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I am currently in the process of buying my first house (I live in the UK). Having had an offer accepted, I am now waiting on the sellers to complete on buying the house they're moving to.

With the current stock market turmoil, I am wondering what the implications of this are (if any) on my buying a house. I know that house prices have generally been rising for quite some time, but I'm wondering if the current situation with the stock market is likely to have an impact on the housing market..?

I'm aware that this is probably something that no-one can answer with a great degree of certainty, but what is the potential impact that the stock market crash will have on the housing market? If we are entering a bear market, does that mean that house prices are likely to drop as a result of this?

With the 2008 crash having been caused by the housing market bubble- I'm just aware that the two things can be (but are not necessarily) linked. Either way, I am not buying with any purpose other than owning my home- although I know it is a financial investment, that is not the primary purpose of the purchase, and I don't anticipate selling at least within the next 30 years (obviously, unforseen circumstances may dictate that I have to, but there is always that risk).

Interest rates are very low at the moment- so it's a good time to buy & get a long fixed rate mortgage, but is the current drop in the value of the markets a reason to hold off buying? If so, why? If not, why not?

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    You've already received an excellent answer, but I wanted to add: predicting the future is hard. This makes it hard to answer things like, is this a good time to buy. Ultimately, the "time to buy" is personal and will basically be when you have found a house you want, which you can afford. Getting much beyond that is pretty speculative. – dwizum Mar 12 '20 at 13:26
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    I appreciate that- my point about it being a good time to buy was more to do with it being a good time to borrow money, as interest rates are very low at the moment. So if I can fix a mortgage for 10 years, then the interest rates are unlikely to get much lower, and if they increase, I still have the low rate. – Noble-Surfer Mar 12 '20 at 13:44
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    That's a good clarification. Interest rates are a little more clearly understandable (or predictable) than home values. I'm not really immersed in the situation in the UK, but I can say that right now is an excellent time to buy in the US - rates are historically low and locking in a long term loan right now makes a lot of sense. – dwizum Mar 12 '20 at 13:47
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First understand that when the stock market drops like this, it absolutely can impact you, even if you aren't "in the stock market", because when stock prices decrease that's an indication that the market believes those companies are going to be performing worse. ie:if Apple shares drop 10%, the market believes (to be simplistic) that the total foreseeable profits of Apple are 10% less than what the market thought yesterday. It is a signal that the market thinks Apple sales will drop because the economy is going to go through a downturn, and people will be tightening their budgets as a result.

In an economic downturn, lots of things will happen, and none of them would typically result in standard real estate prices increasing. Here's a hypothetical chain of events:

If companies do poorly, they might lay off employees. Employees without jobs cannot pay their mortgages. Unpaid mortgages are foreclosed on. Foreclosed homes add to the supply of houses in the market. Decrease in generally available funds from an underemployed workforce also decreases the demand. This means real estate prices drop.

What was 'special' about the 2008 Global Financial Crisis, is that people were incredibly overleveraged, with mortgage debt they couldn't realistically afford offered by banks that were not motivated to decrease the risk of those mortgages [because those mortgages were sold to 3rd parties in Collateralized Debt Obligations that hid the true risk of mortgages leant to people with minimal down payments or income]. This increased the foreclosures noted above, but the other impacts I've listed there are still probable outcomes in a severe economic downturn.

At the same time, this only affects you personally if you lose your own job - if your employment is very secure even during a downturn, and you can happily afford your mortgage, then even if the price of your neighbor's house drops by 30%, you will still survive.

If you want to know how long it might take for your house's value to recover if you planned to sell, that is harder to tell. And that's also why it is risky to buy a house for 'investment' purposes, instead of personal reasons to secure your own living space.

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  • Thanks for your answer. I am aware that the stock market dropping is impacting me (some of the money I'll use for the deposit is in the markets), and although I have had to change jobs numerous times over the years for various reasons, I am fortunate enough to have a trade to fall back on that is highly desirable, and is still a growth industry- the longest I have gone between jobs is about 2 months. As mentioned in my OP, my primary purpose for buying is personal- it's about owning my home, rather than renting, and is very much not a purchase for financial 'investment' purposes. – Noble-Surfer Mar 12 '20 at 13:57
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    @Noble-Surfer Then it sounds like you are in a great situation to be able to lock in your housing costs at current interest rates. If you look back a year or two from now, you might see that property prices have fallen and regret not delaying your purchase, but that's the cost of fixing your risk. – Grade 'Eh' Bacon Mar 12 '20 at 14:57

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