"They" probably did exactly what I did and waited until 93-5 when prices dipped briefly into affordable territory.
There's no right to buy though, I accept that. But a balanced housing market is in the interested of everyone, and without a new generation of social housing to give people options and act as a natural brake on prices, that balance is sorely lacking if you ask me.
Andrew McP
"Andy Pandy" wrote
Yes, and which is also why there could be some way to go yet with current house prices before a similar crash happens -- because (un-)affordability levels haven't yet got to the same as they were in the 1970's or 1990.
Read your post above:-
i. increased divorce rates ii. more people living as single households iii. people living longer
What justifies prices is what people are prepared to pay for something not some notition of what it is worth. You can buy a reasonably sound terraced house in some parts of Manchester for under 10K at auction. That house would cost a lot more than that to actually build but it is deemed by the market to be the wrong product in the wrong location.
unfortunately one seller's loss is another seller's 1.2% price increase
No, but in the 1970's high inflation reduced the real level of the mortgage debt quickly, making it easier for people to move upmarket after a few years. In the
1990's interest rates fell quite sharply from their 15% peak. Yet in both cases price still fell significantly in real terms.
(un-)affordability
"Andy Pandy" wrote
But people buying back then didn't *know* (for sure) that their purchase was definitely going to be followed by a period of high inflation - and yet they still bought!
"Andy Pandy" wrote
But people buying when interest rates *were* 15%, didn't *know* (for sure) that their purchase was definitely going to be followed by a period of falling interest rates - and yet they still bought!
"Andy Pandy" wrote
I'm not saying house prices definitely *won't* go down - just that the un-affordability hasn't got to the same sort of levels that people have accepted in the past.
What amazes me is their "negative amortisation mortgages". Those are mortgages where you not only don't pay capital, you don't even pay the full interest and the shortfall is rolled-up into capital.
My question is now that Fannie and Freddie have been reined in, who's supplying the credit by buying mortgages and selling mortgage-backs? Is it just that Fannie and Freddie can't hold more on their own portfolios and are selling through? If so, then we need to worry about who's holding the risky tranches on the bonds. Could it be our bans and pension funds?
FoFP
The problem that I have with the current ideal is the people that 'champion' the view that rental is lost money and you should buy at any cost.
This *was* true when the total cost of buying was less than renting but ISTM that the equation has swung the other way. You can now rent for less than the cost of buying so why saddle yourself with a load of debt, for an assest with a current investment potential that is questionable.
tim
A bit time stock market crash.
(and yes, I seriously believe that this IS the reason for the rampant house price increases)
tim
Neat! Amazing indeed. A damned fine idea. Clearly so long as you are paying *some* interest, the debt will grow at a rate lower than the interest rate. So it would clearly suit someone who was not planning ever to own the house outright, but was happy for the debt to be repaid upon sale, typically after their death, either because they have no heirs or took the "why the hell should they be left anything, they can stand on their own bloody feet" view with respect to any they did have.
The only snag is that the obvious pre-supposition might not hold in the long term, i.e. that the house price grows faster than the debt.
Provided there's no time limit on the deal, the borrower would, I guess, always "be all right, Jack", and so if the lenders are daft enough to lend on that basis, it's their lookout.
Ummm no. They resell the mortgages. Whose lookout it actually is will probably, due to the lack of transparency in the derivatives markets, remain unclear until the whole house of cards collapses.
FoFP
I was one of those, and one main reason for buying at that time was that we wouldnt have been able to afford one if we waited much longer ! We were stretched on our mortgage almost to breaking point, however inflation meant that a couple of years later the mortgage was no problem. But we didnt know that at the time, all we knew was that we couldnt afford a house that would be 20% more expensive.
"tim (moved to sweden)" wrote
It is also amazing how many otherwise reasonably intelligent people think that renting the money to buy a house is somehow qualitatively a better 'investment' than renting the house itself.
"Tim" wrote
Actually in terms of %age of net pay required to pay mortgage interest, capital, and personal loans / credits, we are back at 1989 levels of over-extension. It won't take much of a blip in unemployment to pop the bubble.
"Andrew MacPherson" wrote
The trouble with 'social' housing, if you mean (as I take it) council housing, is that it allocates space rather poorly in the longer term. Families of chavs get huge houses to accommodate the 16 kids, but when the kids all leave home, the chav parents aren't booted out and resettled into a
2-bed flat so someone else can have the huge house. They get to keep the house until they drop dead, and the council charges them a nice cheap rent in the meanwhile. If you put people into artificially cheap housing it will always end up being misused."Ronald Raygun" wrote
Or as a neat form of IHT avoidance: you indebt the estate to the point where it's below the band that triggers a tax liability, and you give all the money you save meanwhile to your heirs.
In message , John Redman writes
Well... All those reasonably intelligent people who rented the money to buy their house, (or several properties), say 5 or more years ago, are quids in, even if the property market crashes over the cliff edge.
If other reasonably intelligent people rented the money to buy a house say 10 or 15 years ago, they are sat on a small fortune which most could not possibly have generated any other way.
Whilst not guaranteed, in 10 or 15 years, it is likely that hindsight will show that it was not a bad thing to buy a house even now.
Things change and it is possible that, if you do not currently own a property, renting is the right thing to do for most... but, in much of the past 10 years, buying was the right thing to do for most.
I agree it's not ideal. But what ever is?
Andrew McP
"Tumbleweed" wrote
Exactly my point. Even if inflation hadn't rocketed afterwards, you made an assessment of affordability at the time, and still decided to buy.
People doing that today will see that houses are even more affordable than they were back then (when buying with a mortgage, as most people seem to do).
"John Redman" wrote
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