Eas Desperately Massaging Rightmove Stats

[bucks hopeful]

Just when EAs started listing more affordable properties I realised we must be looking at a +ve figure from Rightmove regardless

First the handy typo: £2.35 million terrace - a keen seller would probably ask £235k - just a quick oops to the vendor and the Rightmove stats will never know.

I was only sensitised to this because I had started wondering about this 2 bed place for more than £600k. Probably close to the real price, but this place sold recently, board came down, was taken off Rightmove and now magically appears as a nice expensive 2 bed list - shown as sold immediately so shouldn't come to the attention of the occupant.

Full marks for creativity.

[Lone_Twin]

I've also noticed a lot of houses that have been on the market a long time (no hopers at current price) being prced up rather than down recently.

[Alfie Moon]

I've been talking to quite a few Estate Agents recently in Worcester, Droitwich Spa and Bromsgrove to get a feel of the market and Estate Agents thinking. It takes a while to get past the - everything is fantastic; buyers are coming out in their droves; prices are rising rapidly, etc. - before they begin to open up a bit more. Many have confirmed that the collapse in transaction levels that started in 2008 has not seen any recovery, that the majority of properties that go SSTC get stuck in incomplete or chains that break and can't get to completion, and that this is a dire state of affairs for them. However, they do consistently seem to be of the opinion that the way forward is to try and keep asking prices at current levels or higher; to tell potential buyers and the general public that everything is going great guns (the recovery is here, and here to stay). They also argue that the problem with the property market is not that asking prices are too high but rather that Banks won't lend out. They seem to be of the mind that if they keep holding their ground on asking prices Banks will very soon start lending out for mortgages at the level they were at the peak of the house price boom (the Government has said lending will return to 2007 levels) and the public will stop 'choosing' not to buy property and will again start to 'choose' to buy property just like they were in 2006, 2007, etc.

Estate Agents as a group really seem to have zero understanding of the economic situation they are operating within - I know that this is of no surprise to HPC'ers but you would have thought the senior management of the large chains would have grasped the basics of the new economic reality.

There was also a very strong sense from the Estate Agents that I talk to that they view the lowering of asking prices as like 'losing at a game' and also as a real embarrasment in terms of their 'professional/expert' standing with vendors.

[Lone_Twin]

Check this out for an example:

http://www.rightmove.co.uk/property-for-sa...y-21836383.html

Has been on since April09, if you have PB you cn see lots of history on it, open days etc.

I had a look round, its a nice place except you have to go through an bedroomto get to the bathroom which rules it out for me.

Then at the end of August09 the vendors instruct a second agent who put it on the market for 10k more!http://www.rightmove.co.uk/property-for-sale/property-26896598.html

I just cannot understand the logic did the second guys think they had secret magical powers?

What did the vendor think would happen?

[Sybil13]

I've been talking to quite a few Estate Agents recently in Worcester, Droitwich Spa and Bromsgrove to get a feel of the market and Estate Agents thinking. It takes a while to get past the - everything is fantastic; buyers are coming out in their droves; prices are rising rapidly, etc. - before they begin to open up a bit more. Many have confirmed that the collapse in transaction levels that started in 2008 has not seen any recovery, that the majority of properties that go SSTC get stuck in incomplete or chains that break and can't get to completion, and that this is a dire state of affairs for them. However, they do consistently seem to be of the opinion that the way forward is to try and keep asking prices at current levels or higher; to tell potential buyers and the general public that everything is going great guns (the recovery is here, and here to stay). They also argue that the problem with the property market is not that asking prices are too high but rather that Banks won't lend out. They seem to be of the mind that if they keep holding their ground on asking prices Banks will very soon start lending out for mortgages at the level they were at the peak of the house price boom (the Government has said lending will return to 2007 levels) and the public will stop 'choosing' not to buy property and will again start to 'choose' to buy property just like they were in 2006, 2007, etc.Estate Agents as a group really seem to have zero understanding of the economic situation they are operating within - I know that this is of no surprise to HPC'ers but you would have thought the senior management of the large chains would have grasped the basics of the new economic reality.

There was also a very strong sense from the Estate Agents that I talk to that they view the lowering of asking prices as like 'losing at a game' and also as a real embarrasment in terms of their 'professional/expert' standing with vendors.

Obviously they have not read Rightmove's recent HPI have they ?

Future price and transaction growth is now controlled by the bottleneck of mortgage availability. This is unlikely to change for years to come, with the Centre for Economics and Business Research (CEBR) forecasting that mortgage application levels will recover slowly and remain well below the levels seen in the early part of this decade as far ahead as 2013. Even in 2013 the CEBR state that numbers will still be 24% below 2006 levels. This may well reflect a paradigm shift in access to mortgage lending. While HSBC is the only major lender to have taken a more proactive stance and increased its market share, its reported average loan-to-value of circa 50% on new mortgage lending is a perfect illustration of the new era of both caution and cherry picking.

Shipside adds: “Lenders are looking to remove as much risk as possible from their mortgage book. While the government’s left-hand is waving them on to lend to more home movers and small businesses, the right-hand is effectively flagging them down again by urging lenders to re-build balance sheets and improve capital adequacyâ€.

[non frog]

....

Estate Agents as a group really seem to have zero understanding of the economic situation they are operating within - I know that this is of no surprise to HPC'ers but you would have thought the senior management of the large chains would have grasped the basics of the new economic reality.

...

Quite the opposite. Your post shows clearly that the senior management understand the economics and have a strategy (working it would seem) to get round it.

[Lone_Twin]

Quite the opposite. Your post shows clearly that the senior management understand the economics and have a strategy (working it would seem) to get round it.

Depends if they can hold their breath long enough.

[Alfie Moon]

Quite the opposite. Your post shows clearly that the senior management understand the economics and have a strategy (working it would seem) to get round it.

I'm not quite sure what you mean. In Worcester as elsewhere the number of properties being sold successfully by Estate Agents has collapsed by 66% compared to their performance in 2006. In some Worcester postcodes, e.g. WR4, the collapse of transactions is 70% or more. There is no evidence whatsoever of there having been a 'recovery' in transaction levels, in Worcester, at all during 2009 - all their strategy has achieved is an ongoing collapse in sales, which must mean a massive drop in their income/profit levels - how is this a strategy that is 'working' for them?????? I thought the aim of business was to raise turnover and increase profit, not the opposite.

Edited September 20, 2009 by Alfie Moon

[non frog]

I'm not quite sure what you mean. In Worcester as elsewhere the number of properties being sold successfully by Estate Agents has collapsed by 66% compared to their performance in 2006. In some Worcester postcodes, e.g. WR4, the collapse of transactions is 70% or more. There is no evidence whatsoever of there having been a 'recovery' in transaction levels, in Worcester, at all during 2009 - all their strategy has achieved is an ongoing collapse in sales, which must mean a massive drop in their income/profit levels - how is this a strategy that is 'working' for them?????? I thought the aim of business was to raise turnover and increase profit, not the opposite.

There will be no recovery in transaction levels, so you need to derive more revenue from each transaction. The more negative equity there is the lower transaction levels fall as people cannot move. A 50% crash will put so many into negative equity EAs might as well shut up shop altogether. Plus a 50% drop means you need to sell twice the volume for the same commission.

Fear and greed are primary human motivators. Fear you might "miss the boat" and greed at potential easy money were key drivers of the 97-07 boom. Both of these are re-emerging as the papers talk up the "recovery" and keep talking about house price rises. In London property is selling above 2007 prices - fact. The "boom" is back on and good times just round the corner. Any evidence to prove this wrong needs to be suppressed.

If the OP's analysis is an accurate reflection of some EA's strategies I am not at all surprised TBH.

[Lone_Twin]

There will be no recovery in transaction levels, so you need to derive more revenue from each transaction. The more negative equity there is the lower transaction levels fall as people cannot move. A 50% crash will put so many into negative equity EAs might as well shut up shop altogether. Plus a 50% drop means you need to sell twice the volume for the same commission.

Fear and greed are primary human motivators. Fear you might "miss the boat" and greed at potential easy money were key drivers of the 97-07 boom. Both of these are re-emerging as the papers talk up the "recovery" and keep talking about house price rises. In London property is selling above 2007 prices - fact. The "boom" is back on and good times just round the corner. Any evidence to prove this wrong needs to be suppressed.

If the OP's analysis is an accurate reflection of some EA's strategies I am not at all surprised TBH.

But do the sums, an extra few % for holding out on an asking price is nothing compared to more throughput.

[Alfie Moon]

There will be no recovery in transaction levels, so you need to derive more revenue from each transaction. The more negative equity there is the lower transaction levels fall as people cannot move. A 50% crash will put so many into negative equity EAs might as well shut up shop altogether. Plus a 50% drop means you need to sell twice the volume for the same commission.

Fear and greed are primary human motivators. Fear you might "miss the boat" and greed at potential easy money were key drivers of the 97-07 boom. Both of these are re-emerging as the papers talk up the "recovery" and keep talking about house price rises. In London property is selling above 2007 prices - fact. The "boom" is back on and good times just round the corner. Any evidence to prove this wrong needs to be suppressed.

If the OP's analysis is an accurate reflection of some EA's strategies I am not at all surprised TBH.

Except that their current strategy is creating exactly what you say they might fear from falling prices - in terms of collapsed income/profits. Transaction levels will recover as prices fall - as they fall more and more people will find that they can afford the price being asked for and they will be able to get a mortgage. Keeping asking prices at current levels means transactions levels can't recover in a sustainable way and, as prices rise transaction levels will begin to fall even further and their incomes/profits will also fall. Their current strategy has not worked for them and is leading towards an even bigger disaster for them.

In London property is selling above 2007 levels - fact you say. Can't say I've seen the evidence for that. However, I have seen Land Registry data that reveals that transactions in London postcodes are at about 1/3 of the 2006 levels - fact. So, incomes and profits are likely to have fallen by a similar level - or at least by a huge margin compared to their 2006 levels. The strategy of keeping asking/selling prices up, and even rising, is a completely disastrous strategy for Estate Agents. They are shooting themselves in the foot with this strategy. They seem to think there is a mortgage famine when what they have got is a transaction famine. They seem to believe the Government claim that was made in the autumn of 2007 that the Government would ensure that lending levels would return to their peak 2007 levels - it ain't going to happen, fact. The only strategy that will work effectively for Estate Agents is to focus on increasing transaction levels even though they will earn less per transaction - earning 50% less per transaction is a million times better than earning nothing from non-transactions. To get back to their 2006 levels they currently need to achieve, with their - we will not reduce asking prices and will even raise them - a 300% rise in transaction levels. Yep, brilliant strategy!

Reducing asking prices aggressively and repeatedly until sales are achieved will lead to a sustainable rise in transaction levels. They will just have to accept that the the earnings made from individual transactions in a boom time scenario just isn't possible after the boom has gone and has turned to bust - they are deluded if they think otherwise and if they think their current strategy will somehow materialise into a world whereby the levels of credit that bankrupted the world will magically reappear with asking prices maintained and transaction levels recovered. Their current strategy of keeping asking prices at levels that played a major role in bankrupting the world is completely daft and is not working for them.

[Alfie Moon]

But do the sums, an extra few % for holding out on an asking price is nothing compared to more throughput.

+1

Unfortunately I think Estate Agents think like non frog. As I say, even senior management in the lage chain Estate Agents seem to have little understanding, if any, of the economic environment they are operating within.

If they are aiming at minimising their income/profit levels then their strategy certainly is 'working' for them!

[porca misèria]

Interesting thing is vendors who want to sell doing the opposite.

Recent local house, 1930s 3-bed semi, ex-council, very nice situation, good garden, etc, wanting lots of updating. Came on the market at £135k, which is about £40k down on LR figures for recent sales in the same road. Sold immediately at (AIUI) above the asking price. I got involved 'cos a friend asked me to take a look, and thought I could take an interest in this one myself, despite the fact that I'm more targeting the £250k stamp-duty-precipice ...

Sounds too good to be true? Buyer gets a decent house, vendor gets a sale, agent gets a fee, everyone is happy. Except other buyers who miss the bargain and see just how overpriced everything else is by comparison.

[Lone_Twin]

+1

Unfortunately I think Estate Agents think like non frog. As I say, even senior management in the lage chain Estate Agents seem to have little understanding, if any, of the economic environment they are operating within.

If they are aiming at minimising their income/profit levels then their strategy certainly is 'working' for them!

I suppose it depends on how convinced you are that volume won't increase. If EAs genuinely think if they sell at lower prices their books will be empty. There is some logic but it seems self defeating.

[Timm]

There will be no recovery in transaction levels, so you need to derive more revenue from each transaction. The more negative equity there is the lower transaction levels fall as people cannot move. A 50% crash will put so many into negative equity EAs might as well shut up shop altogether. Plus a 50% drop means you need to sell twice the volume for the same commission.

(...)

A 50% drop would put many more EAs out of business. Then the survivors can mop up.

I suspect Harry Hill already has his Countrywide troops briefed for the next leg down.

I'd suggest fixed fees, and a marketing plan that includes neither a valuation nor sole agency.

[Alfie Moon]

At the moment Estate Agents are like anorexics - there is plenty of food on the table for them to have, but they just refuse to eat. They are going to end up starving themselves out of business. It would be better for them to fight aggressively with each other for the food available rather than all starve.

[gravity always wins]

Quite the opposite. Your post shows clearly that the senior management understand the economics and have a strategy (working it would seem) to get round it.

LOL that reminds me of the guy who jumps off a 70 storey building as he passes the fiftieth floor his colleagues ask how its going? - OK so far is his reply.

[HouseDog]

HPC needs a weekly summary newsletter for estate agents?

(with pictures)

[NEO72]

There will be no recovery in transaction levels, so you need to derive more revenue from each transaction. The more negative equity there is the lower transaction levels fall as people cannot move. A 50% crash will put so many into negative equity EAs might as well shut up shop altogether. Plus a 50% drop means you need to sell twice the volume for the same commission.

Fear and greed are primary human motivators. Fear you might "miss the boat" and greed at potential easy money were key drivers of the 97-07 boom. Both of these are re-emerging as the papers talk up the "recovery" and keep talking about house price rises. In London property is selling above 2007 prices - fact. The "boom" is back on and good times just round the corner. Any evidence to prove this wrong needs to be suppressed.

If the OP's analysis is an accurate reflection of some EA's strategies I am not at all surprised TBH.

We should be expecting John Lewis etc. to start massively raising prices shortly then in that case....

[Alfie Moon]

We should be expecting John Lewis etc. to start massively raising prices shortly then in that case....

+1

Exactly.

[non frog]

+1

Unfortunately I think Estate Agents think like non frog. ...

Good. Then their behaviour will follow the route I have indicated. I am glad you can see I am right.

Lower prices mean vendors do not come to the market - they cannot crystallise their losses. People move for jobs when there are jobs to move for.

People sell when they don't want to at great personal loss for several reasons. They may die, or they may go bankrupt, or they may have personal reasons like divorce. As best I can see for the time being there is enough demand to buy up that handful of properties.

If prices were 50% of what they are now everyone would want to buy but no-one would want to sell. Negative equity means people cannot sell and there are, I believe, already some 7 million in that boat.

London prices are now over 2007 peak in the nice areas - I have several friends buying/selling and this is their experience. (One person recently sold in a week at over asking - 2 bed flat - 460 grand). Crazy money and 6 times that person's earnings.

[redwine]

A 50% crash will put so many into negative equity EAs might as well shut up shop altogether. Plus a 50% drop means you need to sell twice the volume for the same commission.

Fear and greed are primary human motivators. Fear you might "miss the boat" and greed at potential easy money were key drivers of the 97-07 boom.

Talking about France i am waiting for the 50% drop and its coming the signs are here as for EAs they can all go and kill themselves because a couldn't give a f*ck about a French EA let them go into negative equity so what who cares

Easy money today does not exist no pity game over