Moving House Dilemma

[Family Man]

Hi all,

Need some advice. Ironic that having just joined this forum I find myself in this situation.

We were about to extend our present 3 bed semi and live out our days here - but our neighbours who are good friends are not happy so no go. Long story so don't ask. No bad feeling.

Now we are considering selling up and moving up. Houses seem to be selling quite quick here when a reasonable price is asked. Currently none in the street up for sale. One similar to ours sold for 315k a month ago ( I know still a stupid amount for 3 bed semi but nice area). This would give us about £260k equity. To move up we would be looking at possibly a furtrher 150 to 200k for a decent area with an additional bedroom or two.

Gut feeling is sell put 260k in a high interest account at 5.5% - rent for a year or two at about £9600 a year and come back with 350K (after some additional saving) when prices have dropped. Hope is some of the 400 to 450K house will have lost 20% of their value. How realistic Mr Bear?

Must stay local because of schools - I feel pretty sure prices will drop. We could afford the payments on a 200k mortgage - depending on IR of course, while its not really about money its security, I feel we could be looking at a 150/200k mortgage now or maybe 30 or 40k in two years, which is a big difference. Especially as we are a year or 18 months away from being mortgage free.

I'm just not certain ? need some opinions - many thanks FM

[enworb]

Hi all,

Need some advice. Ironic that having just joined this forum I find myself in this situation.

We were about to extend our present 3 bed semi and live out our days here - but our neighbours who are good friends are not happy so no go. Long story so don't ask. No bad feeling.

Now we are considering selling up and moving up. Houses seem to be selling quite quick here when a reasonable price is asked. Currently none in the street up for sale. One similar to ours sold for 315k a month ago ( I know still a stupid amount for 3 bed semi but nice area). This would give us about £260k equity. To move up we would be looking at possibly a furtrher 150 to 200k for a decent area with an additional bedroom or two.

Gut feeling is sell put 260k in a high interest account at 5.5% - rent for a year or two at about £9600 a year and come back with 350K (after some additional saving) when prices have dropped. Hope is some of the 400 to 450K house will have lost 20% of their value. How realistic Mr Bear?

Must stay local because of schools - I feel pretty sure prices will drop. We could afford the payments on a 200k mortgage - depending on IR of course, while its not really about money its security, I feel we could be looking at a 150/200k mortgage now or maybe 30 or 40k in two years, which is a big difference. Especially as we are a year or 18 months away from being mortgage free.

I'm just not certain ? need some opinions - many thanks FM

Houses in the most sought after area in my home town seems to be increasing by >5% despite being very expensive compared to the rest of the town. They must be fetching the asking price give or take a few thousand because they are selling immediately.

If this is the same where you live it may be best to buy. Keep an eye on the market and check sold prices of houses in your area on www.rightmove.com

[Ignorant Steve]

Location Location Location.

[nodumsunreader]

Hi all,

Need some advice. Ironic that having just joined this forum I find myself in this situation.

We were about to extend our present 3 bed semi and live out our days here - but our neighbours who are good friends are not happy so no go. Long story so don't ask. No bad feeling.

Now we are considering selling up and moving up. Houses seem to be selling quite quick here when a reasonable price is asked. Currently none in the street up for sale. One similar to ours sold for 315k a month ago ( I know still a stupid amount for 3 bed semi but nice area). This would give us about £260k equity. To move up we would be looking at possibly a furtrher 150 to 200k for a decent area with an additional bedroom or two.

Gut feeling is sell put 260k in a high interest account at 5.5% - rent for a year or two at about £9600 a year and come back with 350K (after some additional saving) when prices have dropped. Hope is some of the 400 to 450K house will have lost 20% of their value. How realistic Mr Bear?

Must stay local because of schools - I feel pretty sure prices will drop. We could afford the payments on a 200k mortgage - depending on IR of course, while its not really about money its security, I feel we could be looking at a 150/200k mortgage now or maybe 30 or 40k in two years, which is a big difference. Especially as we are a year or 18 months away from being mortgage free.

I'm just not certain ? need some opinions - many thanks FM

Depends if you need to remain a wage slave or not. If the answer is yes then you probably have no choice but to remain on the consumer treadmill if the answer is no then my suggestion would be to get the hell out of workhouse UK and head for the hills and sanity. Any house in the consumer wastelands of Britain faces becoming swamped by roads, nuclear power stations and chav social housing estates in the next 20 years - so sell, get out and drop out if you can.

BTW where exactly are you planning on getting 5.5% on any investment?

Edited July 18, 2006 by nodumsunreader

[Clouseau]

If you rent & invest like you say, seems to me that you're not taking a huge risk, as it's not likely that prices will rise so high & so fast that you'll be priced out, & if they fall, they MIGHT fall enough to make the gamble pay off; also, if renting, you're well placed to move swiftly back into ownership, should you so wish. It HAS to be a gamble, no way for it not to be, but if my circs allowed it, it's one I'd be taking right now..good luck..

[dog]

The problem with crashes is that they start with a big freeze where it becomse very difficult to sell. If you don't discount your house people won't come to see it and if you do, the buyers will make an offer and then walk away at the last minute. If you find a house you want, wary sellers will not want to deal with you unless you are a cash buyer.

When the crash comes, having cash will put you in an extremely strong position.

[karen1000]

Do you need to move now? I would wait for 12-18 months. I certainly would not sell and rent if you are living in a desirable area. If you are upsizing, then your increment would drop should there be a housing crash (this is why I'm waiting to see what happens).

Don't accept without question the bedsit wisdom of the bitter majority in this site - the crash may not come, and indeed may have already manifested itself in the collapse of HPI in the last couple of years. Higher interest rates are the only certainty. The rest is amateur guesswork mostly by people who have been proved very wrong over the last few years!

Hi all,

Need some advice. Ironic that having just joined this forum I find myself in this situation.

We were about to extend our present 3 bed semi and live out our days here - but our neighbours who are good friends are not happy so no go. Long story so don't ask. No bad feeling.

Now we are considering selling up and moving up. Houses seem to be selling quite quick here when a reasonable price is asked. Currently none in the street up for sale. One similar to ours sold for 315k a month ago ( I know still a stupid amount for 3 bed semi but nice area). This would give us about £260k equity. To move up we would be looking at possibly a furtrher 150 to 200k for a decent area with an additional bedroom or two.

Gut feeling is sell put 260k in a high interest account at 5.5% - rent for a year or two at about £9600 a year and come back with 350K (after some additional saving) when prices have dropped. Hope is some of the 400 to 450K house will have lost 20% of their value. How realistic Mr Bear?

Must stay local because of schools - I feel pretty sure prices will drop. We could afford the payments on a 200k mortgage - depending on IR of course, while its not really about money its security, I feel we could be looking at a 150/200k mortgage now or maybe 30 or 40k in two years, which is a big difference. Especially as we are a year or 18 months away from being mortgage free.

I'm just not certain ? need some opinions - many thanks FM

[Ah-so]

If you sell and rent, you will not be saving much money as you will need to rent somewhere. If you are renting an equivalent house at the prices you indicate, most of that interest will go on rent, so there is no real financial advantage unless house prices fall.

Will they fall? Yes, but the question is when and where will they reach before they do. It could take too long and prices may rise to the level where you want to cut your losses and end up buying somewhere less than what you could afford now.

If I had the money and could afford to trade up, I would and do it now. Good luck to you if you wish to take a gamble on them coming down in a certain period, but we have been waiting long enough for the HPC.

Even if prices fall, they may never "crash", but slip down over years in a low interest rate environment (see Japan or Germany). You could rent, see house prices fall 10%, buy in, and then see them fall another 10%.

If you sell and rent, would a 10% increase hurt more than a 10% decrease? Most are risk averse enough not to want to risk that.

Despite believing that we will face a reduction in prices, I would not try to out-guess the market, especially in a bubble. Bubbles will happily inflate long after everyone knows they are a bubble and get far larger than anyone expects.

However, there are plenty in the STR crowd who will take the opposite view, and they were clever enough to buy years ago!

[Son of Taeper]

We had the same dilemma. In the end we did some maths and figured we were no worse off selling up and renting and if interest rates increased we would be quids in. A couple of days after we moved out the "house price in reverse" news came out. That was a good start and I still believe the interest rates will increase next month. A word of warning though, spread your equity into about £30k chunks and spread the risk across lots of different saving accounts. You should set the accounts up before you move too as it's a lot easier if you can produce proof of residence. Thereafter, spend as much time as possible watching the market and house hunting. If prices suddenly surge up, you want to be able to get back in in a hurry.

[bearwithaconscience]

I think it is unlikely that prices in good areas will come down significantly in the near future. More and more graduates all the time looking for a good house in a good area. I wouldn't gamble in your position. If prices do come down and you stayed in the market, your next step is easier. If they go up, you haven't lost out either. The only way you can lose is to sell and rent, if prices go up. Then you will end up bitter and twisted like us all.

[Tempest]

Do you need to move now? I would wait for 12-18 months. I certainly would not sell and rent if you are living in a desirable area. If you are upsizing, then your increment would drop should there be a housing crash (this is why I'm waiting to see what happens).

Don't accept without question the bedsit wisdom of the bitter majority in this site - the crash may not come, and indeed may have already manifested itself in the collapse of HPI in the last couple of years. Higher interest rates are the only certainty. The rest is amateur guesswork mostly by people who have been proved very wrong over the last few years!

Agree you should not STR if you live in a desirable area - the downside is too risky. The voluntary STR decision is fraught with danger despite what many on this board say (and I am a bear who is certain that property is overvalued and is due a massive correction). The reason is that it is almost impossible to call the top and make money from STR. There are very, very few years in the last 40 where STR would have paid off well if you had done it. If you get it right, excellent - if not, it can be disaster.

An example: In late 2004, emboldened by the good advice on this board, we decided to sell our SW London terrace and rent a bigger family house in the same area pending a move out of London a year or two later. By the time we got around to putting it on the market and getting offers it was spring 2005. The buyers faffed around for too long getting their finance and we took it off the market as we had another child due imminently. We have just gone on the market again at the weekend at a price £115k higher than the £410k we had accepted last year - the agent suggested price was achieved on our road two weeks ago for a similar house. Houses are selling like hot cakes around here. Even with an average discount to this asking price the price will be fully 20% higher than agreed last spring. Madness.

Last year I was annoyed that (so I thought) I had missed a once in a generation STR opportunity as the HPC began - sadly it was a false dawn for HPC but now I am thankful - the decision would have cost me a fortune (£100k plus a year or twos rent, say £50k, plus the incremental difference in house prices for the area we are looking at buying out of London which is around 5-10%, say another £100k (that would be worse if we were staying in the same area...)). £250k.

To put it bluntly, we would have been priced out of the market for the size of homes we were looking at and would have been forced to (i) bite the bullet and buy anyway despite the above financial hits or (ii) sit out, rent and await the HPC, which with a family looking to settle down in a house of their own is tricky given that people have been saying the HPC is around the corner for 5 years. Ironically, the size of mortgage I am contemplating for the move is exactly the same as that planned a year ago - the increase in the London house price will more than meet the increase in price up the chain. Someone down below is paying for this.

Don't get me wrong. HPs are ludicrous and many aspects of the worlds economy/financial system are due some major corrections. But I just don't think we can accurately call the top (the pros cant!). I now believe this winter will see the market collapse due to a combination of internal and external factors, but I said that last year.

The intractable problem for us bears is (i) we are right fundamentally in value and historic terms but (ii) there have been only a few years over the last 40 where buying a house proved a bad idea and only a few years where STR proved a good idea. I remember people saying property was getting too pricey in 1986 and look what happened for the next two or three years.

Us? We will sell asap and if we find a property quickly we'll buy, if not we'll sell and rent while we look to buy. It may be the top of the market, then again it may not - but we've made our money having bought in 1996 so having been fortunate to catch one property wave I do not want to be greedy and risk what dame fortune has given us. We have to move by Oct for schools reasons but if we were forced to rent in order to move by Oct we would be continuing to view houses and aiming to buy by the end of the year latest. I do not want 2007 to be a repeat of 2006 and will not take that risk.

The only thing that would sway me from buying and delay things is two quarters of -ve HPs in Halifax or Nationwide. That might, just might be enought to persuade people the party is over...

Edited July 18, 2006 by Tempest

[Son of Taeper]

<Tempest>

So you would agree that it is all about timing?

Buy low and sell high must equate to sell high and buy low. Traditionaly, long term, property ownership is a good idea so I am inclined to sleep with one eye open, but if ever the time was ripe for a crash, it's now.

[Tempest]

<Tempest>

So you would agree that it is all about timing?

Buy low and sell high must equate to sell high and buy low. Traditionaly, long term, property ownership is a good idea so I am inclined to sleep with one eye open, but if ever the time was ripe for a crash, it's now.

Yes but my point is that I do not pretend to know when the time is. None of us do precisely.

I agree "now" is more ripe for a crash than last year! Absolutely. I really believe next year will see/have seen the turn nationally.

Do sleep with one eye open - one word of warning, once out of the market and STRing then, if prices move up again, it is very, very, very difficult to decide to buy then and take the hit of increased prices vs sale proceeds yet be "nearer" the crash than you were before! I think I would get caught like a rabbit in headlights and risk getting priced out forever. Have you set yourself limits/stops as triggers to buy back in or are you now STR until HPC? Just interested in where you've drawn the line.

[Son of Taeper]

Yes but my point is that I do not pretend to know when the time is. None of us do precisely.

I agree "now" is more ripe for a crash than last year! Absolutely. I really believe next year will see/have seen the turn nationally.

Do sleep with one eye open - one word of warning, once out of the market and STRing then, if prices move up again, it is very, very, very difficult to decide to buy then and take the hit of increased prices vs sale proceeds yet be "nearer" the crash than you were before! I think I would get caught like a rabbit in headlights and risk getting priced out forever. Have you set yourself limits/stops as triggers to buy back in or are you now STR until HPC? Just interested in where you've drawn the line.

The line is an 11% hpi yoy. This would see us <5.5% down as the rental place we have is "snug" and not too expensive. I figure the yoy increase at present is 4.92% (adjusted average of all the VIs and land registry)

[Immigrant]

My advice FWIW - stay where you are for say another year, by which time you should have a clearer idea of where the market is heading (or maybe not - that is what people were saying this time last year). In the meantime start looking around, do your homework, get a clear idea of prices etc. Who knows, you may pick up a bargain sooner than you think.

I just want to reinforce the point made by another poster, that you don't have to STR to benefit from a crash. Even if you stay put, you would benefit, as the cost of upgrading would be less. You would only have to move once not twice, and there would be less risk should a crash fail to materialise. Depends I suppose on how desperate you are to move into a bigger place.

[Ritters]

Depends if you need to remain a wage slave or not. If the answer is yes then you probably have no choice but to remain on the consumer treadmill if the answer is no then my suggestion would be to get the hell out of workhouse UK and head for the hills and sanity. Any house in the consumer wastelands of Britain faces becoming swamped by roads, nuclear power stations and chav social housing estates in the next 20 years - so sell, get out and drop out if you can.

BTW where exactly are you planning on getting 5.5% on any investment?

I agree

You've seen the light, now take the money and run like f**k

[dog]

Its good to have a few bulls on this site but I would not pay to much heed to their siren voices (speaking up for home ownership). Buying a property today is about as smart as catching a dose of clap. House prices have overshot by between 200% and 400%. Bubbles do that sort of thing. The bull run has gone on for so long that people now believe that houses obey their own special economic laws. Don't believe it. Houses will fall 50% in value and people will say 'thank heavens the crash is over'. Then prices will start falling seriously. The crash when it comes will be all the more savage for being delayed for so long. Before it is finished, people will be talking about having the government buy land to stabilise prices.

[DabHand]

I think it is unlikely that prices in good areas will come down significantly in the near future. More and more graduates all the time looking for a good house in a good area. I wouldn't gamble in your position. If prices do come down and you stayed in the market, your next step is easier. If they go up, you haven't lost out either. The only way you can lose is to sell and rent, if prices go up. Then you will end up bitter and twisted like us all.

When you said graduates did you mean millionaires?

Graduates dont suddenly have more wealth, if anything they now leave with 20-30k of debt. Of course they are more likely to have boomer parents who'll help "get them on the ladder". Maybe thats what you meant?

[Family Man]

Many thanks for all your replies.

Even though they were mixed it has helped us to make up our mind. We will stay put for the time being.

Our goal has been to be mortgage free and we are not far from that. We may yet speak again with our neighbours reference the extension. I agree with so many views but I think we are choosing the safest option. We don't want a big mortgage millstone around our necks, with inflation back up at 7.5%.

Nodumbsunreader and son of T, were all wage slaves when you have kids, as sure as the sun comes up, so too will the cost of living. We have thought about emmigrating for all the reasons you mention, Oz is high on the list with my wife having lived there for six months, I would like to visit first. Incidentally Realistbear put a thread on hear about Abbey doing a bond at a rate of 5.5% but I imagine all the banks will be after anyone with cash when comet HPC hits.

I run a small business and while we are up on last year and busy we are bucking the trend - its hard work getting new business and I'm not confident that we won't be affected. Its in the car industry, which at present is really suffering. People are buying fewer new cars via MEW . Learned last week of two local car dealerships which closed down, one was a main dealer - closed down overnight, just like that, after a major customer defaulted. These sorts of small business stories don't hit the headlines. Car dealers are making very little profit on cars, I heard of one this week who sold a car and did not make £10 profit on the car! The dealerships are pushing volume to get the manufactuerers bonus payments.

I don't like to be negative as in business you have to have a positive approach but I feel a HPC is coming and more then that a big recession.

I don't know if anyone here reads BBC ceefax or Teletext, but they seem to be overplaying the good news and down playing the bad, esepcially beeb. I can understand that you don't want to depress the nation but there are a lot of debt ridden gulible people out there who will finally decide they will have that Plasma on MEW because mortgage lending in June hit a new record. Excuse my ignorance but if houses are more expensive then people will have to borrow more, I wonder how many mortgages were taken out in comparison to last june - forget remortgages and the total figure its BS. I only have a £40000 mortgage but have considered remortgaging and locking myself into a fixed rate deal for my own protection. Surely most people have thought the same. As the advert says " percieved wisdom is re-mortage every two years". With credit card debt going down its obvious people are consolidating their debts.

There was a recent thread on here about credit cards charging interest daily. A Friend who has a Halifax credit card and pays his bill in full religiously at the end of the month received a standard looking letter last week which he just happened to read all the way through. It said they would be charging interest daily - says it all.

We are all looking for shock headlines to come out through the media, it won't happen because the impact would be instantaneous, look around your area and you'll see the evidence for yourself. NHS cutbacks, Friends with BTL Mortgages who are worth a million (on paper!! ), unemployment rising, cost of living rising. Even if owning a house become something only the rich can afford there are thousands of people who have just bought who'll lose everything, has anyone given any thought to the cost of supporting them , or the bitter underclass it may create, the longer this goes on the worse it will be. I hate politicans but I hope GB pulls off a miracle and its a slow HPC.

Once again thanks for the advice.

[Impartial]

Hi all,

Need some advice. Ironic that having just joined this forum I find myself in this situation.

We were about to extend our present 3 bed semi and live out our days here - but our neighbours who are good friends are not happy so no go. Long story so don't ask. No bad feeling.

Now we are considering selling up and moving up. Houses seem to be selling quite quick here when a reasonable price is asked. Currently none in the street up for sale. One similar to ours sold for 315k a month ago ( I know still a stupid amount for 3 bed semi but nice area). This would give us about £260k equity. To move up we would be looking at possibly a furtrher 150 to 200k for a decent area with an additional bedroom or two.

Gut feeling is sell put 260k in a high interest account at 5.5% - rent for a year or two at about £9600 a year and come back with 350K (after some additional saving) when prices have dropped. Hope is some of the 400 to 450K house will have lost 20% of their value. How realistic Mr Bear?

Must stay local because of schools - I feel pretty sure prices will drop. We could afford the payments on a 200k mortgage - depending on IR of course, while its not really about money its security, I feel we could be looking at a 150/200k mortgage now or maybe 30 or 40k in two years, which is a big difference. Especially as we are a year or 18 months away from being mortgage free.

I'm just not certain ? need some opinions - many thanks FM

don't do it look up bruno's web page. STR's are the scum of the earth and have lost not gained because of it, sell up and move on without renting, don;t be such a greedy pr!ck it will all end in tears and you will be crying eating curries wishing you saved that take out money so you could buy again when house prices are 1million pound avg.

[Family Man]

Impartial uh yeah right

Watch your mouth retard!

[bearwithaconscience]

When you said graduates did you mean millionaires?

Graduates dont suddenly have more wealth, if anything they now leave with 20-30k of debt. Of course they are more likely to have boomer parents who'll help "get them on the ladder". Maybe thats what you meant?

Sorry, my whole reasoning here was a bit oblique. Let me explain - apologies for the length but it can't be compressed into a paragraph.

I am not suggesting that graduates have more wealth now. They don't - they have less. I am very sceptical about the housing market in general and believe a correction is long overdue. But I am trying to highlight the polarisation that is going on at the moment between good and bad areas, that rides over peaks and troughs in the market. And I don't think that nice estates are going to be affordable any time soon. This is why:

Thirty years ago, (and until about 10 years ago) 10% of the population went to university and got professional "graduate jobs", which placed them in the lower middle class if they had poor parents, upper middle if they had rich parents. All of these people could fit in the middle class housing estates then. Along with skilled manual labourers and small businessmen, they lived happily in suburbia, washed their cars on a Sunday and went to church.

The rest of the substantial working classes lived in slightly more down-at-heel areas, but were happy nonetheless that they had their own place on the "ladder", and family nearby. The good schools generally were those with a higher concentration of middle class housing nearby, but it was only obvious through word of mouth. Poorer households lived on council estates, but most of them worked, because there wasn't really any other option.

Fast forward through two or three decades of social engineering.

At the last count 46% of the population went to university and are now "graduates". This was largely because of the change in skills needed in the labour market. But the result is higher aspirations on the part of the many. 46% of the population coming through now see themselves as the professional middle classes, and therefore expect to live on a nice estate, with good schools.

At the other end there has been a gradual increase in numbers of people dependent on the state for support. The numbers of families needing tax credits, pensioners being topped up, families where no-one has worked for a couple of generations.

The working class, to a large extent, has been eliminated. You are either a have or a have-not. Working class jobs don't pay enough to enable you to stand on your own two feet - unless you bought your house years ago, you will need to pretend to be a single mother to get any flat/house anyway.

The very last thing the 46% now want is to end up next to the have nots in society. What is the point loading up on debt and studying for years, only to find yourself in an ex-LA flat next to those who did nothing but throw themselves into the care of the state. Then your children go to the same schools and *bingo* you have achieved downward mobility.

I think that solid middle class areas are increasingly sought after, even discounting our place in the HPI cycle. I think that one of the reasons for HPI is that the premium for living in a middle class area is growing, and the new graduate class is getting nervous. They can't all cram onto the middle class estates, and don't want to accept that they can only afford to live in a poor school catchment area.

Parents are desperate to help their children stay in the middle class. Why else are they prepared to stake their own wealth on their children's property? Because they don't want to see little Johnny buying a crappy ex-council flat, next to the chavs.

This is why I wouldn't risk selling a house in a nice area.

[Sceptical Fox]

Economics is infinite desires constrained by finite resources. Of course all graduates desire, probably expect, to live in lovely homes in attractive locations. But perhaps this is what is feeding the problem of indebtedness which is causing absurd HPI. For me the key question is the extent to which the UK and its citizens can cope with the level of debt. I'm in a similar situation to Family Man and simply can't decide which way things are going to go over the next few years. In 2005 the economy seemed to be slowing and house prices were flat (at best) so I was not expecting to see headlines this year declaring that houses are rising at their swiftest pace for 6 years and that the economy is due to expand by some 2.5%.

I think Family Man has made the right decision to stay put.

Our situation is that I changed jobs in 2004 and the new job came with great free accommodation. As we were advised that our flat would be difficult to rent (poky bedrooms/no parking) and Mervyn had just advised against anyone buying a house we decided to sell. This has seemed like the right decision, we were saving good money each month and house prices were static (East Sussex) but the recent headlines have got me all twitchy. We will buy again in summer 2007 unless the signs of a correction start coming through loud and clear.