Friday, Nov 06, 2009
Here's one for SmugDog & GreenBay ...
Metro: Five buyers chase every home on sale
"There are five potential buyers chasing every property on the market as demand continues to outstrip supply. But that high level of demand has not translated into increased sales during October. Estate agents are selling an average of 7.7 properties each, down from 8.5 in September, figures from the National Association of Estate Agents show. But the rate at which new buyers are entering the market may be slowing. There are few signs of more properties coming on to the market during October, with estate agents seeing their average stock levels dip to 57 per branch. It is the lowest level since July 2007 and down from 62 in September. 'It is now up to the government and the banks to do more to keep the momentum of market recovery going,' said Gary Smith, president of the NAEA."
47 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. Karma4all said...
On my travels between Olney, Milton Keynes, Northampton, Wellingborough ... I see a lot more for sale signs than sold.
I wonder how David Smith's index is going.
2. cynicalsoothsayer said...
What about all the property that has been on sale for months, many with price reduced?
3. jack c said...
"five potential buyers chasing every property on the market" - they key word being 'potential' - how many of these potential buyers have the means to actually get themselves from offer stage to exchange of contracts? and more to the point if the market has picked up and prices etc are up why is Gary Smith, president of the NAEA asking for yet more Government intervention/support.
4. ontheotherhand said...
Let's look at numbers. Rightmove has 650,000 for sale and claims 90% of the market = 720,000 properties for sale. 5 buyers for every one would make 3.5 million households looking to buy. Why then were there only 55,000 sales last month?
5. jack c said...
ontheotherhand - just to support your brief analysis Uncle Tom and Mark Wadsworth carried out some fairly exhaustive number crunching on this issue (roughly about 1 month ago from memory) and the conclusion was that there is no shortage of supply, indeed there are lots of properties that have been on the market for 12 months or more. Why are the transaction volumes so low? well ridiculously high, generally unaffordable prices might have something to do with it.
6. mark wadsworth said...
@ OTOH, JC, yup, that was Uncle Tom's idea. What it boils down to is there is about one year's worth of supply on Rightmove; average time on market is hence one year, a third of those on Rightmove are shown SSTC, ergo from SSTC to actual sale is about four months.
Their "five buyers" figure is obviously completely made up, or perhaps each "potential buyer" registers with five different EAs?
7. will said...
It's getting embarassing for the estate agents in Devon. Hundreds of houses that I have been following at pre-peak prices that have been marketed for several years now.
Maybe the number of registrations are up, but they are not going to buy at these prices.
I think the EAs are getting desperate now.
8. icarus said...
"High level of demand has not translated into increased sales". I'd like to give that to Wittgenstein to analyse - it seems pretty meaningless to me.
"It's now up to the government" Yeah, let it borrow more.
9. str 2007 said...
'It's up to the governement now'
Funny that, whenever you pick up a property bull on the massively overpriced cost of land they say - it's a free market.
Strange this free market depends on government/tax payer bailouts.
10. estrader said...
"First-time buyers accounted for 22 per cent of sales during October"
So does this mean 4 in 5 "Buyers" are in a chain and are therefore also sellers at the same time?
11. mark wadsworth said...
STR2007. That's the beauty of Home-Owner-Ism. It's "free markets" on the way up but "subsidies" on the way down. Win-win!
12. greenshootsandleaves said...
The time has come to unveil the HPC Index, which measures Vested Interest Spin! Given that, during the boom, the Lawzz, Gabhoerz and Boltonkingz of this world did not feel the need to talk the market up, the relentless propaganda currently pouring out of the NAEA, daily express et al can safely be interpreted as a sign of an impending return to more realistic property price levels.
13. jack c said...
To pick up on the point made by Will (Friday, November 6, 2009 11:25AM) - the EA's will definitely become desperate because to survive they need sales volume. If I were running an EA business the last thing I would want is a stalemate in the housing market ie a stand off between sellers and buyers over price. The path ahead for EA's is quite simple - get the prices down to get the market moving again and stop trying to prop up an over inflated market whilst whining (like a 747 jet engine) to the government for more intervention.
14. Jonh said...
As a buyer I am registered with 12 estate agents - presumably I therefore represent 12 interested buyers!
If the average buyer is registered with more than 5 estate agents there are,then, fewer potential buyers than selles.
Hay-Ho for statistics and vested interests!!
15. krustyatemyhamster said...
So a high level of demand compared to supply at this price leads to surplus of stock for sale. It's been 19 years, but I'm sure that's not what Mrs Fish taught me in GCSE economics.
16. timmy t said...
9. estrader said..."First-time buyers accounted for 22 per cent of sales during October"
So does this mean 4 in 5 "Buyers" are in a chain and are therefore also sellers at the same time?
This was discussed on here a couple of weeks ago. Many "First time buyers" are not actually buying for the first time, but they are called FTB's because they have nothing to sell - presumably many of these are cash rich having sold previously. If the number of these is dropping, perhaps even the cash rich are pulling out... Either way, if the proportion of transactions involving new buyers is decreasing this can only have downward pressure on prices - if you're buying and selling you're far less fussed about the price you pay, it just means you hold out for more on what you sell for.
17. mountain goat said...
MW - I am not sure if your Home-Owner-Ism ideas are altogether right. Sure the gov is trying to hold up house prices, preventing repos etc, but not as blatantly as the Fed for example which is buying mortgage debt (see today's article at 12.03). I think it is more desperate than Home-Owner-Ism. If house prices keep falling the solvency of the UK is at stake, banks, individuals, the lot.
18. ontheotherhand said...
9 estrader. That 22% slightly mixes up actual sales with registered buyers. First time buyers are not in a chain so are less likely to fall through?
19. brownsters_billions said...
This might be a seasonal thing, but the shortage seems to be getting worse. For the past couple of weeks absolutely nothing has come on in the areas we were looking in. Actually, tell a lie, one did, but it was vastly over-priced (the result maybe of EAs selling a similar property quickly and feeling bullish?)
You guys talk about there not being a shortage, but I can tell you there is a real shortage of 'good' property coming on. The people who wasted their money on cr@ppy little flats are the ones who need to worry in the future, I think.
20. jonny parker said...
@ 2 Jack C
"how many of these potential buyers have the means to actually get themselves from offer stage to exchange of contracts?"
I think this may be very true, my brother in Law has just taken his property off the market after several offers and subsequent retraction of said offers - people cannot get the mortgages or maybe the mortgages are not worth it. Another friend who works in admin for an estate agents says its common to have an ongoing saga on the same property of - offer - no mortage - new buyer and new offer - no mortgage etc and so on; they stated one case that for a year they had a succession of 5 to 6 buyers putting offers down (same property) that were accepted and each then failed to secure mortgages. Maybe scenarios like that would fill the criteria of 5 buyers chasing one home?
21. estrader said...
@15 - Not sure I buy into that argument. House prices (Valuations) don't make people rich or poor unless they do something like stop paying their mortgage. I think the idea that low house values leed to economic disaster is brainwashing by VI's and Government spin doctors. I think someone said something along the lines of "Low house prices are the symptoms not the cause"
22. icarus said...
@8 and 10 - didn't you know? - they're destroying the free market in order to save it.
23. cyril said...
@15 mountain goat - the govt is definitely trying to prop up the housing market because the banks will lose money on mortgages if houses go down in price (negative equity, reposessions etc.)
The govt will continue to hold down interest rates and do more QE until the banks have rebuilt their balance sheets - then they can be sold off at a profit. But where does this profit actually come from? (ans=you & me)
24. jack c said...
@ jonny parker - thanks for your input - the 2 examples you give are not isolated cases in my experience, this is certainly replicated in the North of England and has been for the last 18 months or so.
The key to why the offers fall through is largely (IMO) down to affordability eg offer made/offer accepted - buyer goes to broker or lender and applies for mortgage - lender gives maximum loan amount which falls short of asking price - vendor wont drop price - offer withdrawn. Alternatively mortgage lender will grant necessary loan amount - apoints valuer - valuer "down values" property - offer withdrawn. So round and round in circles we go - until............................................ prices are set at realistic levels to match affordability.
25. Waitingfor Hpc said...
load of bol****ocks - i am being harrased by my local EA to view property NOW. They even told me 'am i going to wait while priecs go up'!! To their shock i replied ' yes - that is the case if they continue to go up'!!
They are chasing FTB's - and i am one, so i guess not enough buyers out there for them to chase me with four calls a week!!
26. brownsters_billions said...
Should get results from our mortgage valuer soon - will let you know for more anecdotal evidence of what's going on! If it is undervalued, it's likely the vendor won't renegotiate as he had several bids at the asking price. But what chance each of them going through the offer>acceptance>undervaluation process too I wonder?
27. mark wadsworth said...
@ 15, Mountain Goat.
I'd go with what Estrader says @ 19.
I'd take issue with Cyril's reply @ 21 - "the banks" won't lose money, banks are just middlemen and don't have any money. It will be a vast army of faceless "bondholders" (insurance companies, pension funds, sovereign wealth funds etc) who have already lost money (in market value terms) who have to face up to their losses. Those bank bonds are trading at 50p or 70p or 90p for £1 nominal. The money's gone.
We can fix the banks overnight via debt-for-equity swaps - we say to the bondholder, your debts are only worth 70p - we'll cancel them and give you new shares worth 70p. This is exactly what happens in a bankruptcy situation - see the case of CIT Group (a US bank) or General Motors or Eurotunnel or what they are stumbling towards with Northern Rock.
But these people don't have many votes. The government doesn't care too much about them, or the banks, what it cares about is the 70% of voters who own a house and want to see it steadily rise in value. Bailing out the banks is just a means to an end, which is reinflating the house price bubble. There's no great world-wide conspiracy of financiers (well, there is in the USA, but not in the UK), it is as simple as Home-Owner-Ism.
28. timmy t said...
estrader@19 - the problem is that people DID do something - they took out too much equity and spent it. If the market was left to find it's own bottom, so to speak, there would be so much negative equity around that, as MG says, we would all be fooked. It would spiral down. The potential disaster is so bad that I don't think the government will let it happen. Hence QE is needed to ensure massive inflation erodes the potential debt by bringing the cost of everything else up.
29. jack c said...
brownsters_billions
Very best of luck, hope all goes well - will be very interested to hear how you get on - please keep us posted
30. estrader said...
@25 "Hence QE is needed to ensure massive inflation erodes the potential debt by bringing the cost of everything else up" I am worried about inflation now that I have sold my property. However, the inflation theory "works" as long as wages and employment goes up with it. Otherwise it is an absolute disaster. I'm sure someone much smarter than me can explain why my reasoning is flawed but I have thought about inflation and yes, it is good provided you keep your job and your wages go up.
31. brownsters_billions said...
Thanks Jack c.
Although I'm becoming a home-owner, I hope to remain non 'homeowner-ist' and will keep visiting this site for a dose of realism!
32. The Baldman said...
timmy t not sure if the governement has teh ability to avert the meltdown...just wait till we have to call the IMF in
33. mountain goat said...
MW and Estrader - well we will have to agree to differ on this one. If house prices fall then homeowners that have not paid off the mortgage yet risk falling into negative equity. This effects their financial circumstance severely even if they can continue making their mortgage payments. Since they must spend less the cumulative effect means the recession persists and eventually they too will lose their jobs , vicious circle. So I think this is a struggle for financial survival rather than scoring political points with home owners. When the sovereign solvency gets questioned by the markets we shall get an answer. Home owners will be left to their lot as the government battles to keep the country afloat. Currently these two, home owners that have not paid off their mortgages, and the government, both benefit from a house price bubble that wont deflate. This is because the governing classes have not accepted that the game has changed yet. To them everything was fundamentally fine, but we got tripped up due to some silly mistakes that were made in the finance system. Just prop things up for a while they think, wait for confidence to return and then we can continue as normal, sell off the nationalised banks and mortgage assets again. By trying to do the things that have worked for the past decades, i.e. stimulate lending and spending with mild inflation, they are now threatening the solvency of the country as the debt burden is becoming critical. When the markets question this the penny will drop and then survival requires something other than propping up asset prices, something more like Iceland's problems perhaps, we shall find out some day.
34. timmy t said...
Our economy is reliant on retail. The last 10 years were so bouyant because people spent loads, safe in the knowledge that their house price was going up so they could afford it. If house prices go down, people feel poorer so stop spending, slowing the economy and making folk redundant. Houses get repo'd so prices fall further exaserbating the problem. House price deflation then becomes a cause not a symptom.
35. growler said...
@29 MG
You've said: -- Since they (negative equity people) must spend less the cumulative effect means the recession persists --
There is no direct causality here. It's a very weak link
If they (the negatives equities) keep their jobs, then negative equity just means they are out of the housing market and will not be able to "trade up".
Negative equity has nothing to do with spending less - it just means you're out of the "large capital purchase" market since the option of extending the mortgage on the back of equity growth isn't open. This might mean there are less buyers for houses in the market - which will have a depressing effect on house prices.
36. mountain goat said...
Growler - people are paying back debt since the hpc started. The feel good factor dies if you know that you are underwater. So I stand by my assertion that they will spend less.
37. 51ck-6-51x said...
timmy_t
- The wealth effect is really what home-owner-ism's popularity in political circles is when one get down to it: people feel richer, spend more, business does better, taxes come in and ... "everybody's a winner" ( well, heh not quite everybody, eh? But all the people that "matter" ).
Here is some recent research into the wealth effect with a particular focus on housing and how it "ain't all that"
...and here is an Economist article triggered by the research.
OK it's far from gospel, but I believe it confirms our collective suspicions.
38. 51ck-6-51x said...
^^ For those who cant be ar5ed, here is the abstract, it's probably enough for most:
"""
Using individual-level data on homeowner debt and defaults from 1997 to 2008, we show that borrowing against the increase in home equity by existing homeowners is responsible for a significant fraction of both the sharp rise in U.S. household leverage from 2002 to 2006 and the increase in defaults from 2006 to 2008. Employing land topology-based housing supply elasticity as an instrument for house price growth, we estimate that the average homeowner extracts 25 to 30 cents for every dollar increase in home equity. Money extracted from increased home equity is not used to purchase new real estate or pay down high credit card debt, which suggests that real outlays (i.e., consumption or home improvement) are likely uses of borrowed funds. Home equity-based borrowing is stronger for younger households, households with low credit scores, and households with high initial credit card utilization rates. Homeowners in high house price appreciation areas experience a relative decline in default rates from 2002 to 2006 as they borrow heavily against their home equity, but experience very high default rates from 2006 to 2008. Our estimates suggest that home equity-based borrowing is equal to 2.8% of GDP every year from 2002 to 2006, and accounts for 34% of new defaults from 2006 to 2008.
"""
39. ontheotherhand said...
@31 growler. Study on negative equity and spending in Bank fo England review;
http://www.bankofengland.co.uk/publications/quarterlybulletin/qb090203.pdf
"Falling house prices reduce the value of collateral that homeowners have at their disposal and the amount of borrowing that can be obtained on more favourable terms. That can discourage households from borrowing and spending."
By reducing the value of housing equity, falling house prices may lead some homeowners to seek to rebuild their balances of precautionary
saving at the expense of consumer spending....those with low or negative equity have a stronger incentive to increase their balances of precautionary savings"
"A situation of falling house prices pushing people into negative equity, would then imply greater saving and lower spending."
40. jack c said...
I'll throw my hat in the ring on posts 29 onwards - I believe the most important part of MG's input is this - "When the sovereign solvency gets questioned by the markets we shall get an answer" - IMO that day of reckoning is getting ever closer, maybe 6 months or less.
41. mark wadsworth said...
@ MG 29, without wishing to impune any impure motives on your part, this is classic Home-Owner-Ism. It's "free markets" on the way up but "subsidies please" on the way down. What does nequity have to do with it? (yes there is a wealth effect as later comments point out, which is quite measurable, in the UK MEW added a staggering 5% to household spending)
But if you're a tenant with unsecured debts nobody gives a hoot about you - even the Home-Owner-Ists look down on you - why are reckless mortgage borrowers a special case?
Two words: Moral Hazard.
42. mountain goat said...
MW - glad I am not suspected of impure motives! Feel free to suspect me of not understanding Home-Owner-Ism correctly or in the same way you do, or as a consensus understanding of it. I suppose I am objecting to this being presented as some sort of political policy to gain popularity, because it doesn't do justice to how out of options Western governments with housing bubbles are. It suggests they are free to let house prices fall, but they wont for fear of becoming unpopular. In my opinion in fact propping up house prices is making them unpopular. Most ordinary people I know are shaking their heads in horror at the exploding national debt, QE and bailouts of fat bankers who won't give up their bonuses.
If you mean Home-Owner-Ism as an economic policy as 51ck-6-51x seems to then perhaps we have no difference of opinion after all.
43. phdinbubbles said...
Maybe it's a state of mind thing. The first time someone smugly told them they'd MEWed, in 2002, I though they were barking mad. When the BBC news started cheering every time houses prices rose and stated that people were spending more on the high street as a result (at around the same time), I thought they were barking mad and lacking objectivity (both the BBC and the home-owners). Agree with MW - why are reckless mortgage borrowers more worthy? Anyone that spent more money because their house price rose in value (so soon after a major housing crash in the UK) deserves eveything they get imo.
I know one or two people that cheer house prices going down, but most people I speak to seem happy for them to rise to infinity and beyond.
44. cynicalsoothsayer said...
Home-Owner-Ists that get repossessed end up as tenants with unsecured debts at least the size of their nequity. Everyone looks down on them.
45. mountain goat said...
Sorry need to go out and leave the thread, thanks for the posts and have a good weekend all.
46. tenyearstogetmymoneyback said...
There is a simple explanation. Five potential buyers for each house but all waiting for a bargain to come up.
I have seen houses sell in a week. In each case they were about 20% below the average asking price
for that type of house locally.
47. Yoss said...
Look at all the things that are due to end soon :-
The stamp duty holiday
VAT clicks back up 2% or more (With subsequent effect on CPI/RPI figures)
Stimulus for new cars ends
QE is brought to an end... (along with low government interest rates)
Then add in a government that openly acknowledges the need for cost cutting and raise taxes rise.
perfect conditions for a massive rally in house prices! Yip Yip