So when will it be a good time for me (a previous repo sufferer) to buy again?greenspun.com : LUSENET : Repossession : One Thread
I have just finally agreed out of court a settlement, my record is clean and I can get a mortgage but property prices have gone up a load while this has been going on, what do you think is going to happen to house prices? Should I buy now, later this year or next year? any comments? Thanks
-- John Cartwright (email@example.com), March 13, 2003
I think property prices will fall relative to wages - eventually.
How do you work out when it is a good time to buy?
Rough guidelines: When annual rentals are roughly four/five percent of house prices.
After interest rates have been high for a few years.
When people think house prices will never rise again.
Rental levels indicate the level of demand for housing relative to the ability to pay for it. House prices indicate the demand for housing relative to the price you have to pay for a loan to buy it.
I'd argue that rental levels give you the best indicator of likely house prices because rental levels are far more sensitive to housing demand and affordability than house prices are. House prices are more sensitive to interest rates and "fear of missing out" than they are to real demand.
That's because rental levels are not dictated by long term conditions. They are generally a year long and so change to reflect demand and affordability with a precision of one year. Mortgages are generally 25 years long and cost more to set up, so they force homeowners to delay reacting to real changes in affordability.
Using the above logic, I'd say that houses are not a good buy right now.
-- Lee (firstname.lastname@example.org), March 14, 2003.