A realistic picture of house prices

[Cyberman]

Homes with HIPS are selling quicker on average. The problem is that the market is only currently supporting cash buyers or buyers with a fat deposit.

When it eventually picks up, the value of the HIP will be clearer.

Figures released last week showed that up to 30% of house sales do not have a HIP even though the law dictates that they should, and most HIPS appear very late on in the transaction. Most sellers indicated that buyers did not ask to see a HIP in any case. So they really are a waste of time!!

Will HMG fine sellers that have no HIP ? Another nice revenue raiser perhaps.

[expat]

well yes if the supply drops by the same rate as demand then prices would stay the same but volumes would drop, is this what you mean? Surely market volume and market price are different things? My A level economics is a touch rusty - i only lasted a month.

I am saying that the market mechanism of supply and demand is not the correct way to describe the aspects of the current situation that people are mostly interested in. I am not for a moment suggesting that the situation for someone with a house to sell is as rosy as it was last year. But saying simply that supply "exceeds" demand is not useful since it pretends to use the economic theory, when in fact this description is meaningless in terms of the theory.

You are right that if the supply drops by the same rate as demand then prices would stay the same but volumes would drop (remembering that both supply and demand are curves, not single numbers). More likely is that supply will be unchanged, while demand drops. The result will be that the intersection between the 2 curves moves left (lower price) and down (lower volume). Which of these (lower price, or lower volume) seems the better description would depend on:
1. how steep the supply curve is at that point,
2. whether you've got a house to sell, and
3. whether you've got an article to write.

Among the interesting consequences are:
1. the whole point of the supply-and-demand analysis is that neither curve is obliged to change as a result of the other curve changing: it is the intersection that changes.
2. what an unchanging supply curve represents in real life is no individual would-be seller budging on price, but settling for not selling instead. I suspect this will happen a lot, to the disappointment of many would-be buyers who are being told that prices are tumbling, but still can't find the cheap house that they want.
3. as long as the government flaps around trying to be seen to be doing something, but only ever touches the demand and not the supply, they will not succeed in getting everone on the housing ladder; or even a single extra person, indeed.

[LittlestHobbo]

Thanks thats now clear as a crystal ball... I always found abstracting the theory a toughy, it almost seemed like you'd start at point a in your understanding confuse yourself for a while, get to point b at which point you'd realise that point b was just a different way of describing point a.

Anyway as for 3) i think there are 1000's of new homes in our area, Pub gardens now have blocks of flats in the middle of them, larger homes have sold the gardens and now have at least 3 new neighbours and most villages round this way appear to have some pretty unattractive new housing complexes on the outskirts. Not to mention the city high rise 2 bedroom flat horrors..

I'm too young to remember, but was there a housing shortage at the end of the 80's early 90's. I remember lots of new estates being built, and discussions on the news about modern day habits of divorce and marrying later etc etc...

Was there then a glut of housing stock by the end of the 90's recession? It does appear that history may be repeating itself...over leaverage of both banks and consumers combining with inflatory preassures.

My prediction for the future, a wealth correction and solar power will get us out of this one...