A first-time buyer's story

[Lucy]

I stood outside and all the cars lined up infront of me waiting for me to go green.

Oh dear.

Aloe Vera is good. (from the woman who has been sunburnt many times!)

[Old Greg]

But you don't own it. It would be like having your cake AND eating it, whereas renting is like eating the cake and not having it.

I think.

I assume you 'avin' a larf. My rent is currently lower than the interest element of a mortgage would have been - these would both service the price of being in the house - that's a win for renting. A repayment element of a mortgage would pay off the debt, but I could save the money instead. The mortgage wins out over the rent because of capital appreciation in a rising market. In this market, it loses out considerably through depreciation.

[BrilloPad]

It used to be that if you can afford the mortgage repayments and are not worried by dips then over 25 years you will almost certainly make money.

Has anything changed to affect that?

[DimPrawn]

It used to be that if you can afford the mortgage repayments and are not worried by dips then over 25 years you will almost certainly make money.

Has anything changed to affect that?

Yes. People have bought at such a monumental peak, everything else is going to be a dip, for a very very long time.

[EternalOptimist]

It used to be that if you can afford the mortgage repayments and are not worried by dips then over 25 years you will almost certainly make money.

Has anything changed to affect that?

No, but obviously you want to buy low, minimise repayments, pay off balance in good times then sell high

[Old Greg]

It used to be that if you can afford the mortgage repayments and are not worried by dips then over 25 years you will almost certainly make money.

Has anything changed to affect that?

The thing to remember if that you'll be even better off if you buy near the bottom of the market in a couple of years time than if you buy now. E.g. - why buy a property for 250k if now if you can buy the same for 175k (assuming a 30% drop - alter according to where you think things are going to be) in a couple of years. You will be 75k (give or take) better off in real money. Then invest that over the remaining 23 years of your 25 year period.

[BrilloPad]

The thing to remember if that you'll be even better off if you buy near the bottom of the market in a couple of years time than if you buy now. E.g. - why buy a property for 250k if now if you can buy the same for 175k (assuming a 30% drop - alter according to where you think things are going to be) in a couple of years. You will be 75k (give or take) better off in real money. Then invest that over the remaining 23 years of your 25 year period.

Provided you are sure where market will be. I worked at Goldman Sachs with someone in 2000. They had been trying to buy since 1998. Saw the rises since 1995 and believed it was over inflated and about to fall. The financial stuff in 1998 put them off - thought a fall imminent.

At the moment, with repossessions rising, it is hard to see prices doing anything other than falling for a while. It looks a one-way bet.

[Old Greg]

Provided you are sure where market will be. I worked at Goldman Sachs with someone in 2000. They had been trying to buy since 1998. Saw the rises since 1995 and believed it was over inflated and about to fall. The financial stuff in 1998 put them off - thought a fall imminent.

At the moment, with repossessions rising, it is hard to see prices doing anything other than falling for a while. It looks a one-way bet.

Yep - some people will call it wrong. Having accidentally called it right when we sold a few months ago, it's going to be pretty hard to get it so wrong that we miss the whole recovery and end up paying more than we would have done earlier this year.

[BrilloPad]

What is the average rate of wage inflation? And the average savings rate?

Long term prices tend to end up as three times average earnings. If average earning increase at 5% a year compounded over 10 years it means a 63% increase.

Let us say average earning are now 30k and average house price £180k (mult of 6). In ten years earnings could be 50k. So if prices are 150k gives a mult of 3. So prices only need to fall 16%. Now alot of assumptions there - but do you get my drift?

[rootsnall]

Yep - some people will call it wrong. Having accidentally called it right when we sold a few months ago, it's going to be pretty hard to get it so wrong that we miss the whole recovery and end up paying more than we would have done earlier this year.

I think it will be very difficult to resist staying out of the market long enough to make a real killing. We are programmed to be house owners. I'd rent a real palace to help the process along and keep the family happy.

I've seen a good summary post somewhere that showed all the vested interest produced newspaper articles starting in 1990 ( ie. where we are at now ) saying the bust is over buy soon or you'll miss out. The same articles repeated over and over for years until it did bottom out in the mid 90s and you then had a few years before things did finally take off.