A realistic picture of house prices

[DimPrawn]

The market is stagnant because there are few buyers due to lack of easy mortgages available and few sellers because nobody wants to sell at less than they may have got a few months ago. This stalemate however does not mean that house prices must fall, because supply is still not meeting demand.

Deary me.

Lookup credit bubbles and fiat currency inflation.

Or better still, since you house has gone up 12% and must still be at an all time peak, why not sell up now and cash the profit and laugh at everyone on how your home is still booming.

[Cyberman]

Deary me.

Lookup credit bubbles and fiat currency inflation.

Or better still, since you house has gone up 12% and must still be at an all time peak, why not sell up now and cash the profit and laugh at everyone on how your home is still booming.

What a clever prawn you are. Have you thought of changing your name? Oh perhaps not!! ...... after you castigated me a week or so back for suggesting that the government should suspend stamp duty and abolish HIPS to give impetus to the market I see these moves are being proposed in in the 'higher ministerial echelons'.

[Diver]

Realistic picture

[ASB]

The market is stagnant because there are few buyers due to lack of easy mortgages available and few sellers because nobody wants to sell at less than they may have got a few months ago. This stalemate however does not mean that house prices must fall, because supply is still not meeting demand.

There are a number of people predicting a "strong rebound". Whether this turns out to be correct remains to be seen (the key thing with forecasting is what or when but not both ).

In any event the type of market has changed significantly. In general there are two classes of vendor. Those who *have* to sell - repossession, job move, probate etc and those who *want* to sell - to trade up, down or whatever.

The former - because of the stagnant market are going to have to accept a lower price. Okay, in some limited cases and areas this may not be true. The latter may choose to stay put until there is more confidence. Of course, this sort of market is generally a good one to trade up in - ultimately it's cheaper.

So, in principle if supply is not meeting demand than there is no real reason to suggest prices are compelled to fall. But that is not the case. It is self evident that current supply far exceeds current available demand.

[LittlestHobbo]

I must admit I'm at a bit of a loss with those figures..

use http://http://www.property-bee.com/ (don't tell every one though!)

with firefox 3.0 or less.

in my area (SE) I know prices are down nearly 10%, on the type of property i want to buy and long may it continue.

As previosly mentioned there is no like for like comparison.

Demand isn't outstripping supply, and probably won't do for a while now. I was looking at B2L and was chatting to a mate of mine who did the same at the peek. He's interest only and the rent only just covers his interest payments and infact he's finding it very hard to let at that price.

B2L interest only mortgage was just a vehicle to keep people in the market and to drive up prices, in my opinion.

Some one like me (with high liquidity) is going to come along buy a similar property much cheaper make some money on my rental and charge less for the let. Many people like him will end up having to drop/ subsidise his rent to compete or sell up, it could create a downward spirral.

Everyone in our area who can't sell is trying to let.

As in the 90's people will just live with Mum and Dad for longer. For first time buyers the price of housing just is not sustainable full stop. And as anyone who has been in a chain knows they are quite important to the process.

It seems to me that everywhere I look there are new houses squashed in unnatural places and houses converted into tiny flats.

The stock of quality housing is probably reducing as one house is knocked down and made into 4, which could be whats driving the figures, somewhere though there has to be parity.

Many of the temporary workers and immigrants will move on once the work dries up. I think there could be a glut of properties then, hopefully at the same time the BOE will have slashed interest rates.

Your doom is my boom.

[Old Greg]

If house prices are going to go up or stagnate, try spread-betting on the Halifax House Price Index - you'll clean up!

Anyway, we sold up in April and are now renting, and I'm feeling much better about things than I would have done if we'd bought the bigger house we were planning to.

Best of luck with whatever you decide.

[bobhope]

You probably don't understand:

* His house is special
* His area won't be affected


and of course: it's different this time :-)

[ASB]

If house prices are going to go up or stagnate, try spread-betting on the Halifax House Price Index - you'll clean up!

Anyway, we sold up in April and are now renting, and I'm feeling much better about things than I would have done if we'd bought the bigger house we were planning to.

Best of luck with whatever you decide.

Only hindsight will tell if you actually end up better off, trying to call the bottom will be likened to catching falling knives. I guess the declines is likely to have some way to go so you can probably improve your position. When we last moved in 1991 we sold a house in Middlesex @ 96k. Bought one in Somerset @ 205,000. This subsequently dropped to probably 180,000 (by which time the one we sold was probably about 85k).

About 1 year before when we considered moving the house we sold was probably worth 115k. The house we actually bought was marketed at 350,000 and had an offer of 325,000 turned down.

Cost to change therefore reduced from 250k ish to 110k ish (and at the absolute trough would have been 100k ish).

The point of this? The tendency is that when the recovery starts it has always tended to be strong. If you are still looking to buy a bigger house then wait until there is blood in the streets and only those who would be regarded as insane are buying. This is probably as close as you'll get to calling the bottom.

Good luck.

[expat]

So, in principle if supply is not meeting demand than there is no real reason to suggest prices are compelled to fall. But that is not the case. It is self evident that current supply far exceeds current available demand.

"Supply" and "demand" are not fixed numbers; each is a function of price. Normally supply is taken to be a curve with positive gradient, and demand a curve with negative gradient. Where they meet, supply = demand, and that gives the market price. And the market volume.

What is likely to happen with press furore and FUD about the housing market is that prospective buyers will tend to wait, since they are being told that prices will drop more. That, together with would-be buyers who now can not get a big enough mortgage, shifts the demand curve left.

For a given supply curve, that means that the market price goes down, and so does the market volume.

It does not necessarily mean that the price of any given house changes at all: it could simply be that some houses do not now sell, when they would have done a year ago.

The whole concept of supply and demand only works if some possible sales do not take place because no buyer and seller agree on this particular item. It is not correct to say that supply exceeds demand (or vice versa) in an economic sense. It may do in an aspirational sense - some would-be sellers wish that a buyer would come along at the price they want - but that is not a description of the market.

[LittlestHobbo]

"Supply" and "demand" are not fixed numbers; each is a function of price. Normally supply is taken to be a curve with positive gradient, and demand a curve with negative gradient. Where they meet, supply = demand, and that gives the market price. And the market volume.

What is likely to happen with press furore and FUD about the housing market is that prospective buyers will tend to wait, since they are being told that prices will drop more. That, together with would-be buyers who now can not get a big enough mortgage, shifts the demand curve left.

For a given supply curve, that means that the market price goes down, and so does the market volume.

It does not necessarily mean that the price of any given house changes at all: it could simply be that some houses do not now sell, when they would have done a year ago.

The whole concept of supply and demand only works if some possible sales do not take place because no buyer and seller agree on this particular item. It is not correct to say that supply exceeds demand (or vice versa) in an economic sense. It may do in an aspirational sense - some would-be sellers wish that a buyer would come along at the price they want - but that is not a description of the market.

that makes quite alot of sense, but... when someone needs to sell a house as will probably happen shortly alot more sales will be realised. As there will be fewer buyers than sellers you'd expect prices to drop as sellers compete to atract the smaller pool of buyers.

In economic terms this negates the aspirational argument as wants become needs.