A Pent-Up Supply Should Flood The Spring Market

[Tired of Waiting]

And until there is a trigger they will sit and wait for the price to recover, or rent it out. There are really very few forced sellers so actual sold prices may be low but asking prices are still 2007 +10%. So there may be a flood of properties on to the market but they will be at high asking prices with no real need to sell. I fully expect rightmove asking prices to show an increase for January. The delusion is still there.

Prices expectations started to change fast, in these past 3 months:

http://www.housepricecrash.co.uk/forum/index.php?showtopic=157276&view=findpost&p=2849325

[wealthy]

And until there is a trigger they will sit and wait for the price to recover, or rent it out. There are really very few forced sellers so actual sold prices may be low but asking prices are still 2007 +10%. So there may be a flood of properties on to the market but they will be at high asking prices with no real need to sell. I fully expect rightmove asking prices to show an increase for January. The delusion is still there.

It's not delusion, it's desperation. Accidental landlords for instance know full well their investment isn't sound, they're just hoping for that miracle. It's like the one out in the deck at poker or, the longshot horse that suddenly hits incredible form. At some point the odds will bring reality to fruition.

[arrgee1991]

This will be very dependent on location and type of property. I spent the last year looking for a family home in a particular area and there were only a couple that came up that I offered on, both of which sold within a week of going on the market. I had one offer accepted but the purchase fell through due to my buyer withdrawing and someone else offering before I could find another buyer.

I can't see a flood of the type of property I want coming up for sale (4 bed semi in suburban london/essex). The people that own them bought long ago and won't need to sell.

The only thing that I can see that would open the floodgates would be a lot of unemployment and sharp rises in interest rates as was the case in the early 1990s, neither of which appear to be forthcoming where I am looking. Another factor inhibiting sales is the cost of buying. £20K+ in stamp duty, not to mention other fees, to buy a 3 bed semi in our area means that buyer have to add that to their budget.

There is a pent-up supply, my own house included, but without anything to purchase it will remain pent-up. I suspect the housing market will continue with low volumes for the foreseeable future.

[chrismar]

We are about to hopefully make an offer on somewhere this weekend. We have been watching and waiting in a specific area for past 12 months. The 5 properties on the market in this area have all been on market for over 12 months. One has been on since 2007 (they have reduced their price - but given location of theirs I can see why it still sits there....)

All the others are just sitting there. the one we are looking at is currently on for £248 and agent has intimated that they are still looking for £230 .

We are likely to offer £210 with intention of increasing in small chunks to maybe £215/218.. At that point in current market we are prepared to probably walk away.

The current owners purchase shows up on LR as being in Jan 2007 at £218.

Are we being realistic or stupid? What should we offer and what should we walk away at. We have offered on another similar property in 2010 and we walked away at £212 as we knew that went through at what we considered a high price (eventually at £232)

[Tired of Waiting]

(1) This will be very dependent on location and type of property. I spent the last year looking for a family home in a particular area and there were only a couple that came up that I offered on, both of which sold within a week of going on the market. I had one offer accepted but the purchase fell through due to my buyer withdrawing and someone else offering before I could find another buyer.

(2) I can't see a flood of the type of property I want coming up for sale (4 bed semi in suburban london/essex). The people that own them bought long ago and won't need to sell.

(3) The only thing that I can see that would open the floodgates would be a lot of unemployment and sharp rises in interest rates as was the case in the early 1990s, neither of which appear to be forthcoming where I am looking. Another factor inhibiting sales is the cost of buying. £20K+ in stamp duty, not to mention other fees, to buy a 3 bed semi in our area means that buyer have to add that to their budget.

(4) There is a pent-up supply, my own house included, but without anything to purchase it will remain pent-up. I suspect the housing market will continue with low volumes for the foreseeable future.

1) You are saying: Last year volumes were very low.

I agree.

(2) In normal years Britain had a property ownership turnover of around 10% of the total stock/year. In round numbers, 2 million sales/year out of a total of 20 props. That also meant that people owned their properties for an average of 10 years, cause life changes, for all those usual reasons we all know.

(3) and (4): Unless, or until you realised that 207 prices were bubble prices, and that prices will fall for the foreseeable future. And that in real terms (adjusted by inflation, or even future savings accounts rates), prices will never again go back as high as in 2007.

Just suppose for a moment that you, or another pent-up property seller (being realistic now), understood that. Wouldn't he/she then try to lower the price now, and sell it now? Before it fell even more?

Edited for clarity.

Edited January 11, 2011 by Tired of Waiting

[The Masked Tulip]

We are about to hopefully make an offer on somewhere this weekend. We have been watching and waiting in a specific area for past 12 months. The 5 properties on the market in this area have all been on market for over 12 months. One has been on since 2007 (they have reduced their price - but given location of theirs I can see why it still sits there....)

All the others are just sitting there. the one we are looking at is currently on for £248 and agent has intimated that they are still looking for £230 .

We are likely to offer £210 with intention of increasing in small chunks to maybe £215/218.. At that point in current market we are prepared to probably walk away.

The current owners purchase shows up on LR as being in Jan 2007 at £218.

Are we being realistic or stupid? What should we offer and what should we walk away at. We have offered on another similar property in 2010 and we walked away at £212 as we knew that went through at what we considered a high price (eventually at £232)

See my reply to your thread.

[Tired of Waiting]

We are about to hopefully make an offer on somewhere this weekend. We have been watching and waiting in a specific area for past 12 months. The 5 properties on the market in this area have all been on market for over 12 months. One has been on since 2007 (they have reduced their price - but given location of theirs I can see why it still sits there....)

All the others are just sitting there. the one we are looking at is currently on for £248 and agent has intimated that they are still looking for £230 .

We are likely to offer £210 with intention of increasing in small chunks to maybe £215/218.. At that point in current market we are prepared to probably walk away.

The current owners purchase shows up on LR as being in Jan 2007 at £218.

Are we being realistic or stupid? What should we offer and what should we walk away at. We have offered on another similar property in 2010 and we walked away at £212 as we knew that went through at what we considered a high price (eventually at £232)

You are thinking about offering Jan 2007 prices, a near peak of the highest property prices bubble in UK history.

See this chart. Where do you think prices will go next?

For goodness sake, wait al least until the spring, just 2 or 3 more indices from Halifax and Nationwide, and then think again. You don't have to decide now. time is on your side. Even our bulls are agreeing with that now.

With thanks to "Free Trader".

[Tired of Waiting]

there is no such thing as a pent up buyer anymore, pent up buyers only came about because it seemed that the housing market was going to eternally go up 10% a year and there was a massive fear amongst buyers that they were about to miss the only one way ticket into property

now that the market is falling, there are only pent up sellers, who are sat waiting for the market to "uptick" so that they can offload their property. such a good investment they want to sell it eh? what's the reasoning behind that - the only reasoning is that they know that they're sat on an overpriced asset but can't face the reality that they're going to lose money on it so they're sat there all "pent up" hoping that the market recovers quickly so that they can sell it for the price they bought it at

Very good.

[arrgee1991]

You are saying:

1) Last year volumes were very low.

I agree.

(2) In normal years Britain had a property ownership turnover of around 10% of the total stock/year. In round numbers, 2 million sales/year out of a total of 20 props. That also meant that people owned their properties for an average of 10 years, cause life changes, for all those usual reasons we all know.

(3) and (4): Unless, or until you realised that 207 prices were bubble prices, and that prices will fall for the foreseeable future. And that in real terms (adjusted by inflation, or even future savings accounts rates), prices will never again go back as high as in 2007.

Just suppose for a moment that you, or another pent-up property seller (being realistic now), understood that. Wouldn't he/she then try to lower the price now, and sell it now? Before it fell even more?

(2) People have their properties for longer mainly because of the cost involved in moving. It was easy to buy my current house @ 1% stamp duty, but buying the next @ 4% is going to hurt. Many people are in this situation. Only ONE out of about 50 houses sold in my street in 2009 and it looks to be the same for 2010. 7 were sold in 2001 and 2003 with most other years to 2007 having a similar story.

I really don't care about the price, it makes little odds to me.

I was selling a 3 bed to move to a 4 bed, so I pay the difference which is about £200K (current house virtually paid for).

A 50% drop in prices would be nice, and would leave me finding just £100K, but it is less than a third of the price.

Given I paid about 50% of the current price for my place I wouldn't lose in that scenario, bar the interest paid.

Most people sell to buy unless they have to (death, divorce, work). Only at the top of the property chain are there outright sellers (normally due to death). And with people living longer....

My problem is nothing to buy as most people with the type of house I want won't sell until they have to.

[arrgee1991]

If you're sat on a 200K "investment" that's dropping at a rate of 1K a month, it tends to focus the mind

All depends on when you bought and your equity.

If you bought 10 years ago and have seen your property double in price and have paid off most of your mortgage, your house "falling" by £1K a month won't bother you. I quote "falling" as no one has any idea what their house is truly worth until someone actually pays for it.

If you bought 3 years ago you will be bothered, but probably can't afford to sell.

Never see a house as an investment, just a money pit. If you are lucky it will appreciate. I bought my first in 1992 and it took about 7-8 years to rise in value.

[Tired of Waiting]

(2) People have their properties for longer mainly because of the cost involved in moving. It was easy to buy my current house @ 1% stamp duty, but buying the next @ 4% is going to hurt.

You are saying that it is not price, but a 3% stamp duty difference that is making people delay selling an asset that is losing 1%/month?

Many people are in this situation. Only ONE out of about 50 houses sold in my street in 2009 and it looks to be the same for 2010. 7 were sold in 2001 and 2003 with most other years to 2007 having a similar story.

I really don't care about the price, it makes little odds to me.

I was selling a 3 bed to move to a 4 bed, so I pay the difference which is about £200K (current house virtually paid for).

A 50% drop in prices would be nice, and would leave me finding just £100K, but it is less than a third of the price.

Given I paid about 50% of the current price for my place I wouldn't lose in that scenario, bar the interest paid.

Most people sell to buy unless they have to (death, divorce, work). Only at the top of the property chain are there outright sellers (normally due to death). And with people living longer....

My problem is nothing to buy as most people with the type of house I want won't sell until they have to.

I suggest that the market is frozen because sellers and buyers are not agreeing on the price. There is a tug-of-war there.

[arrgee1991]

You are saying that it is not price, but a 3% stamp duty difference that is making people delay selling an asset that is losing 1%/month?

I suggest that the market is frozen because sellers and buyers are not agreeing on the price. There is a tug-of-war there.

3-4% is on the sum of your purchase and it is the purchase price that matters not the sale price. And most people buy when they sell, normally buying for more. 4% of 700,000 isn't much different from 4% of 693,000

The market is frozen because if you have a £600K house to move to an identical house will end up costing over £25K. Most people upgrade when they sell and buy. So even if prices fall they still have high costs. The market is frozen because fewer buyers/sellers that can afford the costs of moving. At the sub £250K level it makes little odds, but at over £500K it does, and most chains have at least one of those towards the top of the chain.

Things are probably very different outside the South East, but I don't expect a flood of properties this spring. If anything, I expect less availability as house owners dig in.

[sammysnake]

"A Pent-Up Supply Should Flood The Spring Market"

I seriously ******ing doubt it.

[Inca]

I don't think there will be a flood of cheap property on the market until there are forced sellers.

Sadly this is unlikely to happen for a few reasons:

- People have mortgage protection insurance

- The government has the SMI scheme

If you don't absolutely have to sell and take a haircut why would you?

Why not rent out your house and rent a new place if you can't afford to buy a second property?

[Si1]

Why not rent out your house and rent a new place if you can't afford to buy a second property?

because you might not be able to get a BTL mortgage on the first one owing to tighter credit restrictions

additionally, it's zero sum, by renting your place out to avoid selling, you are not only reducing the number of properties for sale, but also reducing the number of households needing a home by the same amount

[Vagabond]

There is data about that. TMT posted some here: http://www.housepricecrash.co.uk/forum/index.php?showtopic=157276&view=findpost&p=2849286 (I've replied to that already. Please take a look.) In the past 3 months the number of property owners thinking prices will fall grew from 1/4 to 1/3. People do learn. And I think pent-up sellers are following the market more closely than the general property owner.

Agreed the trend is rising, but the majority of people still believe that house prices will rise this year. This seems to suggest there won't be a flood yet. Not until the majority of people, a clear majority IMO think that prices will fall.

As I said, the dam is cracking but hasn't yet burst. I think another year of smallish falls will keep that trend in peoples views and then maybe this time next year people will start to panic..

[Vagabond]

One more caveat for you (touched on by tired of waiting edit: and papa serf) is that just as people jump into a rising market for fear of missing out (usually towards the peak), people will also jump out of a falling market due to fear of being the only one left in (usually towards the trough).

We're not yet near the panic stage, but we are I think, already in the realisation stage

Agree with this. I think people will only admit it to themselves when they have no other choice but to admit they were wrong. That will then be the panic stage and then you'll see floods and bigger falls

[Inca]

because you might not be able to get a BTL mortgage on the first one owing to tighter credit restrictions

That may or may not be an issue - I have not heard of anyone not being able to switch from a residential to btl with their lender. Also most lenders will give you a couple of years grace i.e. you can rent out your house without having to change mortgage if you tell them you are doing that.

additionally, it's zero sum, by renting your place out to avoid selling, you are not only reducing the number of properties for sale, but also reducing the number of households needing a home by the same amount

So what?

They would be avoiding taking a loss.

Agree with this. I think people will only admit it to themselves when they have no other choice but to admit they were wrong. That will then be the panic stage and then you'll see floods and bigger falls

Disagree. They will wait it out unless they are a forced seller - don't think people think "prices are falling, better sell up, make a loss and uproot my family"

There is a reason why you only get crap property on the market when it is falling

Edited January 12, 2011 by Inca

[Si1]

So what?

They would be avoiding taking a loss.

no they wouldn't, the reduction would be the same (OK similar...) on prospective new-house and would cancel out loss on old house

Edited January 12, 2011 by Si1

[Si1]

Disagree. They will wait it out unless they are a forced seller - don't think people think "prices are falling, better sell up, make a loss and uproot my family"

There is a reason why you only get crap property on the market when it is falling

how long do you suppose 'it' will be? (loaded question I know)

[Inca]

no they wouldn't, the reduction would be the same (OK similar...) on prospective new-house and would cancel out loss on old house

eh?

Suppose I bought and am now in negative equity. I decide that I have to move - so I can either crystalise that loss and sell OR I can rent out my house and move into a rental myself.

Thus, I do not have to realise the loss or have any of the stamp fees etc to pay.

If I am in ne how is my loss cancelled out?

how long do you suppose 'it' will be? (loaded question I know)

Don't know! Has been about 8 years since the madness began

[MississippiJohnHurt]

My concern is Shapps stated goal of flat nominal prices for 1 or 2 decades. :angry: We will all be too fecking old by then!!! :angry: The b@stard!!!

It's pish though isn't it, any such aim is inconsistent with first time buyers entering the market in any great numbers. Also he might want to show us any other market that trades in a straight line for 10 years.

I can't see any reason why prices won't fall heavily from here on, for quite a while. Think those predicting only 5% falls etc are going to be in for bit of a shock

[Si1]

eh?

Suppose I bought and am now in negative equity. I decide that I have to move - so I can either crystalise that loss and sell OR I can rent out my house and move into a rental myself.

Thus, I do not have to realise the loss or have any of the stamp fees etc to pay.

If I am in ne how is my loss cancelled out?

stamp fees - fair point

re: cancelling out loss, your point seems to be that house prices will recover towards former peak prices at some point

if hyou sell one house (at a loss) and buy another one at the similarly reduced price, then surely the new house has an equal chance of recovering previous highs, the loss may be corrected by the market irrespective of which house you own, the first or the second

and, to boot, if you make the exchange at a low price you may well pay all sorts of lower fees to move

but as you say, it might not be possible to find a nice house for sale in some circumstances during dips

[Si1]

I can't see any reason why prices won't fall heavily from here on, for quite a while.

BTL brigade hanging on until the bitter end in about 10-15 years time, supported by a dodgy banking system strong-armed into not foreclosing on them

(granted this means they will lose a fortune and the renters will benefit so not a huge hardship)

Edited January 12, 2011 by Si1

[MississippiJohnHurt]

BTL brigade hanging on until the bitter end in about 10-15 years time, supported by a dodgy banking system strong-armed into not foreclosing on them

(granted this means they will lose a fortune and the renters will benefit so not a huge hardship)

can see the possibility, but can't see it happening to any great extent. So much has happened in the last 2 years and it's surreal that housing has held on, but I guess in context with the big moves in equities and sovereigns it's a really illiquid asset and should naturally take longer to adjust. Just an instinct but I think the housing bubble is all done with from here, for at least half a generation (ha. brave statement. pull me up on that in a year when they've gone up 5%!)