Houses Prices - Are They Really Rising?

[m4nclad]

I keep reading of house prices rising, and reading into most articles there is a general acceptance even from respected bears that prices are genuinly rising. This is of course then followed up by something along the lines that this is a short-term trend and they will have course head downwards again in the near future.

I can only talk about the area I'm in and interested in buying in (North-West), but no way on this earth - can you say anything acutally rising. When I talk about house prices rising by say 2% a month, I expect this to mean that an exact same house that sold for 100k last month, will sell for 102k this month.

Property Bee is a sea of red, nothing, litterly nothing is actually increasing in value and then getting sold.

In my opinion, where we are now, is at the point where not a lot is selling, but what is selling has to be desirable and good value, not any old property that people were panicking themselves into buying (as in 2007). Therefore the mix of house being sold is different than during the boom. Therefore these averages are measuring something different, therefore don't see how they can be valid. If you look at 2007, I suspect there was a huge amount of new builds and in particular flats, which are always going to be at the lower end of valuations.

Is this illustration a good (but very simplified) example of what is going on:

In the "boom", you'd get 10 crappy flats selling at 100k each and 10 Four bed detached selling at 300k. Your average house price of those sale would be 200k.

In the situation we're in now, no one wants to buy flats, so they are not selling at all or very, very few are. The desirable 4 beds are still selling but at a lesser price.. So lets say the flats don't sell but the same 10 Four bed houses are now reduced from 300k to 225k and sell/or get a mortgage agreed on these then you're average is now 225k. Wow.....the average property prices have gone up by 12.5%.........but they haven't really....because it's a different type of property mix that is selling.

Is that what is going on? or is there more to it?

[Charterhouse]

Ha, I just posted a thread with some numbers in saying pretty much the same thing...

{mods feel free to merge if you like}

Edited August 5, 2009 by Charterhouse

[LuckyOne]

The mix adjustment factors used to calculate the indices might be inappropriate given the terribly low volume of sales.

That said, I have seen some properties transact at 5% to 10% above previously declined offers. That means a drop from peak of around 20% to 25% rather than the 30% that we say in the depths of last winter.

We are in the new era where less bad news is actually good news according to some .......

[Justice]

Just because the casino is empty it does not mean the price of the chips has gone down.

Go for it mate and buy but i'll take a rain cheque on that one for now.

[Toilet-Currency]

Further to the opening post:

One month , Nationwide may have a market-leading rate for large mortgages but with a low %LTV.

The next month, it is no longer best for this product but it becomes market leading for high %LTV buy-to-let mortgage.

The amount lent out in both cases may be the same, but the price and quality of the 2 houses could be very different. How do you compare this month on month? Surely the haliwide indices are reflective of each lender's preferred customers at a given point in time (as reflected in the deals on offer).

Edited August 5, 2009 by Toilet-Currency

[stew]

M4Nclad - nail. head. hammer. Exactly.

add into the mix... the wealthy are selling up. Probably down to a lack of cash flow from investments & pensions. If I'm honest, I'm surprised that the HP indexes haven't risen more, which demonstrates to me how bad it really is for the 'average' house value.

[guitarman001]

Prices are definitely lower in Edinburgh, however the sentiment from most is that now's a great time to buy. And many are. Bugger

[bb7t6]

Haliwide indeces are mix adjusted to account for the type of property being sold. I.e. they compare like for like sale prices and wouldn't compare the price of a 4 bed detached house this month with that of a 2 bed semi last month.

[Brave New World]

Someone flagged this up a few weeks back, the banks have played a blinder – by sucking fools in now they are halting the off the cliff slide that would have resulted in big losses on houses. These folk selling now have seen a lot of equity eroded and a bit of NE but not as much as the banks would have suffered if it were not for the bull trap. They then pad out their landing on the next leg down with the muppets thinking now is a great time to buy when their equity is lost…….in another 15-25% fall.

Yes this prolongs the pain for us but it keeps the banks stable (in our long terms interests) and teaches even more fools down the line that property is not a one trick miracle pony.

[topliner]

Prices are definitely lower in Edinburgh, however the sentiment from most is that now's a great time to buy. And many are. Bugger

Hmmm.. methinks you are not a native of Auld Reekie going by your accent, I guess you were brought up in somewhere like Bathgate?

[guitarman001]

Edinburgh born and raised ;D

[cashinmattress]

Always be wary of statistics.... miniscule sampling leads to skewed results eh.... we all know better, well except for Sibley and the discraced Hamass MacTwat

Put it this way, as a bloke...you could shag 1000's of women, and that makes you a 100% full-on, hot blooded, macho man.

but...

Shag one man, and that makes you 100% fag.

[topliner]

Edinburgh born and raised ;D

Sir, I apologise unreservedly in that case!

How's prices in "the Lothian hinterlands" anyway?

[futurepaul]

Always be wary of statistics.... miniscule sampling leads to skewed results eh.... we all know better, well except for Sibley and the discraced Hamass MacTwat

Put it this way, as a bloke...you could shag 1000's of women, and that makes you a 100% full-on, hot blooded, macho man.

but...

Shag one man, and that makes you 100% fag.

A drunk man uses a lampost lika a politician uses statistics, for support rather than illumination

[guitarman001]

Prices here more reasonable than places down South. In electronics, anyway, I'd otherwise have to work in Cambridge/California - so prices here much nicer. Still too high, though. E.g. I was looking at a one bedroom flat on the edge of town for ~£130k - and it had damp on the walls, as it turned out!! Prices coming down slowly! I'd be looking outside of town - can't stand the noise here. Unfortunately nice detached houses cost a bomb - £180k for the basic, £220k+ for something decent.

[m4nclad]

Thanks for the responses. It's interesting that the "mix" isn't really commented in any analysis I see. I completely expect this ignoreance for the Haliwide and other vested interests, but it doesn't really get mentioned by any serious commentators...even in Moneyweek who are generally particularly bearish(the mag and the daily emails), there isn't any mention of this, and to me this looks like a key driver of why house prices look to be rising, but actually there are little or no example of the same or similar properties starting to sell at higher prices then they were earlier this year. That to me is the defintion of house price increase.

The reason for my original post, is that wasn't sure whether it was me just completely missing something obvious or whether it is a factor but not being mentioned

[judas]

Prices are definitely lower in Edinburgh, however the sentiment from most is that now's a great time to buy. And many are. Bugger

Prices have falled here for sure, but in the best areas there are only two things to observe :

a-Hardly any properties on the market.

b-Sold signs.

[Bearback Mountain]

I mentioned earlier this morning that I am seeing only reductions in my area, so I am just chillaxing and saving..

Open your eyes and and you will see that prices are not rising.

[AThirdWay]

I keep reading of house prices rising, and reading into most articles there is a general acceptance even from respected bears that prices are genuinly rising. This is of course then followed up by something along the lines that this is a short-term trend and they will have course head downwards again in the near future.

I can only talk about the area I'm in and interested in buying in (North-West), but no way on this earth - can you say anything acutally rising. When I talk about house prices rising by say 2% a month, I expect this to mean that an exact same house that sold for 100k last month, will sell for 102k this month.

Property Bee is a sea of red, nothing, litterly nothing is actually increasing in value and then getting sold.

In my opinion, where we are now, is at the point where not a lot is selling, but what is selling has to be desirable and good value, not any old property that people were panicking themselves into buying (as in 2007). Therefore the mix of house being sold is different than during the boom. Therefore these averages are measuring something different, therefore don't see how they can be valid. If you look at 2007, I suspect there was a huge amount of new builds and in particular flats, which are always going to be at the lower end of valuations.

Is this illustration a good (but very simplified) example of what is going on:

In the "boom", you'd get 10 crappy flats selling at 100k each and 10 Four bed detached selling at 300k. Your average house price of those sale would be 200k.

In the situation we're in now, no one wants to buy flats, so they are not selling at all or very, very few are. The desirable 4 beds are still selling but at a lesser price.. So lets say the flats don't sell but the same 10 Four bed houses are now reduced from 300k to 225k and sell/or get a mortgage agreed on these then you're average is now 225k. Wow.....the average property prices have gone up by 12.5%.........but they haven't really....because it's a different type of property mix that is selling.

Is that what is going on? or is there more to it?

Over on the Scotland site, The McGlashan posts a price index graph based on Registers of Scotland data. I assume this is pure data, no adjustments for property mix, and it shows the Dundee area at close to 2007 peak prices! Prices are definately dropping in the area (I would guess around 10-15% from peak), so your 10 crappy flats scenario could be bang on the money.

http://www.housepricecrash.co.uk/forum/ind...90&start=90

[zebbedee]

I've been thinking the same for a while now, maybe wishful thinking, maybe not.

Its a shame there isn't a non weighted SA average to make a comparison of the effects of p!ss poor quality houses not selling coz like you say PB is a sea of red (well about 1/3 of them, the rest are stuck on thier initial asking) where I am as well

Edited August 5, 2009 by zebbedee

[The Ayatollah Buggeri]

The mix adjustment factors used to calculate the indices might be inappropriate given the terribly low volume of sales.

Agreed: it analogous to the Concorde going from statistically the world's safest passenger airliner to the world's most dangerous in a single accident. It flew so few passenger miles a year compared to most other planes in mainstream use that generalisations were being produced from too little data. By the same token, the volume of house sales going through is tiny compared to the boom years. Forced sellers are being kept artificially out of the market by a combination of banks reluctant to repo, government unemployment mortgage subsidy meddling, would-be but not forced sellers sitting tight anticipating further rises and prospective buyers (especially FTBs) sitting tight anticipating further falls.

[yellerkat]

Agreed: it analogous to the Concorde going from statistically the world's safest passenger airliner to the world's most dangerous in a single accident.

I like that analogy - may pinch it!

[Guest An Bearin Bui]

Prices have falled here for sure, but in the best areas there are only two things to observe :

a-Hardly any properties on the market.

b-Sold signs.

I beg to differ. I live in Morningside and there are plenty of For Sale signs, although if I'm honest more 'To Let' than 'For Sale', presumably the 'rent it out instead' brigade. Some stuff has been sitting on the market for a year now with the 'For Sale' sign now looking very weathered. I do keep an eye on the Morningside/Merchiston/Bruntsfield area and did see one 'Under Offer' sign go up just recently but nothing with 'Sold' in a long time.

In general in Edinburgh, the crazy froth has come off prices so we're back to 2005, possibly 2006 values as far as I can see. It is very unpredictable though. One place I notice regularly has been for sale for a year now, fixed price, never went under offer. An almost identical property (although more private with nicer decor) nearby is on the market for 70k more and yet it's gone under offer within a fortnight of being on the market. Bizarre...

[Warwick-Watcher]

I've been thinking the same for a while now, maybe wishful thinking, maybe not.

Its a shame there isn't a non weighted SA average to make a comparison of the effects of p!ss poor quality houses not selling coz like you say PB is a see of red (well about 1/3 of them, the rest are stuck on thier initial asking) where I am as well

Perhaps the properties that are selling are the ones attractive to people with large deposits to put down? Thus sales price appears to be rising? Effectively sh't won't sell but reasonable & reasonably priced properties will?

[jonb]

I keep reading of house prices rising, and reading into most articles there is a general acceptance even from respected bears that prices are genuinly rising. This is of course then followed up by something along the lines that this is a short-term trend and they will have course head downwards again in the near future.

I can only talk about the area I'm in and interested in buying in (North-West), but no way on this earth - can you say anything acutally rising. When I talk about house prices rising by say 2% a month, I expect this to mean that an exact same house that sold for 100k last month, will sell for 102k this month.

Property Bee is a sea of red, nothing, litterly nothing is actually increasing in value and then getting sold.

In my opinion, where we are now, is at the point where not a lot is selling, but what is selling has to be desirable and good value, not any old property that people were panicking themselves into buying (as in 2007). Therefore the mix of house being sold is different than during the boom. Therefore these averages are measuring something different, therefore don't see how they can be valid. If you look at 2007, I suspect there was a huge amount of new builds and in particular flats, which are always going to be at the lower end of valuations.

Is this illustration a good (but very simplified) example of what is going on:

In the "boom", you'd get 10 crappy flats selling at 100k each and 10 Four bed detached selling at 300k. Your average house price of those sale would be 200k.

In the situation we're in now, no one wants to buy flats, so they are not selling at all or very, very few are. The desirable 4 beds are still selling but at a lesser price.. So lets say the flats don't sell but the same 10 Four bed houses are now reduced from 300k to 225k and sell/or get a mortgage agreed on these then you're average is now 225k. Wow.....the average property prices have gone up by 12.5%.........but they haven't really....because it's a different type of property mix that is selling.

Is that what is going on? or is there more to it?

What you need to look for is the properties are aren't on Property Bee, because they actually managed to sell. Looking in my local area, there are is a tiny number of these, maybe about 4-6 per month, which are reasonably priced and get snapped up very quickly. There are several hundred properties on Rightmove at much higher prices, typically about 50-100% more which are not selling, and there are reductions on these asking prices, but not by nearly enough.

The prices of properties that actually sell, and these are mostly auction properties, has been pretty stable since the spring, and it is possible that they have risen slightly.

Look at the figures. The Rightmove index says asking prices are £227,864. The Land Registry index says selling prices are £153,043. The properties you see on Rightmove are the overpriced ones that aren't selling. This means there is a huge pent-up supply building up which will cause a downward pressure on selling prices in the future.