Is it the right time to buy?

[gabriel]

Historically all property crashes follow this pattern:

1. Prices fall.
2. Buyers don't buy because they anticipate further price falls.
3. Sellers can't sell because of 2) but also because they still think of their property as being worth what it was before the market peaked. It hurts them to slash the price to something a buyer would pay.
4. Transactions stagnate.
6. Pent-up demand starts to ignite the market - buyers try their chances with low offers, sellers who need to sell drop their prices.
7. Potential sellers who had been waiting for prices to steady or go back up realise they are in for a long wait and rush to the market before prices fall even further.
8. Excess supply gives buyers even more negotiating power...

There is a school of thought that says that if you need to sell in the present climate, bite the bullet and drop your price. The longer you hold on, the more likely it is that you will have to drop it anyway. Remember, you are not the only seller waiting for prices to stop falling. Once it dawns on people that this correction in house prices is here for a good few years yet, everyone will be rushing for the exit at once.

[GlasgowGirl]

That's an interesting perspective, and it seems fairly reasonable to me. We have already dropped our price twice, and I'm seeing the same thing happening to a lot of properties in our neighbourhood. I suppose the trick is to drop the price to a point where it will sell, but not drop it so far that we don't have a deposit to buy the next place. Easier said than done perhaps!

[Tony]

I was reading today that mortgage approvals have fallen by 67% compared to June last year and the mortgage lenders are wanting bigger deposits than ever - so don't underestimate how much deposit you need Glasgow Girl - I don't envy you trying to sell a house at the moment.

Tony

[Jeddo]

I read somewhere recently how some sellers who are unwilling to lower their prices, but who need to move, are choosing to rent out their homes for 6-12 months in the hope that things will improve in that time.

This is wishful thinking in the extreme. A Merrill Lynch report forecasts that it will be 20 years before the market reaches last year's highs in real terms.

GG - Do you NEED to buy when you move? If you could rethink things so that you are able to invest your deposit and rent instead, you might end up in a very strong buying position in the not too distant future.

[GlasgowGirl]

That's a reasonable point Jeddo, I have been considering the idea of renting for a while to see what the market does. At this point though, questions about what to do once I've sold feel slightly academic, since there is no sign that anyone is ever going to buy the flat!

[Jeddo]

GG, you have my sympathy. There is little you can do but wait. The only other option is to drop your price so that someone will snap it up. Painful as that may be, it could save you in the long run. Put yourself in the buyer's shoes and ask yourself what would overcome your resistance to buying at the present time? At least at the present time some people think the fall in prices may only last a year or two more. What will those same people think a year or two from now if prices have fallen a further 10-15%?

I guess you have to take a view on your own situation and your attitude to risk. There is no arguing with the facts that point to a continuing downturn in property prices, but that is not to say that the outcome will follow forecasts or that the editorial opinion that influences one's thinking will turn out to be accurate.

Ultimately it's your decision. But the more research you can do, the better informed you will be. Just don't listen too closely anyone with a vested interest in property as they have no alternative but to try to see a glimmer of hope where there may be none. This may sound like doom-mongering, but IMO the weight of evidence backs up such a view.

[GlasgowGirl]

We've already dropped the price twice, but we may need to do so again. I am seeing some flats selling in this area so at least the market isn't totally stagnant: the estate agent is sounding increasingly strained though! We've got a new viewer on Monday so fingers crossed that they'll be interested.

[Jeddo]

GG, I wish you the very best of luck for the viewing. The most important thing is to keep an open mind as to what price you would accept. Let's face it, anyone buying now is going to put in an offer well below the asking price to see what happens.

It's always useful to put yourself in the buyer's position - what else is on the market that matches your property in terms of accommodation? What else is on for around the same price? How would you feel if you were looking now and had this same selection of properties to choose from and had seen the market fall?

I'm not expecting you to answer the Qs! Only raising them as a way to help you see things from the other person's viewpoint.

Good luck!

[GlasgowGirl]

Cheers Jeddo :-)

[Paul Carcone]

There is a big difficulty with the renting market at the moment...it's not cheap! Also, it's really just throwing money away every month and even if you are in negative equity in the meanwhile, you are still owning a greater percentage of your home every single month and some of the money disappearing every month is actually going to benefit you.

If you intend to stay in the housing market for the long term, you just need to remember that the house you move into will also have dropped in value and, as long as you are not earning less, it will cost you lesss in real terms for you to own this house.

You need to be as hard-nosed in your purchasing negotiation as potential buyers are being with you.