A Pent-Up Supply Should Flood The Spring Market

[Tired of Waiting]

Residential sales volumes in the past 3 years have been very low, I think half, or a third, of normal years. As we know, the main cause was that since 2007/08 most property owners preferred to believe that the house price falls were just a temporary thing, and prices would eventually go "back up to 'normal' ". Many wishing to sell decided to wait for a "recovery", instead of lowering their asking prices.

But people need to move, for many reasons, like jobs, divorces, retirement, emigration, death, etc. Some people may be able to delay a house sale for a while, but I guess in most cases the pressure to sell should build-up. So it stands to reason that in these past 3 years we have been accumulating a "pent-up supply", from "pent-up sellers".

I am not sure exactly why (it could be just wishful thinking), but I am having the feeling that in the Spring we will see this pent-up supply bursting and flooding the market. Why am I have this feeling? Anybody having the same feeling?

( Edit: I think I've realised why I think pent-up sellers will flood the market: Because price expectations have shifted significantly in these past months. Many pent-up sellers have now realised that prices will not go "back-up". Now they don't have any reason to delay selling any more. Any thoughts/comments?)

Cheers,

ToW

PS: Yes, we also have a pent-up housing need, but we don't have a pent-up demand, because demand = need + ability to pay. If the banks keep current lending policies we will not have a large increase in demand in the Spring.

Edited also for clarity, and to include a little data at the start of this the OP (residential sales volumes), for the benefit of visitors - as this thread is attracting many.

Edited January 8, 2011 by Tired of Waiting

[guitarman001]

My fear is when 'properties' (I HATE that word) come onto the market at lower prices people will see them as a bargain and prices will just rise again.

[Tired of Waiting]

My fear is when 'properties' (I HATE that word) come onto the market at lower prices people will see them as a bargain and prices will just rise again.

But if the banks keep their current lending policies, potential buyers won't be able to buy.

[Timm]

I am not sure exactly why (it could be just wishful thinking), but I am having the feeling that in the Spring we will see this pent-up supply bursting and flooding the market. Why am I have this feeling? Anybody having the same feeling?

I have the same feeling, but I have nothing to support it either.

Except that it happens every year.

The difference, (as you sort of point out), is that the balance between supply and demand has changed.

[Tired of Waiting]

I have the same feeling, but I have nothing to support it either.

Except that it happens every year.

The difference, (as you sort of point out), is that the balance between supply and demand has changed.

Yes, I know, every spring sees an increase in relation to the preceding winter. Sure. But IIRC volumes in these past 3 springs (and years) have been much lower than a "normal" spring. And we all agree that this spring will see an increase in supply in relation to this winter. But I guess what I am trying to say is that I think the 2011 spring may see a (much?) stronger increase. We must have been accumulating a pent-up supply. I mean, for how many years can volumes remain 1/2 or 1/3 of normal? After all, people's lives go on.

[Lepista]

The difference, (as you sort of point out), is that the balance between supply and demand has changed.

Supply is driven by the house owners mortgagees.

Demand is driven by the banks.

[exiges]

But people need to move, for many reasons, like jobs, divorces, retirement, emigration, death, etc.

Yep, hatches, matches + dispatches provide a feed for the market, but that is easily met by the few that can afford to buy "the house they must have"

The bulk and main feed of houses (people just wanting to move) has stopped while interest rates are so low and people can't afford to move.

Until rates rise we won't see much movement IMO

[Chugger]

I'm buying a jerrycan to collect all the tears of disappointed Estate Agents.

Sweet nectar of the Gods!

[The Bull Trap]

I hope you're right - I wasn't old enough to really know what happened leading up to the last correction, but I suggest one difference is the BTL market?

Everytime houses fall, they are snapped up by the BTL mob as an investment and us first time buyers can't buy. I'm quite fortunate, I could buy if I wished, but I don't want to buy now, possibly on the verge of a collapse.

Unfortunately, I cannot see how a crash is possible, with all lower priced houses being bought by the BTL army. The ONLY way I can see a crash is if interest rates rise and our BTL friends who have over stretched themselves are forced to sell (along with the other house 'owners' indebted up to their eyeballs).

Who knows, but I have my fingers crossed.

[Timm]

Yes, I know, every spring sees an increase in relation to the preceding winter. Sure. But IIRC volumes in these past 3 springs (and years) have been much lower than a "normal" spring. And we all agree that this spring will see an increase in supply in relation to this winter. But I guess what I am trying to say is that I think the 2011 spring may see a (much?) stronger increase. We must have been accumulating a pent-up supply. I mean, for how many years can volumes remain 1/2 or 1/3 of normal? After all, people's lives go on.

I agree with that. There is a pent up supply.

As others have pointed out, much of this is because people can't afford to move - they can't move theri mortgage to a new house / sell up completely because they have too little equity.

Personally, I think this is what Cameron was on about. He wants lenders to ease up on existing borrowers so that they can move, even if they are in negative equity. This would free up the market, allow further falls and allow people to follow work etc.

Edited January 7, 2011 by Timm

[The Masked Tulip]

http://www.rightmove.co.uk/property-for-sale/property-30556481.html

07 January 2011 12:38:33

* Agents Telephone found: 08433148516

* Price changed: £575,000 £515,000

23 October 2010 21:37:00

* Price changed: £549,000 £575,000 [Found by n/a]

20 October 2010 23:54:00

* Price changed: £575,000 £549,000 [Found by n/a]

09 October 2010 22:05:04

* Price changed: £549,000 £575,000 [Found by n/a]

08 October 2010 22:45:30

* Price changed: £575,000 £549,000 [Found by n/a]

30 September 2010 21:38:33

* Price changed: £549,000 £575,000 [Found by n/a]

07 September 2010 16:37:35

* Price changed: £575,000 £549,000

19 July 2010 16:22:30 Original entry

TMT in Facepalm mode

Edited January 7, 2011 by The Masked Tulip

[MinceBalls]

There is also something else - quite powerful - that increases the pent up supply theme and that is childbirth/having a family. People get together and have children; they can last for a few years in a small flat with one child maybe but if they have a second - which a lot do - or when the child starts to grow up and requires more space (maybe even a garden!) then the pressure to move builds up.

The people affected by this are mostly those on the first rung of the ladder or not on at all and as years go by the pressure to move builds.

Like you say, there is only so long people can stay in a 'holding position'.

As we know, since 2007/08 most property owners preferred to believe that the house price falls were just a temporary thing, and prices would eventually go "back up to 'normal' ". I know that this is hard to believe, but most, or at least many, property owners did believe that. Many wishing to sell decided to wait for a "recovereh".

But people need to move, for many reasons, like jobs, divorces, retirement, emigration, death, etc. Some people may be able to delay this for a while, but I guess in most cases the pressure to sell should build-up. So it stands to reason that in these past 3 years we have been accumulating a "pent-up supply".

I am not sure exactly why (it could be just wishful thinking), but I am having the feeling that in the Spring we will see this pent-up supply bursting and flooding the market. Why am I have this feeling? Anybody having the same feeling?

Cheers,

ToW

( Yes, we also have a pent-up housing need, but we don't have a pent-up demand, because demand = need + ability to pay. If the banks keep current lending policies we will not have a large increase in demand in the Spring. )

[Tired of Waiting]

No the seller will just rent it out until the prices recover. There is no pressure to sell. Sure some people will need to sell or choose to sell but there are few repossessions and few forced sales. Mexican stand-off between sellers and buyers.

As long as sellers believe that prices will "recover".

Well, to be more precise, it depends on how many sellers believe that prices will recover. If even 10% or 20% of these pent-up sellers think prices will fall, they will try to sell ASAP, and be a trigger for the correction.

By the way, I haven't heard the main media recently using much the word "recover" for house prices recently. They may speculate if prices will go up or down, but not "recover" This may be interesting. It may indicate that people no longer see 2007 prices as "normal". Finally!

Edited January 7, 2011 by Tired of Waiting

[Superted187]

Interesting points OP.

I remember seeing something on ITV news back in 2008 about a couple that had bought a house together, then had broken up, and couldn't sell because of the negative equity they were in. This meant that they were forced to continue living together. Between looking through my fingers, all I could think was "sucks to be you".

[Tired of Waiting]

Yep, hatches, matches + dispatches provide a feed for the market, but that is easily met by the few that can afford to buy "the house they must have"

The bulk and main feed of houses (people just wanting to move) has stopped while interest rates are so low and people can't afford to move.

Until rates rise we won't see much movement IMO

I agree, low interest rates allow a lot of people to hold on to these properties, financially. But other "life factors" must be pressing a lot of people for these past 3 years. Volumes can't remain these low for much longer, can they?

And they will want to hold on to these properties only as long they believe prices will go up. The moment they think prices will fall, or even remain at current levels, then there is no reason to postpone any more, "Shirley".

.

Edited January 7, 2011 by Tired of Waiting

[General Congreve]

But if the banks keep their current lending policies, potential buyers won't be able to buy.

Exactly. I think some people confuse 'Demand' with 'Wishful Thinking'.

I demand a 20-bedroom mansion, but in truth, it is nothing more than a fanciful wish, because I don't have the money and no one, including the bank would ever lend it to me.

So, while there may be legions of people, including most on here, who 'wish' to buy a house, that wish will never be realised and turned into real 'demand' without prices falling to sustainable levels at which lenders are prepared to lend on reasonable terms again.

In the mean time we just need to wait for enough people to lose their jobs and for the bond markets to start forcing rates up to get this party started. Patience is the name of the game, plus venting your spleen on here a bit to pass the time

Edited January 7, 2011 by General Congreve

[proprlyst]

My sentiment is that it will depend on interest rates. If the base rate remains at the levels and mortgage rates especially standard variable rates do no rise then supply will increase at a moderate rate.According to RICS house market survery for Nov 2010- surveyors continue to see fewer vendor instructions. More properties will become rental properties. Price will continue to decline, but the rate of decline will be more of drip-drip , than a gush. Possibly rents will moderate as supply of property on the market rises.

http://*******.com/33fjfmf

[Tired of Waiting]

Exactly. I think some people confuse 'Demand' with 'Wishful Thinking'. (...)

Yes, I've noticed that too. Even in this forum many posters confuse demand with need, or even wishes, as you say.

Like I wrote in the OP: demand = need + ability to pay.

In the mean time we just need to wait for enough people to lose their jobs and for the bond markets to start forcing rates up to get this party started. Patience is the name of the game, plus venting your spleen on here a bit to pass the time

About job losses, I think people should not confuse unemployment levels with job losses. If the government plan works, they will shrink the public sector, and low IR may allow the private sector to hire. Total unemployment levels may remain stable. But that disguises the fact that a lot of people are losing jobs. OK, a lot of people are finding jobs, but these people don't have to be the same people. Those losing jobs may be forced to sell houses. A higher "job turnover" should increase the number of forced sales, even if unemployment levels remain about the same.

[Tired of Waiting]

My sentiment is that it will depend on interest rates. If the base rate remains at the levels and mortgage rates especially standard variable rates do no rise then supply will increase at a moderate rate.According to RICS house market survery for Nov 2010- surveyors continue to see fewer vendor instructions. More properties will become rental properties. Price will continue to decline, but the rate of decline will be more of drip-drip , than a gush. Possibly rents will moderate as supply of property on the market rises.

http://*******.com/33fjfmf

It is almost certain that the BoE will increase IR in the first half of the year, but by just the minimum amount, a token 0.25%, just to reassure government lenders ("bonds/gilts buyers"), just to "signal" that the BoE will not let inflation out of control.

This tiny amount won't make much of a real difference on mortgages and loans, BUT I think it will send a signal to pent-up sellers that may, just may, be strong enough to revert some pent-up sellers expectations, and start a little trickle of price cuts and increased supply, and that little trickle could gather strength, reverting expectations of more pent-up sellers, in a virtuous cycle.

If when most pent-up sellers expectations are reversed, we will have an stampede, and a crash.

Edited January 7, 2011 by Tired of Waiting

[Pent Up]

Did someone call me??

I totally agree TOW. There is massive pent up supply at the moment and Ive said this many times before but what has caused the difference between supply and demand in 2010 has been this pent up supply they are being either forced (expanding family, D,D,D) or lured by the fact that prices began to recover. The VIs will have you believe the removal of HIPS caused a one off increase. but this is not the case. Ands here's why: HIPS were abolished on 21st May 2010 so if the VIs are correct you would expect to see a surge in new properties coming to Market from June onwards. This was not the case and to see this do a rightmove price comparison report for any postcode in England or Wales and you see a little green chart showing total properties on the Market for that month and how many were new listings.

Heres some I tried last year and took screenshots of:

URL="http://img844.imageshack.us/i/postcodes.png/"][/url]

The amount of properties new to Market each month after May is very similar to before May. No sudden increase. So the increase in supply was due to other factors which I believe are three years pent up supply combined with falling demand.

My own observations of the Essex Market show that the amount of properties for sale has dropped considerably since around October time but there are still more on the Market than there was in April last year. According to RICS December survey supply is down by just -4 so im assuming what I am seeing is largely seasonal.

I think that this spring, along with the usual spring influx of new listings we could start to see an increase in forced sellers too. (I know one anecdotally who will put his on within weeks) with Smi cut and the 2 year limit kicking in, job cuts, potential IR rises/ fear of.

Edited January 7, 2011 by Pent Up

[winkie]

I am not sure exactly why (it could be just wishful thinking), but I am having the feeling that in the Spring we will see this pent-up supply bursting and flooding the market. Why am I have this feeling? Anybody having the same feeling?

Cheers,

ToW

( Yes, we also have a pent-up housing need, but we don't have a pent-up demand, because demand = need + ability to pay. If the banks keep current lending policies we will not have a large increase in demand in the Spring. )

.

ToW What are you exactly looking to buy, when, & what are you expecting to pay?

Edited January 7, 2011 by winkie

[Caveat Mortgagor]

Judging by the poperties aded to Rightmove in my area in the last 7 days, i think anyone waiting until spring is going to be sorely disappointed.

80 properties added in last 7 days. Property bee shows that more than 3/4 of these are price revisions, all downwards, and there is a wide range of these recent drops - between 3% -11%. Many of them have dropped 3-4 times now and by up to 20% since first listing.

Of the listings that arent price revisions, many are duplicate listings where the vendor has instructed a second agency.

I imagine that anyone round these parts waiting til March april for a bounce will encounter less than bullish agents and may well have their price aspirations left in tatters before so much as seeing a for sale board!

Edited January 7, 2011 by Caveat Mortgagor

[Pent Up]

Judging by the poperties aded to Rightmove in my area in the last 7 days, i think anyone waiting until spring is going to be sorely disappointed.

80 properties added in last 7 days. Property bee shows that more than 3/4 of these are price revisions, all downwards, and there is a wide range of these recent drops - between 3% -11%. Many of them have dropped 3-4 times now and by up to 20% since first listing.

Of the listings that arent price revisions, many are duplicate listings where the vendor has instructed a second agency.

I imagine that anyone round these parts waiting til March april for a bounce will encounter less than bullish agents and may well have their price aspirations left in tatters before so much as seeing a for sale board!

I've seen an uptick in new properties on the Market already too. Two so far which were removed November/December. Both new agents same price. And spring is still a long way off!

[frenchy]

Unfortunately, I cannot see how a crash is possible, with all lower priced houses being bought by the BTL army. The ONLY way I can see a crash is if interest rates rise and our BTL friends who have over stretched themselves are forced to sell (along with the other house 'owners' indebted up to their eyeballs).

I am a BTLet (in France) albeit with no mortgage and am waiting to BTLive in the UK. In my case, I am not interested in capital gain (I don't actually know how much my flats are worth now) but only income. I would not BTL today either in France or the UK. The rental yield is simply much too low for it to make any sense (it is actually even lower in France where I own my flats). UK BTL may be stupid and only look at CG but surely in a falling (or at least uncertain) market - where the prospect of CG is remote - they must be looking at yields and see how poor it is.

Either prices have to fall (a lot) or rents have to rise (a lot) before BTL can make sense in terms of income. I can't serious BTL snapping stuff at -10% when it needs -25% to begin to make sense (and that is assuming low-ish interest rates, this obviously goes out of the window if rate increase, the net income would be non-existent at current prices (rent and HP).

[Tired of Waiting]

ToW What are you exactly looking to buy, when, & what are you expecting to pay?

We are a couple wanting to start a family. Either a small building plot, or an "entry-level", small family home. A terraced would do. 3 bedrooms if possible, though we could cope with a 2 bedroom for a few years, I suppose.

We think £150k is the maximum such a house is actually worth. But asking prices around here are still at 2007 peak levels, still around £200k for these houses, in good areas - and by "good" I just mean safe.