Asking Prices 74K More Than Selling Price

[The Masked Tulip]

In the past month we have had a few reports stating that asking prices are on average 74K more than the average selling price?

How does that work then?

Does it mean that the average house price - what is it, about 166K? - is on the market for 240K and people are driving down the 240K to 166K? Can't see that happening otherwise we would have better signs of a crash.

Does it mean, on average, people are taking about 74K off the asking prices? So a 300K asking price house goes for 226K? Again, can't see that happening?

Then you have the cases, often reported on here, of sellers and EAs saying that they are open to offers and by that they mean perhaps 5K off the 200K asking price.

Anyhow, Rightmove has made a big thing of the difference between the average asking price and selling price being 74K but where, how, when? If this is an average then surely it means some are going for a lot less than asking price - f so, why aren't us on HPC seeing more evidence of this?

Is it all ******?

[Democorruptcy]

You don't seem to be allowing for a £5m house going for say £4.5m and the effect that will have on the "average"

[BlinkTooFast]

You don't seem to be allowing for a £5m house going for say £4.5m and the effect that will have on the "average"

Surely it won't have any more effect than the £5M asking price and the £4.5M selling price have on their averages, so that should all cancel itself out.

I'm with the OP on this one. Either something doesn't add up, or we are missing out on a phenomenon going on underneath our noses

[Eddie_George]

I asked this in another thread, but didn't get an answer:

So let me get this right. Average asking prices are £236k and selling prices are £165k, that's 30% off. So buyers should be offering 30% less (or even more if they want to meet in the middle when negotiating) than advertised prices?

[catmandu]

I would suspect that Rightmove are measuring different things from Land Registry. I understand their figures have a bias to the south where prices are higher. Whatever the reason, it demeans Rightmove's figures when they are so far from reality.

[The Masked Tulip]

I would suspect that Rightmove are measuring different things from Land Registry. I understand their figures have a bias to the south where prices are higher. Whatever the reason, it demeans Rightmove's figures when they are so far from reality.

That is probably the nail on the head.

[tim123]

Surely it won't have any more effect than the £5M asking price and the £4.5M selling price have on their averages,

Depends what you mean by effect.

500K extra on the asking price will skew the figures in the same that a 5m selling price will.

But asking prices are made up and the figures will be skewed whether ths house sells or not, so NO it won't cancel out.

tim

[tim123]

I would suspect that Rightmove are measuring different things from Land Registry. .

Yeah. They are measuring things which will never sell because the price is too high by a significant margin. Such properties are automaticaly filtered out of the "sales" averages.

tim

[Democorruptcy]

Using the £5m house and how I thought the average asking price being £74k more than the selling price might work:

7 houses

One asking for £5m sells at £4.5m -10%

Six asking for £200k sell for £195k -2.5%

Average difference between asking and selling prices is £75k so a big gap on one expensive house inflates the gap on average.

[Gigantic Purple Slug]

I thought I read somewhere that the average price only measures the price that the house goes on at and doesn't take into account any subsequent devaluations. I may be wrong though.

Round my way nothing is moving except the stuff that offers significant VFM.

Went to see a place today. According to the agent, many people were putting off buying until the spending review came out. Their analysis was though that the spending review wouldn't cause problems with the market because the kind of people likely to lose their jobs aren't the kind of people likely to be buying houses. Make of this what you will.

[The Masked Tulip]

I thought I read somewhere that the average price only measures the price that the house goes on at and doesn't take into account any subsequent devaluations. I may be wrong though.

Round my way nothing is moving except the stuff that offers significant VFM.

Went to see a place today. According to the agent, many people were putting off buying until the spending review came out. Their analysis was though that the spending review wouldn't cause problems with the market because the kind of people likely to lose their jobs aren't the kind of people likely to be buying houses. Make of this what you will.

They have an answer for everything.

[blackgoose]

When they say average is it mean or median?

[The Masked Tulip]

When they say average is it mean or median?

I presume they mean average because that is the word used.

[OnlyMe]

One reason....

http://agentsdiary.blogspot.com/

‘Mr Cameron.’ I bluster, trying to project that ethereal mix of professionalism and confidence. ‘How are you today?’ It’s a stupid question, one I should know better than to ask, so when he answers: ‘Not happy.’ It comes as no surprise.

‘I’ve been thinking about our finances.’ Continues Mr Cameron, as I begin to think maybe he does has something in common with the Prime Minister, until he adds: ‘I’ve seen this survey in the newspaper.’

‘You want to change the price?’ I repeat woodenly. ‘Yes,’ continues Mr Cameron blithely. ‘I think we should increase it.’ I should be stunned, but I’ve heard this one before. ‘We’re attracting the wrong type of buyer at the moment.’ Concludes Mr C with wildly misplaced certainty.

The wrong type of buyer? I mock, once the phone is back in its cradle but still rocking dangerously. And what exactly are they? One who wants value for money? One who wants to avoid negative equity and an early repossession? One who’d like to pay off the loan before the care home fees kick-in?

My survey says Mr Cameron is going to be disappointed.

[luigi]

My take on it is:

1) The rightmove index looks at initial asking prices, without taking into account any subsequent price reductions. In this market, most houses get reduced before selling. This accounts for some of the discrepancy.

2) There are a lot of houses that are so overpriced that they won't sell, and probably be withdrawn from sale at some point, assuming that the owners don't need to sell, so they won't ever figure in the sales stats, so skewing the average.

3)Only the keenest priced stuff is attracting offers ATM, even then 5-15% off the asking price is expected in this slow market.

The rightmove index is just an index of seller delusion ATM. It's always been a bit like that for the reasons above, it's just been exacerbated by optimistic 'recovery locked in' pricing that is a relic of the Spring and the reality of the slowing market and worsening negative sentiment over the summer, at some point the dam will break!!

[Liquid Goldfish]

Isn't RM unmixed and unadjsuted, bascially raw data?

If so there's no point in comparing with Natiowide and Hfax

isn't there also a second LR price index which is unmixed and unadjusted which shows average price is about £220K?

Edited October 23, 2010 by oldsport

[Anne_Uumellmahaye]

My take on it is:

1) The rightmove index looks at initial asking prices, without taking into account any subsequent price reductions. In this market, most houses get reduced before selling. This accounts for some of the discrepancy.

2) There are a lot of houses that are so overpriced that they won't sell, and probably be withdrawn from sale at some point, assuming that the owners don't need to sell, so they won't ever figure in the sales stats, so skewing the average.

3)Only the keenest priced stuff is attracting offers ATM, even then 5-15% off the asking price is expected in this slow market.

The rightmove index is just an index of seller delusion ATM. It's always been a bit like that for the reasons above, it's just been exacerbated by optimistic 'recovery locked in' pricing that is a relic of the Spring and the reality of the slowing market and worsening negative sentiment over the summer, at some point the dam will break!!

This is anecdotal but I was in an EA today (Yorks) and while I was browsing the branch manager was talking to a vendor who hadn't had any interest in her property. She was asking if she should reduce her asking price. The EA said it wasnt worth it with the amount she was talking about as his typical offer at the moment was 15% off asking price. He mentioned 4 other similar properties on with other agents in the area and said none were moving. Interesting sales strategy to do nothing in a tough market I suppose but interesting eavesdropping none the less!

[The Masked Tulip]

I suppose but interesting eavesdropping none the less!

My work here is done.

Yes, it is bizarre.

What I find even more interesting is the complete lack of any EAs trying to sell me something. I go into a shop and they try to flog me some clothes, or a car or a PC but I go into an EAs and they don't try - nothing.

You would think in this market they would be trying to get people interested. I can only assume that they are selling so many houses they do not need the business.

[xux42]

In the past month we have had a few reports stating that asking prices are on average 74K more than the average selling price?

How does that work then?

Asking prices are all properties for sale, selling prices are only those that sell.

Only a small % of properties on the market are selling, mostly at the lower-mid end. Expensive houses are on the market but most just sit there.

Now if there was an average £74k difference between the asking and sale price of the houses that completed - that would be absolutely smashing.

It would be the fabled capitulation we are waiting for.

[harumph]

I presume they mean average because that is the word used.

the word average normally means the mean, but it can just as easily refer to the mode or the median - they are all averages - and this is almost certainly the answer

One set of figures with three VERY different averages.

here's 100 house prices pulled from houseprices.co.uk with the mean mode and median averages applied at the bottom:

£277,000

£162,500

£335,000

£232,500

£480,000

£181,750

£487,500

£220,000

£230,000

£245,000

£190,000

£230,000

£189,995

£285,000

£630,000

£300,000

£88,500

£202,500

£349,950

£195,000

£245,000

£246,000

£175,000

£212,000

£410,000

£435,000

£235,000

£200,000

£200,000

£235,000

£163,000

£204,995

£372,000

£199,995

£170,000

£120,000

£495,000

£231,500

£155,495

£165,495

£161,970

£174,570

£182,500

£570,000

£245,000

£365,000

£232,495

£167,000

£173,495

£170,495

£200,000

£206,995

£122,000

£300,000

£185,000

£285,000

£161,970

£228,000

£248,500

£540,000

£157,220

£310,000

£173,495

£450,000

£142,000

£437,500

£185,000

£208,000

£250,000

£171,000

£162,500

£435,000

£180,000

£200,000

£230,000

£215,000

£225,000

£130,000

£1,200,000

£410,000

£410,000

£725,000

£220,000

£120,000

£235,000

£425,000

£228,551

£200,000

£161,970

£208,995

£157,000

£440,000

£185,000

£250,000

£650,000

£65,000

£217,500

£190,000

£238,500

£205,000

median average £218,750

modal average £200,000.00

mean average (normal!) £267,069

with my very limited data set we see a 67k difference in average - with EXACTLY the same data.

Do these people SAY which average they apply? Can someone email them, I'd be interested in their answer - also some people do some REALLY funny stuff with averages - like putting all the data in numerical order - then chopping OFF the top and bottom 10% of data - then running mean averages. By removing the "spikes" the idea is that the average is MORE average. It's all lies, damned lies and statistics. Just ask Churchill. No not the f#cking dog.

[catmandu]

Yeah. They are measuring things which will never sell because the price is too high by a significant margin. Such properties are automaticaly filtered out of the "sales" averages.

tim

A very good point, and this certainly accounts for some of the discrepancy - but the figures are just too far apart for this alone to reconcile them. Something is amiss on the Rightmove side and always has been - their numbers have always been grossly above reality - it's not a new phenomenon caused by the current market conditions.

[aussieboy]

I presume they mean average because that is the word used.

His question was fair, TMT.

We're all cool with the different average measures, yes?

http://en.wikipedia.org/wiki/Average

Explains why arithmetric means don't word for investment returns etc.

[jethrotull]

Is it all ******?

Try these for reasons why the indexes differ:

1. One index ignores probate

2. One index ignores transfers in family (same name)

3. Sale outside market-value ignored (e.g. gift to child)

4. different populations (high prices lead to unsold houses, not sales at big discounts)

5. timing differences of months between asking price and payment price

6. a house may have separate entries for the building, shared passage, and a bit of garden bought off the neighbour - for legal reasons

7. private sales not included

8. Channel Islands, Isle of Man, etc., excluded

9. etc.

10. etc.

[Mrs Bear]

You don't seem to be allowing for a £5m house going for say £4.5m and the effect that will have on the "average"

Or a £5M house going for £2.83M, like one around here not long ago.

God bless nethouseprices

[Anne_Uumellmahaye]

My work here is done.

Yes, it is bizarre.

What I find even more interesting is the complete lack of any EAs trying to sell me something. I go into a shop and they try to flog me some clothes, or a car or a PC but I go into an EAs and they don't try - nothing.

You would think in this market they would be trying to get people interested. I can only assume that they are selling so many houses they do not need the business.

Agreed- this is exactly the same situation I am finding. I also feel like I'm banging my head against a brick wall with EA's who are trying to convince me that prices have not slipped at all since peak- just that the market is a "bit slow".

Surely they realise the info that is out there for all potential buyers who can be bothered to research? Don't most people do any research at all when they make the biggest financial decision of their lives???

Is all a bit twilight zone if you ask me.

Am also in danger of sounding like Bruce and invoking the wrath of Godley when I say that with all this uncertainty- I am starting to love the feeling of having a substantial nest egg and no mortgage. Can I really be happy renting.......?