Move 2 You

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

 

With house prices continuing to show signs of weakening in many areas of the country are we right to be worried about this?

 

The media love this sort of thing of course, generating attention grabbing headlines telling us how we are all going to be worse off.

 

And of course it is worrying to think that the value of our homes is falling. We are a nation of home owners and the fact that our homes have increased in value so much over the last 10 years has created a feeling of prosperity and indeed for those people that have actually jumped out of the market or relocated to areas where prices are lower it has created prosperity for them.

 

But should we be as fixated on house prices as we are, or is this a ‘problem’ that has been blown out of proportion by the media and our natural inclination to follow the herd?

 

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

 

Let’s take a look at this.

 

Traditionally we have viewed the housing market as a ladder, all striving to climb the ladder by moving to larger more expensive houses and by capitalising on price increases.

 

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. Better to just wait and see what happens to prices and stay put for now.

 

Of course when everyone does that the market grinds to a halt.

 

But viewing the market as a ladder with people climbing up or down it isn’t quite right.

 

Here at Move2You we like to think of the market as an escalator. Those of us that are home owners are on the Housing Escalator rather than the Housing Ladder and this escalator can move upwards or downwards in its own right as well as people individually moving up it or down it.

 

Let me explain.

 

When house prices move up they move up for everyone – ie the escalator moves upwards. And when prices fall they fall for everyone – ie the escalator moves downwards.

 

Of course it’s a little more complex than this in reality. The higher up the escalator you are the faster the escalator moves. This is because if house prices move by 10% the more your house is worth the bigger in the change in value in absolute £ terms.

 

So as prices rise those houses that are further up the escalator move a little further away from you with each percentage increase and likewise you move a little further away from the houses below you on the escalator. In a falling market those houses above you get close to you in affordability.

 

The principle however is that everyone is moving together on this great big housing escalator and this should give us all some comfort in these uncertain times.

 

It can be more worrying if the escalator has moved far enough in a downwards direction for your property to be worth less than you owe on it. But of course even then this situation only becomes a reality if you actually need to sell. If you don’t then it’s a case of holding your nerve and waiting for the escalator to move back up.

 

For the vast majority of us however this isn’t going to be a problem and we should try and be a little less fixated on house prices. Yes prices will go up and yes they will go down, but they are also doing the same for everyone else on the escalator.

 

So the key variable is if you want to make an individual move up or down the Housing Escalator and what you can so to ensure that such a move can be achieved successfully whatever the market conditions.

 

To do this the focus needs to be on the transaction(s) you will actually be involved in; i.e. you need to find a buyer for your property and find a suitable property to move to.

 

Right now finding a buyer is a really difficult thing to do as many of them play a wait and see game or are finding it hard to get a mortgage.

 

The buyers are out there however, they are just hidden or reluctant to make a move.

 

So this means you need to work hard to find these hidden buyers and then do everything you can to encourage them to make an offer.

 

With the way the housing market works right now finding a hidden buyer is not easy. It isn’t geared up to helping you do this. Right now you are dependent on potential buyers taking the necessary steps themselves to search for a property and then actually stumbling across yours.

 

And this is the problem we are working on solving at Move2You.

 

We are developing a tool that will enable you to access the hidden housing market and we think it is going to make a massive difference…..

 

Until next time,

 

Dan