Jump to content
House Price Crash Forum
IMupNorth

It Is Different This Time ?

Recommended Posts

Here's a thought that has occurred to me -perhaps the power of the internet has something to do with the house price boom.

In previous booms and busts, there was no internet ...... think about it a while.

The way EAs work is totally centered around the internet - very low cost form of marketing to a mass audience of prospective buyers.

Also, from the buyers and sellers stance, you have easy access to a mass of information on asking prices, properties on the market and now actual selling prices. Never before has the 'market' been so visible and transparent.

In the past, you had to walk round EAs, get on mailing lists. There was only so many houses you could consider. Now I can go on line and get a pretty damn good idea of hundreds of houses with just a few hours work.

So, its pretty easy to get a value of what other properties are being marketed even before the EA does his valuation. I suspect this creates greed - well my house must be worth a few grand more than whats on the market. The EA just can't talk down his valuation because the punter knows the market as well as he/she does.

Also, why drop the price when it seems so 'reasonable' compared to others. It must be much harder for EAs to talk down the market with their clients than ever before.

Which kind of brings me to my point that unless there is a large up surge in forced sellers, then there will be no house price crash.

The internet has probably changed the behaviour of buyers and sellers. It has probably also affected the pyschology of the housing market and allowed it to be even more greed based and people won't give up their 'profits' on the housing market until they are forced to do so.

Share this post


Link to post
Share on other sites

If the internet can strengthen a rising market it will also weaken a falling market.

The internet gives buyers more choice and sites like this one can spread the word of what is likely to happen. Yes, I'm sure the internet will have a great effect in speeding up the crash.

Share this post


Link to post
Share on other sites

Both are fair arguments - my personal favourite is that the 'do a house up and make £50k' progs have had a massive impact

the main reason there will be a crash is that people just can't afford to OR won't pay the asking prices - 4 years ago for £.5m I would easily have got a 6 bed detatched house in hgte, probably for less - now i would get an average 4 bed - why the **** should i put up with that - answer, i won't - dead easy really

Share this post


Link to post
Share on other sites
If the internet can strengthen a rising market it will also weaken a falling market.

The internet gives buyers more choice and sites like this one can spread the word of what is likely to happen. Yes, I'm sure the internet will have a great effect in speeding up the crash.

That may well prove to be true, but until the crash starts by having lots of forced sellers, then I suspect people will just see stagnation. seeing stagnation will just reinforce it.

At the end of the day, its about economics the internet will just reinforce it which ever way it plays out. When people have to sell at any price, thats when a crash will start - its not on the horizon IMHO.

Share this post


Link to post
Share on other sites
Forced sellers don't need a one-off major economic event to arise:  they accumulate as a function of time.

The reasons are multiple and too complex to enumerate: posted overseas, gone into nursing home, divorce, emigration, want to sell holiday home to pay son's credit card debts, want to move away from new land-fill, etc.

I agree with this. There are always forced sellers who need to realise the equity within their house for one reason or another. It's interesting you say:-

"The longer a "plateau" (read "transaction rate collapse") continues, the more forced sellers accrue."

Sounds sort of like a damn ready to burst. People will start to take bigger cuts in their asking price others will follow. These people will set the market rate.

Share this post


Link to post
Share on other sites

Haven't you answered your own question?

The only ones selling are those with a low price - i.e. what is perceived to be BMV (in my search criteria some are priced 20k more than other houses in similar streets, so I would only look at and buy the cheapest one(s)).

So, when this info finds it way onto net house prices (and other sites) that will then become the Market Value. The problem is this takes up to 4 months.

Edited by Jason

Share this post


Link to post
Share on other sites

Property prices are set at the margin, that's to say by sellers agreeing a price with a buyer on the small perecentage of the housing stock that is transacted at any one time.

BUT.....

No one has to BUY, yet there are always people who have to SELL for all the good reasons outlined in the post above. If buyers hold their nerve in a stagnant market full of oversupply the number of forced sellers will accumulate and deals will have to be accepted at lower prices. These lower prices will, in turn, set yet lower prices in the following period.

However, patience is required. The buyer is now in the driving seat, but the pending price correction will take some time to manifest itself. Think in terms of 2-4 years, not months.

Edited by Red Baron

Share this post


Link to post
Share on other sites

I love technology. I've made a living out of it. But...

Despite new technology humans have not changed. Their underlying motivations and reactions are no different today than they were in the 1990's or 1970's. The difference now is that their reactions can be faster and greater. The results: bubbles and crashes will be the same.

Share this post


Link to post
Share on other sites

But the forced seller will be able to price quite accurately what to put the price at - lets say 5% below the market. It will sell because of the pent up demand that is also growing.

It sells quickly, and whats left sets the market value for when other people put their house on the market. In fact, why not put it on for a few grand more and you never know you might get lucky if you are in no rush to sell. The potential buyer or seller continues to 'see' a high market value and sets their expectation accordingly.

So until the volume of forced sellers exceeds those buying, then large scale price cuts don't happen.

Share this post


Link to post
Share on other sites
But the forced seller will be able to price quite accurately what to put the price at - lets say 5% below the market. It will sell because of the pent up demand that is also growing.

It sells quickly, and whats left sets the market value for when other people put their house on the market. In fact, why not put it on for a few grand more and you never know you might get lucky if you are in no rush to sell. The potential buyer or seller continues to 'see' a high market value and sets their expectation accordingly.

So until the volume of forced sellers exceeds those buying, then large scale price cuts don't happen.

Forced sellers looking for a quick sale will often sell for whatever they can (e.g. mortgageee in possession, a person looking to pay off debts) . In my opinion the market will create a momentum of its own. Plenty of people have bought property purely for capital appreciation. Once they see prices falling they will sell. Sentiment will drive the market down.

Share this post


Link to post
Share on other sites
But the forced seller will be able to price quite accurately what to put the price at - lets say 5% below the market. It will sell because of the pent up demand that is also growing.

It sells quickly, and whats left sets the market value for when other people put their house on the market. In fact, why not put it on for a few grand more and you never know you might get lucky if you are in no rush to sell. The potential buyer or seller continues to 'see' a high market value and sets their expectation accordingly.

So until the volume of forced sellers exceeds those buying, then large scale price cuts don't happen.

But what is a 'forced seller'?

My neighbour has had her house on the market since April with no offers and few viewings. She soes not 'have' to sell - she can afford the mortgage etc.

However, she is remarrying next March and feels she 'has' to sell her house before then to clear the decks. After Christmas, forget it, so she is now talking that she will put it up for auction for 45K less than the original asking price to make sure it sells.

That would be a 15% drop there and then.

And nobody is 'making' her sell.

Share this post


Link to post
Share on other sites

In stagnation surely if you want a quick sale (and who doesn't once they have made their mind up to move) the vendor will have to pitch better than the guy across the road. That means a lower asking price or some goodies thrown in. Once a 'new' price has been set, this becomes the norm and so on.

As a matter of interest, have we ever had a plateau lasting a significant matter of time?

Share this post


Link to post
Share on other sites

The way I see it is that over the past few years people have bought property either to live in or for investment but in both cases they bought thinking "I'd better buy this now because if I wait it will become more expensive and I will lose out". Most people buying knew it was bloody expensive but they felt they would make money as prices rose. But now that the prices have stopped rising there is no pressure to buy, or lose out. In fact now everyone buying is expecting a discount as there is no competition in most cases. How can the inflated prices which were caused by peoples fear of missing out possibly be maintained? In the rising market the vendors were all looking for a price rise and now in the falling market the buyers are all looking for a discount.

It is now a buyers market therefore it is the buyers who have a bigger say in pricing. If their offer is refused they can just move on to the next property. All made that little bit easier by the net.

Share this post


Link to post
Share on other sites

But the way people react in isolation is very different from the way groups act (the herd mentality). People in groups feel inherently less fearful of risk (hence a bubble) and then when the market turns they collectively feel far more risk averse (hence a fall - crash?)

An individual may look at the situation and decide it's a good time to buy due to property being lower in price than before, or their yield has now improved, etc. But what happens in groups is that people follw the signs given out by others.

So buyers suddenly no longer want property.

A buyer raising the price at this time won't sell, unless the herd has collectively decided that it's a good time to buy again.

Edited by Portent

Share this post


Link to post
Share on other sites
As a matter of interest, have we ever had a plateau lasting a significant matter of time?

Possibly not, but we've had one for 12 months and counting by most peoples analysis of the situation.

The plateau can't go on forever, that is not natural. Its has to go one way or the other sooner or later. Its just not on the cards for the next 6 months. After that we are all guessing !

Could things turn out like Ireland, if we end up joing the Euro in a couple of years time ?

Share this post


Link to post
Share on other sites
But the forced seller will be able to price quite accurately what to put the price at - lets say 5% below the market. It will sell because of the pent up demand that is also growing.

It sells quickly, and whats left sets the market value for when other people put their house on the market. In fact, why not put it on for a few grand more and you never know you might get lucky if you are in no rush to sell. The potential buyer or seller continues to 'see' a high market value and sets their expectation accordingly.

So until the volume of forced sellers exceeds those buying, then large scale price cuts don't happen.

-5% per transaction will soon bring a market to its knees.

Of course if all sellers joined a union and said "right thats it, all of us with semis sell them at 170K" then yea it could stagnate indefinatly.

Little problem is that all semis arnt worth the same price, I personally dont want a conservetory but someone might place this highly on thier priority list so if there is a house for 150K and 170K the more expensive one having a conservetory i would go for the 150K , both are semis.

If everyone could see what everyone else is priced at (like they can with the internet) then to sell in a stagnant / falling market you would undercut the opposition, maybe only by a few grand but you would still undercut them , its the way markets work.

Example:

Two forced sellers, both have identical houses(for arguments sake), one is priced at 150K one is priced at 155K, the one for 150K sells (they are identical so it would sell first). Another forced sellet comes along and checks the price the last identical house sold for , they see it sold for 150K so they price at 148K only 2K less but they know that it will get them a sale, now one is priced at 155K and the other 148K, which one gets sold this time? and so on and so on , eventually house one has to chase the market down , never quite reducing enough, they end up hurting.

Ive seen shares go up and down without any shock at all, we didnt need a anti-shock to get the market so high, so you dont necessarily need a shock to bring it down.

Throw a ball up vertically in the air and at a certain point it will stop in its tracks before it comes down, would you say the ball stagnated?

I do agree though that a shock will speed things up but i dont agree you have to absolutly must have one for the market to fall.

Share this post


Link to post
Share on other sites

City Analysts in the papers today are predicting that we have sat on a plateu for some time and are now heading for a dramatic fall.

They are not discussing house prices here, they are discussing interest rates.

The theory is that we just hit the top of the economic cycle and now we can afford to lower interest rates, with no limit on how low we can go.

Gordon Brown needs economic activity for revenue growth and he will stop at nothing to achieve this in order that he well laid out plans on spending come to fruition. We need money for Africa, and we need to save the world, and that costs.

Share this post


Link to post
Share on other sites

To answer the original question FREE websites that tell the previous selling prices are only just 1 year old this IMHO will have a dramatic affect on the downturn, you cannot sit at the dinner party and lie about your bagain!!

Share this post


Link to post
Share on other sites

Think about previous booms and crashes. To get a boom, or a crash, buyers and sellers have to "learn" the accepted wisdom of "prices only go up" or "prices are crashing". These are memes which have to spread widely before they have an effect.

In days of yore, you would learn these memes by reading print media or listening to broadcast media, you could chat to your social circle e.g. at a dinner party, or you could have a look in the EA window as you were wandering past. It is hard to imagine now what that was like.

Some important points about these previous forms of meme transmission:

- they can be slow to transmit, and are limited to existing meme transmission channels (e.g. the paper I always buy, the friend I always talk to).

- they involve vested interests.

- you cannot easily get a global and detailed view of the situation.

The internet allows:

- lightning speed meme transmission, between strangers who don't even have a passing aquaintance.

- bypassing vested interests.

- huge amounts of global and detailed information.

So surely, since bubbles and crashes are about sentiment, and sentiment is about memes, something which speeds up meme-flow will speed up both bubbles and crashes.

The only mitigating factor is that perhaps we may be overestimating the number of people using the internet for house buying/selling. Doesn't seem likely though.

frugalista

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.