goes on. The world hasn't collapsed - and no apocalypse either. Times may be tough there - but its a damn sight more pleasant a place to live than the UK.

Of course it couldn't happen here - but they said that in Ireland, Spain and the US 5 years ago. And Ireland was't exactly short of migrants like the UK.

So you can have huge house price falls - and the world doesn't end. Indeed in some ways its been a positive - there is greater sense of community and common decency than there ever was a decade ago!

[chicker]

Is that 3-4K a year the difference between what you pay in rent and the loss of earning on the £500k plus, used to buy the house?

Yes paying nearly 20k rent a year. Savings getting an average of 3.15% gross (instant access)

[LiveinHope]

I 'feel' very much better off renting and not owning.

Brought up only knowing about 'ownership', I spent a good few years in the 90s house hunting as prices started to accelerate away.

I've now rented the same property for 16 years.

I could never have afforded the mortgage on my rental, and so I would have probably either moved around in that 16 years, or been miserable in a bad location.

In 16 years I have spent nothing on maintenance or the costs of moving that were described in a post above.

Cash saved through 26 years renting now gives me a comfortable buffer if I lose my job, and the interest on it will pay the rent. This is my 'better off' feeling.

Had I bought 26 years ago I might now own outright, the unknown is whether I would have a good buffer of savings to pay the bills if I lose my employment. I would only ever realise any HPI if I were to downsize or STR and either would cost me capital. I also doubt I would I 'feel better off' downsizing to something sufficiently small to release adequate capital for day to day living.

My lifestyle doesn't mean I won't ever buy. It just means that it will be a financial rather than emotional decision i.e. when I get fair value for my money. I am not looking at EAs, but I don't drive around the countryside with my eyes shut...thankfully.

My only gripe is that if I lose my salary my savings are taken into consideration against benefits, whereas if I owned a home they are not; it should be a level playing field, either way.

Edited June 9, 2012 by LiveinHope

[tahoma]

In many areas house prices seem to be really sticky despite transaction levels dropping to 20% of their 2000's average. My watch areas in Peterborough reflect this, there are umpteen 30s semis on the market for £150K+ which have sat there for years. If the dumbass vendors would just accept 125K for them they could get them sold, but no, "they aren't giving them away".

Every now and then I see a house which is relatively good value; how about a 5-bed detached in a decent area for £190K? I'm not saying it shouldn't be cheaper, but relative to bog standard 3-bed semis expecting nearly that amount it shows there are people out there willing to drop the price to actually get a sale. That is the beginning of the next 30% leg down IMHO.

Once that hits, I might buy.

Edited June 9, 2012 by tahoma

[dances with sheeple]

In many areas house prices seem to be really sticky despite transaction levels dropping to 20% of their 2000's average. My watch areas in Peterborough reflect this, there are umpteen 30s semis on the market for £150K+ which have sat there for years. If the dumbass vendors would just accept 125K for them they could get them sold, but no, "they aren't giving them away".

Every now and then I see a house which is relatively good value; how about a 5-bed detached in a decent area for £190K? I'm not saying it shouldn't be cheaper, but relative to bog standard 3-bed semis expecting nearly that amount it shows there are people out there willing to drop the price to actually get a sale. That is the beginning of the next 30% leg down IMHO.

Once that hits, I might buy.

Unemployment and interest rates are going to shift the market? Euro implosion is going to put both way up? The next few days are going to show how quickly the Eurozone will unravel? If the Spanish and Greek guys on Newsnight are anything to go by, it is going to go out like a 1970`s playground fight. MERKEL.. MERKEL.. MERKEL!

Edited June 9, 2012 by dances with sheeple

[TheCountOfNowhere]

I'm a long term bear and I was looking for a nice bowl of porridge

but someone had already eaten it!

Don't worry there Will be plenty bear food over the nexr few months

[Game_Over]

Don't worry there Will be plenty bear food over the nexr few months

Oh yes

The porridge is about to hit the fan!!!!

[JayneyJR]

I posted on here a few months ago about getting spooked over buying a house after HSBC gave us a particularly 'low' mortgage offer.

We are still looking daily on RM but not serious about buying at these prices.

However, I have grave concerns about how things will go even if there is a significant drop in prices. Anything within our potential budget (under £150k) around here gets snapped up pretty quickly. We went to look at a house today (open day) in a local village that had an asking price of £155k. It needed modernisation. The place had a substantial amount of damp, cracks in the walls, and was quite disgusting aesthetically speaking, yet it was swarming with investors. I even bumped into someone from the local mother and toddler group I go to who was looking at it as a BTL investment. This rattled me somewhat and I said to the agent when we were giving our details that we didn't stand a chance against investors, to which she replied, well I don't think so as they will be looking to get a bargain (like us mortgaged FTBs with our hard-saved deposits can afford to pay more!). Anyway, needless to say I left feeling pretty depressed.

There just seems to be so much ingrained greed with people seeing property as thee way to go, that I really do despair for average families like us. We desperately need something to hold back the BTL wave. A return to a house is a home.

I don't know what to do any more. I swing daily between buying a chunk of land with the hope of getting PP for some cheapo log cabin in the future (though most land has a greedy claw back clause so little hope there) and maxing out the mortgage on a much better house on a larger plot. But then at the back of my mind I'm thinking if we got a big mortgage now we'd have no life and be extremely vulnerable to price shocks. To get something equivalent to what we rent (even with all its many faults) would cost us at the very least £300 per month more at today's IRs, which is a fair bit when you have a dependent. So we stick with renting, which financially is the less of the evils, but emotionally is not where we want to be.

[200p]

I wanted to add to the caged tiger metaphor. Be angry, be fired up. Be like Rocky who was in the hold (prison cell with no light) for 5 years, each day he did one arm press ups, training, mentally and physically and being ready for that day. When he was finally let out, boy you don't want to be in his way... ROAR.

Read about people who came from nothing and into great riches. People like Soros, and Li Ka-shing whom I read about today (he bought Northumbrian water recently).

Edited June 9, 2012 by MrTReturns

[wherebee]

To answer the orginal question - I think things are going to get very bad (read - good people not being able to find anything remotely at their skillset) on a number of employment fronts in a number of western countries for the next ten years. I am lucky enough to have a internationally transferrable skill, and have moved to three countries in five years to follow the money. If I had had a mortgaged property at any point, I would have been toast.

So - I am waiting until either i) I can afford to buy somewhere I like outright, or at least with a low enough mortgage that I can pay the mortgage for 12 months at interest rates of 10% from savings or ii) I find a job with true long term security (which I do not foresee).

Yes, my savings are getting very poor rates of return, but the lack of stress from not having to worry about a 200-500k debt hanging over my head is worth that opportunity cost. Plus I get to add to my savings every month (of course, spreading them around to avoid concerntration risk) as renting is letting me save.

Of course, if I had kids, I'd be in a different frame of mind.

[JayneyJR]

I wanted to add to the caged tiger metaphor. Be angry, be fired up. Be like Rocky who was in the hold (prison cell with no light) for 5 years, each day he did one arm press ups, training, mentally and physically and being ready for that day. When he was finally let out, boy you don't want to be in his way... ROAR.

Read about people who came from nothing and into great riches. People like Soros, and Li Ka-shing whom I read about today (he bought Northumbrian water recently).

Like this idea very much - you've cheered me right up after my three-glasses-of-wine negative posting last night! Good old Rocky - it's hard not to be inspired by those films.

[trekking]

I was just wondering if any of the long time bears on here are still actively look for houses ?

I for one have stopped...did 3 viewings this year and was shocked at how bad they were, gave up after that. The record asking prices and the fact that people are clinging on to these asking prices, for me, makes it pointless or impossible to continue looking.

Not yet.

The prices are nowhere near good value as a buyer.

I will give it more time.

[JayneyJR]

I struggled through the times of 15% interest rates - when we took out the mortgage it was about 7 1/2 % so just about doubled the payments. We had 2 young children and had to work every hour we could at as many part time jobs as we could find to keep the roof over our heads. No holidays - no extras. I think you are wise to rent just now in the current financial climate.

What a horrible time to go through - on so many levels. Well done to you all for getting through it.

Thank you for the words of wisdom/experience. Guess we will just have to see what happens in the coming months.

[Game_Over]

What a horrible time to go through - on so many levels. Well done to you all for getting through it.

Thank you for the words of wisdom/experience. Guess we will just have to see what happens in the coming months.

You are far better off buying a house when interest rates are 15% than when they are 2% because

If you are only paying 2% on your mortgage, your payments could easily double or treble at the same time as the value of your property is falling

Whereas if take out a mortgage when interest rates are 15% your payments could easily halve at the same time as your property is increasing in value.

The idea that high interest rates are automatically bad for home buyers is a myth

[Game_Over]

When I bought my first house interest rates were high because inflation was high

This meant house prices were low as a multiple of average earnings.

My wages then went up in line with inflation, as did house prices so that when interest rates returned to their historical average

ie 5% I ended up with loads of equity and a tiny mortgage.