Let’s first take a brief look at what has happened with the real estate market. In the summer of 2007 property prices peaked and mortgages up to that point had been easily arranged with 100% mortgages available. At the time, 40% of the money banks lent to businesses and consumers came from large financial institutions, often offshore and known as wholesale sources. According to the BBC’s Robert Peston, the ratio of our UK borrowing (including consumer, corporate and public sector debt) to our annual economic output rose to just over 300% (or more than £4bn). sterling), which is similar to the US debt-to-GDP ratio. In August 2007, wholesale sources realized that much of their money had been invested in the US housing market, which had already collapsed, and saw that their investments had seriously deteriorated. As expected, they wanted their money back and didn’t want to lend any more. When the banks paid the money back, some banks almost collapsed and were only saved by bailouts of billions of pounds of taxpayers’ money. And at the same time, sources of debt funds dried up. It is a time of unprecedented change in the world economy.
So now UK banks have less money to lend to businesses and consumers, in the form of mortgages, and only customers deemed risk-free are approved. With far fewer mortgages available, there are fewer buyers. With fewer buyers, property prices go down and when prices go down, buyers who can secure a mortgage want to wait until prices have bottomed out, and with property prices still falling, banks are unwilling to invest in them… and so on. the downward spiral continues. A global recession is upon us and more companies are likely to need government bailouts. Unemployment will increase and tax revenues will decrease. It is a glorious prospect.
So against this backdrop it’s not a good time to sell a house.
As a seller, do you really need to sell your house now? Check your reasoning: do you need to sell your house or do you want to sell your house or is it a mix of the two? Sit down and carefully review the reasons why you are selling. Can you delay selling your home until the economy and property prices have changed? Although lending will not return to the business days of previous years, stability will come, and those buyers currently hoping to purchase a property will buy and prices will begin to rise again. Also, because prices have come down, homes are becoming more affordable with a median home price to earnings ratio of 4.56 in November 2008 compared to 5.84 in July 2007. This will support the real estate market when he returns.
But when will he return? According to the prebudget report, credit conditions will stabilize “after 2009,” so that could mean early 2010 (although predictions vary). The worst time to sell could be 6-9 months, which will be when home prices have fallen further, sellers will be afraid of how much further they will go, and the country is likely in the midst of a recession. If the market starts to recover from 2010, house prices will slowly rise from a peak to a trough of around 20-25% (although, again, predictions vary widely). How long will it take to recover 2007 prices? Well, this cannot be answered as it is simply an unknown quantity, but it is likely to be several years.
If you have to sell now, keep in mind that buyers are waiting for a bargain and offers will be low. Be realistic from the start about what you’re willing to accept and have a timeline for when you need to sell. None of these can be guaranteed, of course, but by thinking about them you’ll be better prepared to price your property accordingly. This can save you months of waiting and gradually lower your price. Obviously, you don’t want to do this especially if it would mean going into negative equity. But if you need to sell, you should consider that it would be better to accept a low offer before the market bottoms. You need to calculate your figures and price accordingly. Talk to your real estate agent (and others) and ask what other properties in your area they are looking for. Gather as much information as you can to make a decision.
Selling and moving house is a very personal decision and many areas of your life are affected. Decisions may include wanting to downsize to ease spending pressure, migrate, or start over elsewhere. Moving house often signals a new chapter in your life and it is worth remembering that the reasons for wanting to move may be greater than the reasons for needing to move.
Selling and listing your property for sale can be a difficult decision to make in today’s market, but a low priced property will attract buyers who, after all, exist and are watching and waiting for the right opportunity.