Monday, Aug 17, 2009
Rightmove: -2.2% MoM, -3.1%YoY
Times: Sellers drop asking prices
A seasonal lull in the recent homebuying frenzy has prompted sellers to reduce their asking prices by 2.2% in August to achieve a sale, according to Rightmove. The annual rate of fall remains at 3.1%, but the 2.2% fall from last month more than wipes out the 0.6% rise in July. The typical asking price in the UK is now £222,762, down from £227,864 last month.Market commentators have said that recent house price rises are tenuous because even the slightest increase in interest rates could force more people to sell up.
Posted by little professor @ 01:32 AM (1476 views) Add Comment
18 Comments
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1. pauly_boy said...
"Miles Shipside, director of Rightmove, said: “Future price and transaction growth is now controlled by the bottleneck of mortagage availability. This is unlikely to change for years to come.”"
This roughly translates into "the banks are no longer giving away free money and the property market is screwed". In fairness, the drop in prices surprises me, the fact that it -2.2% is amazing. Can someone explain the comments left by James and Scott on the Times website?
2. pauly_boy said...
Oh, and has anyone else noticed how the times have buried a 'negative' price story deep on the site. Usually it would be the headline on :
- buiness
But this, it's hidden under ...
- Money
- Property and Mortgage
- Scroll down lots ... and here!
Guess it's lucky to have a picture
3. little professor said...
Pauly - the Alt-A market ('near-prime, as opposed to sub-prime) is widely thought to be the next market to crash. It comprises a much larger number of mortgages than the sub-prime sector, and therefore the effects of widespread arrears and defaults amongst this group will be even more devastating than the subprime fiasco.
Option ARMs were nicknamed 'pick a payment' - for a fixed period, normally five years, you would pay a very low amount, less than the monthly interest on the loan, meaning that your mortgage would be getting bigger with time rather than getting paid off. After the fixed period, the monthly repayments shoot up - the hike in payments is even bigger than going from an interest only mortgage to a repayment because of the initial low teaser rate. Most of these loans were taken out in 2006, just before the crash, so will be due to reset to higher rates in 2011. By this time the combination of lower house prices and an increased mortgage will mean that they will almost certainly be in negative equity, so cannot switch to another lender at a lower rate. Result - a tidal wave of mass defaults, due to hit in late 2010/early 2011. A Credit Suisse economist has forecast that 50-70% of option ARM mortgages will default once rates reset - remember in America they can hand in the keys and just walk away from the mortgage; there is little incentive for homeowners to keep paying huge mortgage payments when the value of the house is less than the mortgage they are paying.
4. hpwatcher said...
I can't see things getting better for housing, for a long time...
5. paul said...
Bet you won't find this on the BBC today ...
6. uncle tom said...
Good graphs LP,
If my understanding is correct, my guess is that the Alt A will not be quite such a timebomb, as these were loans typically taken out by those who could afford them, but due to imperfect circumstances did not qualify to be a prime borrower.
The ARM's on the other hand, look deadly - loans taken out by those who really couldn't afford them, and were banking on equity release to see them through when the deal re-set - which is no longer an option...
7. mrflibble said...
Not two minutes ago we were being told a shortage of housing was driving up prices. So what went wrong? Did the two remaining buyers go away? ;-)
8. a saver said...
LP said 'remember in America they can hand in the keys and just walk away from the mortgage; there is little incentive for homeowners to keep paying huge mortgage payments when the value of the house is less than the mortgage they are paying.'
Along with the existence of option ARMS this is why I struggle to understand how anyone could think CDOs would warrant an AAA rating.
9. jackas said...
Nice chartwork LP.
Matches my screensaver at work :)
10. mark wadsworth said...
Hang about here, I thought we agreed that Rightmove's "asking price index" was hokum? If we ignore it when it's rising, then why rejoice when it's falling?
As a separate issue, has anybody else noticed how the average price indices quoted by Nationwide and Halifax have almost converged at about £159,000? A year or two ago Halifax was about £200,000 and Nationwide £180,000.
11. mystie010 said...
to mark wadsworth Post 10 Good point Mark we tend to debate house price statistics when they are rising so I think that we should also debate them when they are falling. We can't say that all prices rises are rubbish and a result hokum reporting and all price drops are true and celebrate. To have a totally subjective view just makes us look silly and gives outsiders the chance to poke fun at us. So - why do we think that this is an honest set of figures guys?
12. Jayk said...
Mark,
In the same way that people rant at the BBC, Times etc for posting articles that suggest an increase in prices yet quietly ignore it when they post articles suggesting the market is still dropping.
Too many selectively-sighted cranks around here.
13. Adskirockski said...
My take on the figures is that there are a sizeable number of sellers who have been bemoaning the lack of liquidity in the market, unable to shift their houses and waiting for “a better time to sell”. The recent spate of short term optimism with poor long term forecasts has given some sellers a now-or-never approach.
Although I would have thought this would be more reflected in price reductions rather than new property prices. Are there any figures around charting asking price reductions over time? I know you can get individual figures from property bee but have these been compiled anywhere to give a bigger picture?
14. greenshootsandleaves said...
mark w@10
It's not necessarily double standards. There will inevitably be a feeling of vindication when even an index skewed towards the magnifying of green shoots points only to weeds.
15. monty032 said...
I don't think we should pay much attention to the Rightmove statistics. They are not mix-adjusted or seasonally adjusted, and the provider has an even clearer vested interest than the Halifax or Nationwide do. Most importantly, asking prices are the opinion of the householder. The only facts to be reported are what houses actually sell for. It does annoy me when the Rightmove asking prices are reported as if they were selling prices by semi-numerate journalists.
16. jonb said...
Responding to some of the comments on here:
Part of the reason for the large fall this month is seasonal factors. We are now past the main spring selling season, and everyone is thinking about holidays rather than buying and selling property. Asking prices usually fall at this time of year, though perhaps not by as much as they did this time round.
A shortage of available for sale properties is holding up prices at the moment, as a lot of sellers are holding out for when things go back to "normal". At some point they will realise this is the new normal, then these properties will flood onto the market, and then the crash will start properly.
I personally don't have a problem with the Rightmove Index. It accurately measures what it says it measures. You just need to be aware of that when using the figures and decide whether or not it is the most appropriate figure. You can never explain what is going on in a market with just one figure anyway, so it should be used along with lots of other information when evaluating the property market. You should look out for when the Rightmove Index re-converges with all the other property indices. That will tell you that the denial stage is over, and then you can start thinking about moving into the market again.
17. greenshootsandleaves said...
jonb @16 'It [the Rightmove Index] accurately measures what it says it measures.'
The trouble is that headline writers won't let people see what it says on the tin, especially when quoting almost meaningless MoM changes.
18. Fred said...
we are at the end of the flogged cat bounce the party is well and truly over, deflation is going to kill the HPI