Move 2 You

In the last post we started to look at the housing market and how we feel more secure by following the commonly accepted wisdom of the ‘the market’

One of the causes of our inclination to follow the herd when it comes to the housing market is the way we think about the market.

In previous posts we’ve discussed the concept of the “Housing Ladder”.

We strive (or we’re told we should strive!) to climb it – bigger and better. We invest so much time, effort, money and worry trying climb the ladder by moving to larger more expensive houses and by capitalising on the price increases we have enjoyed in our homes.

But the problem about thinking of the market as a ladder is that it leads to us becoming fixated on what is happening to house prices. We worry about them. And this is the reason why we can’t help reading about house prices, talking about house prices.

But should we be as fixated on house prices as we are?

Doesn’t our fixation on prices work against us, particularly when prices are not shooting upwards, by paralysing us with fear?

Think about it.

If prices rise we feel good about it and we are keen to make a move up to the next rung. Buyers are easy to come by and all is good.

But when prices fall or stagnate the story is different. Nobody wants to move, worried that they won’t make as much on their property as they feel they ought to or could have done a few months back.

And if everyone acts in this way the market grinds to a halt.

But what if we think about the market as an escalator and not a ladder?

Those of us that are home owners should think of ourselves as being on the Housing Escalator rather than the Housing Ladder. This escalator can move upwards or downwards in its own right carrying everyone with it.

In other words when house prices move up they move up for everyone – ie the escalator moves upwards taking us with it. And when prices fall they fall for everyone – ie the escalator moves downwards. But relative to each other we all move together.

And this is the really key point here; everyone is moving together on this great big housing escalator and because price rises or falls are all happening to us all we are all keeping our positions on the escalator. And unless you want to get off the escalator completely this should give us all some sort of comfort in uncertain times.

Now that we have challenged our view of the housing market we also need to look at how we make our move up and down the escalator; ie how we sell and buy property.

Selling a house in the UK property market can be an extremely frustrating process as too many people know only too well. But more than that it is a very hit and miss process as well.

Worse still it it’s been this way for a long time and if we all continue to act in a herd-like way it will be this way for a long time to come.

It is like a conspiracy and no-one wants it to change. The Estate Agents generally do just fine the way things are (ok it’s a bit tough for them at the moment), the solicitors do ok, the government collects its taxes and we, the home owners, well we just plod along selling our houses in the same old way.

Think about it – as a seller you are completely reliant on a buyer chancing upon your property amongst all the others that are out there.

So even before the pain of the move has started (i.e. the saga of the negotiation, the surveys , hoping the chain won’t collapse, exchanging contracts and all the rest of it) you are leaving your house sale completely in the hands of fate!

i.e Will the right buyer actually find my property or not?

The way the market works at the moment, if you’re selling you just sit there passively and wait for someone to come and make you an offer!

But what is to say that buyers will find your property amongst all the others? The answer is that it is largely luck. You are being what we call an Accidental Seller.

Think about it; all the houses on the market are being advertised and promoted in much the same way. There is nothing to make any one of them stand out from the others.

What does this matter you say? Houses get sold so surely things must work ok?

Well maybe when the market is buoyant. But what about when things are not so good?

Yes we all use estate agents, but they are passive as well. Sure they will advertise your property in their window, produce a nice brochure and ensure your home ends up on one of the property websites, but all of this is still the same old game – it is waiting for a buyer to take action and to find your property in and amongst all the others they and every other estate agent have on their books.

As sellers we need to think of the market in a different way and more importantly ACT in a different way.

And by this we mean:

• You need to access as many potential buyers as possible and not just those that are actively searching for property at that moment in time but also those who are interested but not active in the market.
• You have to work out from all those potential buyers which ones are more likely to be interested in buying your property.
• You need to begin a conversation with this group of more likely buyers in an attempt to persuade them to make an offer on your home.

If you can do all of these things then you really are becoming proactive and taking control and as such you are much more likely to sell your house.

There is no other topic more guaranteed to get people talking in this country than what is happening to house prices; ok maybe the weather.

When the market moves in the right direction we feel good and we feel more wealthy. And when prices fall like they have done over the last year or so we worry a lot about what the consequences might be and we feel harder up.

It’s in the DNA of the nation. We are a nation of home owners and where we live and what we do with our houses tells others a lot about who we are. We add decking to our gardens, we carry out loft extensions, we knock down walls, build conservatories, our home is an integral part of the lifestyles we lead. It matters to us.

On the one hand just take a look at the TV schedule in an average week. Even now with all the turmoil in the economy there are programmes on every day about people buying and selling houses or developing properties or doing properties up …. if there is an angle on the housing market then there is a programme being made about it.

And on the other hand in the broader press we have been hit with so many stories over the last year about about how much money we are losing on our houses.

Why is this?

Because we read it! We lap it up!

And what do you think is the effect of these headlines on the average man in the street, with a house and a mortgage?

Well it makes us worried doesn’t it? Of course it does. That’s because it is a natural reaction to hearing bad news. But more than that, we start to hesitate about what we should do with our homes. Those of us that want to move put plans on hold, deciding to see what happens to prices before committing to a move.

And this becomes a self fulfilling prophecy and this is where we have been in the last 12 months or so. We are told that house prices are going to fall, so fewer of us are in the market for a new house – i.e. demand falls and guess what – prices fall to compensate.

Now clearly there have been some real problems in the market, no-one can deny that. We have seen for example a massive reduction in availability of finance due to the credit crunch.

But even with this the doom and gloom that is spread just adds to our woes. We develop a “herd mentality”. We feel safe if we act as a group – it is an instinct that goes back as long as we have been walking the face of this earth. If everyone else is doing something then it must be the right thing to do.

Can you see how much of what we do is all about psychology? Our mind drives our actions and if everyone feels bad about the market we feel bad about it as well.

Sometimes the right thing to do is to ignore the widely held belief, to take some control back and to act in your own best interests based upon your own individual circumstances.

What is the market after all?

It is just a collection of individuals buying and selling. So if you want to sell your home and you do manage to find a buyer who will offer you the price you want would you still sit tight and refuse to act just because that was the perceived right thing to do?

Of course not.

That’s all for now but check back here soon for more about why the way we see the housing market is all wrong.

In a previous article posted here we’ve talked about the “Housing Ladder”, and how we should really think about it as a “Housing Escalator” – an idea that opens you up to a different way of thinking about what opportunities really exist for you to move house.

But whatever you call it – ladder or escalator – there’s one key ingredient to make the whole thing work. It’s the person who should be everyone’s best friend … the First Time Buyer (FTB).

And right now the Housing Ladder looks less like a ladder, and more like a Well Fortified Castle with the Drawbridge pulled fully upright and firmly shut!

Why’s that then? (we’re just about to tell you.)

And can we help? (hint: answer’s yes – read on to find out how.)

First, let’s look at why FTB’s are finding it so hard right now. Think back to the nineties and early “naughties” – in those times house prices were rising steadily … and so were people’s pay. So lenders could be sensible, and use “multiples of income” to be confident that you’d be able to repay your mortgage.

Multiples of 2.5x – 3x income were commonplace, weren’t they?

But then the craziness started … house prices were shooting up like there was no tomorrow (turned out they were sort of right after all – eventually there was no tomorrow!) … but pay didn’t shoot up in the same way.

The result? House prices started becoming genuinely more expensive … for everyone. Especially for FTBs.

But … banks needed to keep lending … otherwise their income dried up. And they really didn’t want that to happen … not when there was so much money to be made. So they became more cavalier with their lending.

We started to see multiples of 4x … 5x … even 7x earnings.

And that’s if you bothered to tell them your earnings at all! It got to the stage when they just didn’t seem to care anymore.

Don’t have enough income? “No Problem!” said the banks and other mortgage lenders … “as house prices are shooting up, just tell us that you can afford it, and we’ll lend pretty much whatever you need … if it turns out you can’t pay your mortgage, we’ll just repossess your house, which will have gone up in value … a lot … and we’ll be able to sell it and get our money back that way.”

Two things happened as a result … one, the chickens came home to roost, so to speak. In other words, so many people could no longer afford their mortgages that the number of repossessions became enormous … so big that they effectively flooded the market with properties that were trying to be sold off “cheap”.

But the buyers slowed right down. And that led to what we all now know as “The Credit Crunch”.

And the second thing that happened was lending swung right back the other way. Banks then became so worried about lending they made sure they’d only lend if there was plenty of equity in the house.

So the size of deposits required became … well … big. People are needing to find 25% or more as a deposit now. (OK, some deals are now becoming a bit more realistic, but it’s slow change at the moment).

Now, that’s the background to the absence of FTBs. But we desperately need them back in the market don’t we? They are the bedrock of housing chains.

And what we need is FTBs (and everyone else too) to have the ability to buy a house at the right price. So they need:

- the right house

- the right price

- and a deposit (that’s hard to get).

OK, so now we need to help them.

And that’s what we’re going to do here at move2you.

We’re going to be revealing the methods (and there are lots of them) that people can use to raise the deposit they need.

Of course, that doesn’t just apply to FTBs … raising the deposit is useful for anyone buying a house.

So come back here again soon … when we’ll start to reveal methods of raising deposits. In fact we’ll even reveal methods of owning a house without needing a mortgage at all … (and all completely legally, in case you were wondering!)

Only property investors know some of this stuff … and while they’re making a killing from knowing it, it’s about time FTBs benefited from knowing this stuff too.

So, we look forward to welcoming you back soon as we build up the article base of information that could make all the difference to helping you buy your first (or next) home.

Speak soon.

Chris

So the Bank of England lowered interest rates to an all time low, just 1.5% the lowest rate since records began 315 years ago.

So now we have the debate about who benefits, who loses. If you’re trying to sell your house at the moment this should make your property that much more affordable to potential buyers.

That is of course if the banks pass the rate cuts on and if they ease up a bit on their lending criteria.

The best rates at the moment are reserved for those who lay down a 40% deposit; yep that’s right, 40%. Fat chance. That puts the best rates out of reach for the vast majority of buyers. And for the rest you need an impeccable credit rating to be approved for one of their other deals.

So the rate cuts are good for those that have a tracker without some clause that means the banks don’t have to pass the cut on, but if we don’t see an increase in the number of mortgages approved we aren’t going to see a recovery in the housing market any time soon.

Of course there are buyers out there, it is just that much harder to find them at the moment. If you’ve spent money on a HIP and you’re ready and waiting to show buyers around your freshly spruced up property you are going to be waiting a long time.

There is something you can do to help yourself. You can use the UK’s first property matching service that puts buyers and sellers in touch.

move2you.co.uk instantly lets you see how much interest there is for places that match yours - for FREE. It rates the quality of these matches and enables you to contact these potential buyers. If they contact you back you could be on your way to selling your property!

Sound good? It’s got to be worth checking out. It’s completely complimentary to any activity your estate agent may be carrying out on your behalf and the more people that use it the better it will be for everyone using it.

Until next time.