Is This Really the Best Time to Buy A house?

It really is the best time to buy! - honest!

This sign caught my eye as I was cycling home. It was in the window of Connell’s estate agency Between Towns Road, Oxford.

Is this an example of irresponsible estate agents encouraging people to buy a house, when actually it makes a very bad decision? Or are there good reasons to buy now?

Why it is Not A Good Time To Buy

House Prices falling. Even the most optimistic forecasters expect moderate house price falls in the next 12 months. If there is a median prediction of house prices to fall by 12% in the next 12 months, why not wait until house prices have bottomed out? There seems no rush to get on the property ladder when you could wait and save potentially thousands.

Difficulty of Getting Mortgage in Present Climate.

Unless you have a deposit of 25%, you are likely to face higher borrowing costs from banks. If you wait, mortgage deals may become more competitive when the worst of the credit crunch is over.

Negative equity

Falling House prices could lead to negative equity. This is a real problem for people with less than 95% LTV

Why It Could be A Good Time To buy.

• If you are Downsizing it makes sense to sell your high valued house and buy a cheaper house.
• Despite banks increasing their profit margins, interest rates are still low by historical standards. With a downturn in the economy predicted, there is little prospect of a sharp rise in interest rates. Hopefully, when oil prices stop rising, there may even be room for rate cuts.
• If you are buying to live, who cares about falling prices? If you live in a house, it doesn’t really matter if house prices fall, it doesn’t affect your monthly income. It is only a problem if you decide to sell and move into rented accommodation.
• Buying is preferable to renting. There are several advantages of buying a house rather than renting; the sooner you buy, the sooner you will have paid off your mortgage and you can live rent free. Abbey say buying is still cheaper than renting
• Maybe House prices won’t fall that much, in the long term prices could rise. long term forecasts

Would I buy A House in Present Climate?

If I was a first time buyer, I would look on the property market, I would be in no rush to buy, but, if a great value house came along, I would put in a competitive offer, well below the asking price. I would consider buying, even in the knowledge prices could continue to fall. However, if my rented accommodation was quite comfortable, I would probably wait for 12 months in the expectations prices will have fallen; in 12 months I would reassess the property market and probably get something significantly cheaper.