Is it madness to buy our first home now??

desertcircus

Fighting Irish wrote: »

lol, buying while prices are dropping imo is even more daft than buying when they were at the peak

Apologies, my phrasing should have been better. I was trying to indicate that it's bizarre that anyone would ask that question.

desertcircus

Learpholl wrote: »

I understand and agree with a lot of what you're saying but whats the reasoning behind this? Why should banks not consider joint salaries for joint applications?

Main reason - because a high proportion of couples end up with reduced incomes following the birth of any children. Spending on baby stuff goes from zero to several thousand a year, and once maternity leave is over, it's time to decide whether to pay a fortune in creche fees or reduce the hours one partner is working. Even on a purely spending-based analysis, creche and child-related expenses can hit twenty thousand a year - so repayment capacity diminishes once a child arrives, even if both partners continue to work fulltime.

Snakeblood

desertcircus wrote: »

How is it not a good time to buy? Seriously?

At the moment, house prices are dropping faster than monthly rent. A place that costs a thousand a month is losing more than that over the same period. If a place is a grand to rent but losing two grand a month in value, then rent. Even if you don't save a penny from your salary, spending that twelve grand will save you a further twelve in a year's time - and most likely significantly more, thanks to interest.

House today: 250k to buy, 12k a year to rent. Deposit needed: 20k. Mortgage: 230k.
House 2012: 226k to buy. Deposit needed: 18k. Mortgage: 208k.

That's just lopped two years off a 20-year mortgage and reduced the necessary deposit by two thousand quid.

And how are people convincing themselves the market might not keep sliding? There were 3,500 mortgages approved in the last quarter. There are 91,436 properties for sale on Daft. At the current rate, it'll take seven years just to clear the backlog - and that's on the insane assumption that no seller will need a new mortgage. Banks' lending criteria have become tighter; interest rates cannot go any lower and will instead rise; people now have to save for a deposit while they're swallowing pay cuts; and the class of people who usually provide the new buyers - young professionals in their twenties and thirties - are getting the hell out of the country as fast as they can.

Prices will keep falling until the average approved mortgage is about 90% of the average house price, and the average approved mortgage is about three times the average annual salary. That means half the houses in the country need to be selling for less than a hundred thousand quid. 240k houses should be ridiculously flash places in great areas, not decent family homes in middling areas - at that kind of money, they should be limited to people on seventy to eighty thousand a year (sole income, because the banks aren't going to be interested on doing three times joint salary).

Until we get there, we're not finished falling.

House prices are falling at 12.5% p.a. though. That's the mortgage going from 220k in 2011 to 198k in 2012.

Zamboni

donalg1 wrote: »

The economic problems facing the country today are as a result of people taking out mortgages they couldnt afford which isn't financial sense or very prudent, thats the difference.

No. They could afford the repayments at the time.
The problem is that they took out mortgages of astronomical amounts that were based on stupid multiples of couple combined salaries.
Throw in a couple of paycuts and/or job losses and see how quickly affordability then looks.

donalg1 wrote: »

If you have found a house you are happy with and could see yourself living in for the rest of your life, and you can afford the mortgage repayments, and the bank is prepared to give you a mortgage why should you not buy it?

Jesus.

Affordability is only one of many factors that should be addressed in the purchase of a house and the responsibilty of signing a mortgage agreement.

The only saving grace people that argue it is a good time to buy, is that you have probably have no chance of getting a mortgage.

Learpholl

desertcircus wrote: »

Main reason - because a high proportion of couples end up with reduced incomes following the birth of any children. Spending on baby stuff goes from zero to several thousand a year, and once maternity leave is over, it's time to decide whether to pay a fortune in creche fees or reduce the hours one partner is working. Even on a purely spending-based analysis, creche and child-related expenses can hit twenty thousand a year - so repayment capacity diminishes once a child arrives, even if both partners continue to work fulltime.

Fair point. Still don't think it should be totally disregarded though. My better half currently earns about 44K, if she were to have a child and it added 20K additional expenses for us that still leaves earnings of 24K a year that you think a bank should just ignore when it comes to approving a mortgage.

Realise every situation is different but dont think banks should just completely disregard what could be a perfectly legitimate second income in a joint application.

desertcircus

Learpholl wrote: »

Fair point. Still don't think it should be totally disregarded though. My better half currently earns about 44K, if she were to have a child and it added 20K additional expenses for us that still leaves earnings of 24K a year that you think a bank should just ignore when it comes to approving a mortgage.

Realise every situation is different but dont think banks should just completely disregard what could be a perfectly legitimate second income in a joint application.

I don't necessarily think they should; I'm simply pointing out that they will, by and large.

donalg1

Zamboni wrote: »

No. They could afford the repayments at the time.
The problem is that they took out mortgages of astronomical amounts that were based on stupid multiples of couple combined salaries.
Throw in a couple of paycuts and/or job losses and see how quickly affordability then looks.



Jesus.

Affordability is only one of many factors that should be addressed in the purchase of a house and the responsibilty of signing a mortgage agreement.

The only saving grace people that argue it is a good time to buy, is that you have probably have no chance of getting a mortgage.

Well to me affordability is probably the key factor in deciding whether or not to sign a mortgage agreement. That and happiness of course.

The op wants to know should he take out a mortgage and the argument you offer is: no you shouldnt as house prices will have fallen next year. Thats all good and well, but he has found a house he wants, so that house may not be on the market next year, it might not even have fallen in price next year as that is up to the seller to reduce it, and it doesnt automatically reduce with the average house price. So what you are saying is the OP should risk losing the house he wants to live in and can afford to live in on the off chance he may save a couple of grand. If its what he wants and what he can afford and will make him happy then why not go for it.

Nobody here is saying taking out a mortgage is something that should be done lightly it is a huge risk and always has been, but surely losing out on a home you and your family could be happy in is also a huge risk, I mean at the end of the day there are more important things in life than money and i would put happiness at the top of that list along with providing a stable and secure home for my family to live in.

Zamboni

donalg1 wrote: »

Well to me affordability is probably the key factor in deciding whether or not to sign a mortgage agreement. That and happiness of course.

Nobody here is saying taking out a mortgage is something that should be done lightly it is a huge risk and always has been, but surely losing out on a home you and your family could be happy in is also a huge risk, I mean at the end of the day there are more important things in life than money and i would put happiness at the top of that list along with providing a stable and secure home for my family to live in.

This is not the first time you've gone off on a tangent about how important family and happiness is and how money isn't all that.
Go back and read post #57. And then read it again until you understand it.

You can revel in ignorance if you wish but don't try and justify that financing an overspend on a devaluing asset is creating a stable and secure home for your family.

Theboinkmaster

donalg1 wrote: »

And taking out a mortgage you can easily afford isn't financial sense and prudence.

No it's not if that's your basis for your decision - just because you can afford it at present doesn't mean you should ffs.

donalg1 wrote: »

If you have found a house you are happy with and could see yourself living in for the rest of your life, and you can afford the mortgage repayments, and the bank is prepared to give you a mortgage why should you not buy it?

Because in 1 year's time it will be significantly cheaper. I see a house i like and can afford for €650k requiring a mortgage of €300k which i can easily afford and this will be my long-term home. BUT if i wait just one year (a year which is part of this historical property crash) i could buy it for €600k. Why wouldn't i wait? To buy it now would to be effectively burning €50k of my long, hard savings. The only unkown is how much per annum they'll fall but i do know for a fact they will fall, and fall significantly.

I give up it's like talking to a brick wall here

DrPhilG

Anyone hazard a guess how much interest rates might increase over the next 3-4 years?

ZYX

DrPhilG wrote: »

Anyone hazard a guess how much interest rates might increase over the next 3-4 years?

Most guesses by most poeople over the last 2 years have been wrong. However US Fed is leaving rates alone for the next 2 years. It seems reasonable to expect ECB rates will change very little over the next 2 years. After that no one can even guess with any accuracy.

desertcircus

donalg1 wrote: »

So what you are saying is the OP should risk losing the house he wants to live in and can afford to live in on the off chance he may save a couple of grand.

The OP should hold off on buying a house he wants to live in and can afford to live in on the basis that he's more or less guaranteed to save a fairly serious amount of money. A thirty grand drop between this year and next year is about fifty thousand quid not handed over to live in that house - over a 25-year term, that's two thousand quid a year. The OP could quite probably pay for his family holidays for the next two decades with the money he saves by waiting a year or two.

Not to mention: what on earth is this nonsense about "a stable and secure home for my family to live in"? Is a rented house less structurally sound? You're not providing any more stable or secure a home than you would by renting; you're paying a couple of thousand quid a year to satisfy some psychological need you have to rent money from the bank instead of renting property from a landlord. And it's not as if that's particularly logical; in a still-falling market, a first-time buyer is unlikely to know how large their family will eventually become, and could easily end up in negative equity on a house that turns out to be too small for the family they now have. How on earth is that stable and secure? What if you have to move to keep your job or find a new one? What do you do then with a house in negative equity?

The potential downside to renting is that the landlord might decide he or she wants to move back in and you have to find a new place. The potential downside to buying is that you end up tens of thousands in debt to the bank after buying a house that's now too small and in the wrong place, and have to enter the rental market with no savings and a huge debt to pay off. One of these is far less "stable and secure" than the other.

donalg1

desertcircus wrote: »

The OP should hold off on buying a house he wants to live in and can afford to live in on the basis that he's more or less guaranteed to save a fairly serious amount of money. A thirty grand drop between this year and next year is about fifty thousand quid not handed over to live in that house - over a 25-year term, that's two thousand quid a year. The OP could quite probably pay for his family holidays for the next two decades with the money he saves by waiting a year or two.

Not to mention: what on earth is this nonsense about "a stable and secure home for my family to live in"? Is a rented house less structurally sound? You're not providing any more stable or secure a home than you would by renting; you're paying a couple of thousand quid a year to satisfy some psychological need you have to rent money from the bank instead of renting property from a landlord. And it's not as if that's particularly logical; in a still-falling market, a first-time buyer is unlikely to know how large their family will eventually become, and could easily end up in negative equity on a house that turns out to be too small for the family they now have. How on earth is that stable and secure? What if you have to move to keep your job or find a new one? What do you do then with a house in negative equity?

The potential downside to renting is that the landlord might decide he or she wants to move back in and you have to find a new place. The potential downside to buying is that you end up tens of thousands in debt to the bank after buying a house that's now too small and in the wrong place, and have to enter the rental market with no savings and a huge debt to pay off. One of these is far less "stable and secure" than the other.

Stable has nothing to do with the structurally soundness of the house, it means the child has a place to call home for his whole childhood and cant be told your moving because the owner wants to move back in, and then has to move house every couple of years so can never really settle in the one place. Makes friends with the neighbours then has to move so no more friends until they make some new ones thats what i mean when i talk about stability.

And i suppose you know that the house the OP is looking at is going to drop by 30k in the next twelve months. I assume you know the OP and the house he is talking about, sure you must be the seller then and have plans to drop the price by 30k, sure you should have just said earlier makes total sense now.

donalg1

Theboinkmaster wrote: »

No it's not if that's your basis for your decision - just because you can afford it at present doesn't mean you should ffs.




Because in 1 year's time it will be significantly cheaper. I see a house i like and can afford for €650k requiring a mortgage of €300k which i can easily afford and this will be my long-term home. BUT if i wait just one year (a year which is part of this historical property crash) i could buy it for €600k. Why wouldn't i wait? To buy it now would to be effectively burning €50k of my long, hard savings. The only unkown is how much per annum they'll fall but i do know for a fact they will fall, and fall significantly.

I give up it's like talking to a brick wall here

And you know this how?

You do realize you dont have to pay the asking price and as i previously referred to it is a buyers market so you can get great bargains at the moment, now falling house prices does not necessarily mean this house the op is referring to will fall in the next twelve months. If its 250k now and he offers 190k ultimately getting it for about 205, can you say that if the price does drop by your 10% figure therefore giving a price of 225 that the owners will then accept less than the 205. No course you cant because the seller probably has a figure in mind they can afford and the average house price wont have any bearing on that price, the only thing that will happen next year is they will end up paying the same price, or maybe slightly less but will have higher mortgage repayments.

You say the OP shouldnt buy this house now but should wait because prices are falling, you say he should wait til next year, i suppose in the same way you guarantee this house will be on the market for less next year that the house will not have been sold by then?

Snakeblood

donalg1 wrote: »

Stable has nothing to do with the structurally soundness of the house, it means the child has a place to call home for his whole childhood and cant be told your moving because the owner wants to move back in, and then has to move house every couple of years so can never really settle in the one place. Makes friends with the neighbours then has to move so no more friends until they make some new ones thats what i mean when i talk about stability.

And i suppose you know that the house the OP is looking at is going to drop by 30k in the next twelve months. I assume you know the OP and the house he is talking about, sure you must be the seller then and have plans to drop the price by 30k, sure you should have just said earlier makes total sense now.

Houses are dropping currently by 12.5% per annum. It would take a monumental turnaround for that to stop in a year.

cgarrad

desertcircus wrote: »

The potential downside to renting is that the landlord might decide he or she wants to move back in and you have to find a new place.
The potential downside to buying is that you end up tens of thousands in debt.

Incontrovertible logic always wins

donalg1

Snakeblood wrote: »

Houses are dropping currently by 12.5% per annum. It would take a monumental turnaround for that to stop in a year.

Did you not read that post you quoted, ffs how can you say this house is going to drop by 12.5% in the next twelve months???????????????

Houses is a bit of a general statement, is it not?

You dont suppose the 12.5% refers to the average house price?

You dont suppose the average house price is being driven down somewhat by new to market houses, that need quick sales?

But yeah i see your point houses are currently dropping by 12.5% per annum so that means every house on the market now (91,000 on daft) will be drop by exactly 12.5% next year!!!!!

Theboinkmaster

donalg1 wrote: »

And you know this how?

A) Income taxes will rise substantially for everybody
Significant Property taxes will be introduced for owners
C) Significant Indirect tax increases- VAT/Excise
D) Interest relief for investors will be further reduced from current 75%
E) Rent Allowance will be decreased by some material percentage
F) Personal Insolvencies will increase when the law is changed in their favour
G) Continued downward wage pressures-or no pay increases at least till 2015
H) As competition in Banking is reduced then mortgage margins will rise
I) Emigration will continue by current and future potential homeowners
J) NAMA releasing finished properties onto the market mopping up demand
K) ECB raising interest rates to normal levels once Europe crises recovers, ie by 1%-3%
L) Property owners/investors in tight financial straits will be forced to sell
M) People realise that property in Ireland is still expensive vs other countries
N) More builders are put into receivership and properties are sold at large discounts - don't forget there are 300,000 empty properties
O) Rising fuel prices decrease disposable income and discourage commuting
P) The Croke Park aggreement falls apart and public sector pay falls
Q) Unemployment rises and
R) Loss of economic sovereignty
T) Deflation or very low inflation causes debt to have to be repaid in full rather than inflated away at lenders expense.
U) Stiffer regulation forces banks to provide mortgages with more caution
V) Interbank lending to Irish Banks does not return to precrisis levels and the Banks have to price margins very conservatively-A given
W) Building costs decline further as NERA is disbanded and new build houses can be profitably sold for less.
X) Development land has plummeted so land costs can lead to further downward pressure on prices of future developments.
Y) Commercial rents continue to decline and contagion negative pressures apply to residential rents leading to lower property asking prices
Z) Contrarily the current booming birth rate will provide demand in 25 years time-for subsidised housing at the least

Zamboni

donalg1 wrote: »

Did you not read that post you quoted, ffs how can you say this house is going to drop by 12.5% in the next twelve months???????????????

Houses is a bit of a general statement, is it not?

You dont suppose the 12.5% refers to the average house price?

You dont suppose the average house price is being driven down somewhat by new to market houses, that need quick sales?

But yeah i see your point houses are currently dropping by 12.5% per annum so that means every house on the market now (91,000 on daft) will be drop by exactly 12.5% next year!!!!!

The OP has never clarified the type of house or location of the property so why not speak of averages?

donalg1

Theboinkmaster wrote: »

I give up :eek:

So you dont know it then, finally admitted you aint got a clue but are yet still prepared to give bad advice.

Guarantee if i looked back at all your previous posts you were on here about 5 or 6 years ago telling everyone they should be buying houses and go for the 100% mortgage too and take everything the bank offers cause you gotta get yourself on the property market.

donalg1

Zamboni wrote: »

The OP has never clarified the type of house or location of the property so why not speak of averages?

Because you cant speak of an average of 100,000+ houses when referring to just one in particular.

Zamboni

donalg1 wrote: »

Guarantee if i looked back at all your previous posts you were on here about 5 or 6 years ago telling everyone they should be buying houses and go for the 100% mortgage too and take everything the bank offers cause you gotta get yourself on the property market.

You should do that then.
Please get back to us with your findings

Snakeblood

donalg1 wrote: »

Did you not read that post you quoted, ffs how can you say this house is going to drop by 12.5% in the next twelve months???????????????

Houses is a bit of a general statement, is it not?

You dont suppose the 12.5% refers to the average house price?

You dont suppose the average house price is being driven down somewhat by new to market houses, that need quick sales?

But yeah i see your point houses are currently dropping by 12.5% per annum so that means every house on the market now (91,000 on daft) will be drop by exactly 12.5% next year!!!!!

Yes, it's obviously a general statement.

House prices are dropping. this house in particular might not drop by that much, but given the lack of other information, yes, it's quite likely to drop by some reasonably large amount because it's in a market (try to follow) where houses in general are dropping by about 12.5%. So if they want to sell, then some house price drop is probably going to be necessary.

Will it be exactly 12.5%? Probably not. Will it be more? Maybe. Will there be similar houses dropping by as much: Yes, there probably will.

You're getting too excited, you should calm down.

donalg1

Snakeblood wrote: »

Yes, it's obviously a general statement.

House prices are dropping. this house in particular might not drop by that much, but given the lack of other information, yes, it's quite likely to drop by some reasonably large amount because it's in a market (try to follow) where houses in general are dropping by about 12.5%. So if they want to sell, then some house price drop is probably going to be necessary.

Will it be exactly 12.5%? Probably not. Will it be more? Maybe. Will there be similar houses dropping by as much: Yes, there probably will.

You're getting too excited, you should calm down.

Will it be less? Maybe. (you left that option out) Will it have been sold to someone else? Maybe. Will the OP have missed out on buying the house they wanted to buy? Maybe. Then what buy a different house sure they are all the same after all and sure you might even have saved yourself a few quid. Or sure instead of doing that why dont you buy a house in need of an awful lot of repairs in a dodgy part of town with a serious rat problem and badly built and flood damaged sure you would get that for next to nothing and that way you can save hundreds of thousands. All houses are the same after all. Or no wait though dont buy that house just yet wait a year and it will have dropped in price by 12.5% and with a bit of luck one of the dodge lords from the area might even have started a fire in it which will drive the price down even further for ya. But again look on the bright side you may not be living in the house you wanted to live in but at least you saved yourself a tonne of money.

Theboinkmaster

donalg1 wrote: »

So you dont know it then, finally admitted you aint got a clue but are yet still prepared to give bad advice.

Guarantee if i looked back at all your previous posts you were on here about 5 or 6 years ago telling everyone they should be buying houses and go for the 100% mortgage too and take everything the bank offers cause you gotta get yourself on the property market.

Link just one post where i say that. Go on.

Actually i was telling everyone the opposite and was dismissed as being a scaremonger. I've just given you 26 reasons why they will decline more - not mine originally i took it off another forum last year but still stands.

donalg1

Theboinkmaster wrote: »

Link just one post where i say that. Go on.

Actually i was telling everyone the opposite and was dismissed as being a scaremonger. I've just given you 26 reasons why they will decline more - not mine originally i took it off another forum last year but still stands.

26 reasons i havent seen more than one reason, that reason being that house prices are falling now so every house must go down in price next year

Theboinkmaster

donalg1 wrote: »

26 reasons i havent seen more than one reason, that reason being that house prices are falling now so every house must go down in price next year

Scroll up a little - i edited my post a few mins ago :cool:

Snakeblood

donalg1 wrote: »

Will it be less? Maybe. (you left that option out) Will it have been sold to someone else? Maybe. Will the OP have missed out on buying the house they wanted to buy? Maybe. Then what buy a different house sure they are all the same after all and sure you might even have saved yourself a few quid. Or sure instead of doing that why dont you buy a house in need of an awful lot of repairs in a dodgy part of town with a serious rat problem and badly built and flood damaged sure you would get that for next to nothing and that way you can save hundreds of thousands. All houses are the same after all. Or no wait though dont buy that house just yet wait a year and it will have dropped in price by 12.5% and with a bit of luck one of the dodge lords from the area might even have started a fire in it which will drive the price down even further for ya. But again look on the bright side you may not be living in the house you wanted to live in but at least you saved yourself a tonne of money.

It might drop by less, that's perfectly true.

You don't have any arguments with the rest, you're just spouting nonsense. Try to get a clear point and make it readable. That's a wall of text.

Edit: Hang on, I did say it might drop by less. It's the second line I wrote. Jesus christ.

donalg1

Snakeblood wrote: »

It might drop by less, that's perfectly true.

You don't have any arguments with the rest, you're just spouting nonsense. Try to get a clear point and make it readable. That's a wall of text.

?

Snakeblood

donalg1 wrote: »

?

The rest of what you wrote is a solid wall of garbage. It doesn't make any sense and seems like you wrote it all at once because you are angry, a series of 'WELL THIS COULD HAPPEN AND THEN THAT' that's A) unlikely and Gibberish.