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Goodafterbad

Will Area Or House Quality Be The Biggest Factor When Prices Reduce?

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There is no doubt in my mind what so ever that houses are significantly overpriced and that a correction is long overdue. However after several years biding our time, my wife has finally run out of patience and we are now seriously looking to buy. I understand that we are very likely to be buying the peak, but I just have to accept that, or file for divorce.

We can afford to go up to around £250,000 with a LTV of about 40%, but I'm pushing for a lower budget of about £180,000 so we loose less when prices inevitably fall.

We are looking in the Nottingham area and there is plenty within our budget. What I'm trying to get my head round is whether it would be more sensible to spend £180,000 on a larger/nicer house in less desirable area, or to spend the same amount on a smaller/less desirable house in an area which is more desirable. All else being equal, when prices drop, are they likely to drop further and faster in the poorer areas or for the cheaper houses in the nicer areas?

Any insights would be appreciated.

I've got my fingers crossed for some downward movement in the market soon. If my wife saw prices moving downwards, she'd be very happy to wait, even if that meant pulling out of a sale.

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If you own a house 100k cash and HPC 50%

You still have 50k house.

A 200 k house with 100k mortgage and same fall 50% you end up with.

In both cases you had 100k of paper wealth equity. Mortgage is a huge problem in falling market. Minimize the borrowing as much as possible. By the cheapest you can get. This is safety. Leverage works in the opposite direct when there is deflation it amplifies the losses. The reverse of HPI where is pays to borrow as much as you can?

It's ok to buy just expect to loose a ton of money

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I'm already trying to minimize our exposure by looking at houses at the lower end of what we can afford. What I'm interested in is what people think will happen to different sectors of the market when prices start to fall.

Will 200k of poorly built small house in a good area fair better than 200k of a larger better built house in a poorer area? When prices start to move down, will people stick to the nicer areas or nicer houses?

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I'd guest that it would be the area which would hold up better in a fall. There used to be a saying along the lines of "never buy the best house in the worst area".

When house prices fall buyers see areas that they have always wanted to live in suddenly in their price range. They could also see homes with parking/ garages which are detached.

The exception to this would be homes which are blighted in some way - the ones next to schools, shops, pubs, very poor build or design. As an example of very poor design I'm seeing a lot if similar new builds coming up in my searches which are over 3 floors with a very small footage on each floor. These may have sold in the frantic times but now they aren't - regardless of area.

Bungalows with a large plot size and garage seem to sell regardless of how desirable the area is (at least where I am looking)

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