A Pent-Up Supply Should Flood The Spring Market

[Si1]

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%!)

yep

by half a generation, what timescale do you mean? (just to compare to my thoughts in years)

[MississippiJohnHurt]

yep

by half a generation, what timescale do you mean? (just to compare to my thoughts in years)

I guess 12-15 - suppose i'd see a generation as 25-30 yrs

[Inca]

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

Yes but I have crystalised the loss immediately by selling and will have to make up the shortfall myself right now - a theorical loss is not equal to an actual loss.

Much easier to rent/rent - prices will rise to peak again even if just through inflation (they are not that far off now)

[Si1]

Yes but I have crystalised the loss immediately by selling and will have to make up the shortfall myself right now - a theorical loss is not equal to an actual loss.

sounds fair!

Much easier to rent/rent - prices will rise to peak again even if just through inflation (they are not that far off now)

may have avery long wait

[Tired of Waiting]

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..

53%. But 47% of property owners believe prices will fall. And this share is increasing as we speak, well, type. And pent-up sellers are surely following the news on the subject much more closely than the polled property owners.

Some of these pent-up will decide to sell now. We just don't know how many.

What I am saying is that after 3 years of low volumes, we should have a couple of million pent-up sellers waiting around. With so many now starting to understand that prices will not "recover" up to bubble level, the main reason for delaying the sale has now gone.

I am sure we will have many more sellers this spring than we had in the 3 previous springs (and fewer buyers), we just don't know how many more. But if only half of those "47%" thinking prices will fall decide to sell in the spring market we could have some thing like half a million extra properties for sale in the spring market.

Market "sentiment" (prices expectations) are/will be key here. If we keep having negative indices and headlines, "this sucker" will start to go down this spring, Perhaps between 5 and 10%, or even more in some areas, before August.

Edited January 12, 2011 by Tired of Waiting

[Tired of Waiting]

(...) The market is frozen because fewer buyers/sellers that can afford the (4%) costs of moving. (...)

Listen to yourself. Can you imagine any better proof of a bubble?

People have a half a million house, but don't have £20k in savings.

Arrgee, it was a bubble. It's bursting now.

It's quite simple really. And quite clear. And becoming even clearer by the day/week, even for the general population. Thousands of pence are dropping everyday.

[Tired of Waiting]

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

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

And for any articular reason (data and/or argument) you would like to share with us?

[Tired of Waiting]

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

Because the longer you take to sell, shorter will be your hair cut.

Implicit in your post is your belief that prices will "recover". They won't. It was a bubble.

And as an increasing number of pent-up are finally understanding that, they will try to sell ASAP.

Edited January 12, 2011 by Tired of Waiting

[Pent Up]

And for any articular reason (data and/or argument) you would like to share with us?

According to my data for Essex there are currently more homes on the Market than there were last spring. We at roughly the same level as early summer. And January has already shown a pick in properties on the Market for 4 out 5 areas. Much earlier than I expected it to start.

Chelmsford +10 24hrs yesterday showed 192 new/alterations. Last year (summer) it averaged about 160.

Edited January 12, 2011 by Pent Up

[Tired of Waiting]

(...) prices will rise to peak again even if just through inflation (they are not that far off now)

Yes, I agree, nominal (through inflation) prices will surely at some point in the future go back up to 2007 levels. But even in this case it is better to sell now.

Suppose a 10 years scenario, 2 options:

1) Sell now, put all the money in a savings account, for 10 years.

2) Wait 10 years to sell.

After 10 years, which one do you think will will have more money?

[Tired of Waiting]

According to my data for Essex there are currently more homes on the Market than there were last spring. We at roughly the same level as early summer. And January has already shown a pick in properties on the Market for 4 out 5 areas. Much earlier than I expected it to start.

Chelmsford +10 24hrs yesterday showed 192 new/alterations. Last year (summer) it averaged about 160.

Thanks for the info Pent-Up. Great news.

Yes, like I wrote in a previous post in this thread, I was expecting that these next few weeks would make this trend very clear already.

Because those pent-up sellers who finally got it, must have realised also that the sooner they sell it the better. Like "sh!e, we better get out right now!"

My main fear is that I think the government has been informed (lobbied) about that, and is panicking, with even Clegg asking banks to lend more to FTB! Clegg! Doing a Brown! Using FTB as cannon fodder!

They must be really panicking there.

[Si1]

Listen to yourself. Can you imagine any better proof of a bubble?

People have a half a million house, but don't have £20k in savings.

Arrgee, it was a bubble. It's bursting now.

It's quite simple really. And quite clear. And becoming even clearer by the day/week, even for the general population. Thousands of pence are dropping everyday.

that's fightin' talk in la la house boom land!

boomers need cruises!

Edited January 12, 2011 by Si1

[arrgee1991]

Listen to yourself. Can you imagine any better proof of a bubble?

People have a half a million house, but don't have £20k in savings.

Arrgee, it was a bubble. It's bursting now.

It's quite simple really. And quite clear. And becoming even clearer by the day/week, even for the general population. Thousands of pence are dropping everyday.

Most people who have £500K house have a mortgage and possibly are not in credit to £20K. They may have savings but they are often dwarfed by the size of mortgage.

I would like to see a significant fall myself, but it is not happening where I live (east London/essex) for the type of property I want to buy. No one is selling larger properties because of the cost of purchase. Given the choice between a £30K loft extenstion and £30K fees to move (not to mention the difference in prices) , most opt for the former. We have had about 10 extensions done in our row of 50 houses last year and at least another couple (including mine) starting soon.

The original question is will pent-up supply flood the market this spring? From what I see it won't. Volumes will remain low even if prices crash. I suspect they will crash in some areas, but not all. And falling prices won't make people sell. Only when they bottom out as they did around 1993, do properties start to flood markets.

The bubble hasn't burst, it is slowly deflating.

[Pent Up]

Thanks for the info Pent-Up. Great news.

Yes, like I wrote in a previous post in this thread, I was expecting that these next few weeks would make this trend very clear already.

Because those pent-up sellers who finally got it, must have realised also that the sooner they sell it the better. Like "sh!e, we better get out right now!"

My main fear is that I think the government has been informed (lobbied) about that, and is panicking, with even Clegg asking banks to lend more to FTB! Clegg! Doing a Brown! Using FTB as cannon fodder!

They must be really panicking there.

I think that the thing in people minds will be more a fear of interest rate rises rather than house price falls. And in many cases this rise doesn't necerssarly mean a base rate rise as a friend of mine recenty found out. He's coming off a 5 year IO tracker which was a good rate. Now the best rate he has been offered is double what he is currently paying. Luckily for him they allowed him to stay IO or it would have been game over and also lucky for him he has around 30% equity or the rate would not have been so favourable. He is considering selling now to rent.

[arrgee1991]

Yes, I agree, nominal (through inflation) prices will surely at some point in the future go back up to 2007 levels. But even in this case it is better to sell now.

Suppose a 10 years scenario, 2 options:

1) Sell now, put all the money in a savings account, for 10 years.

2) Wait 10 years to sell.

After 10 years, which one do you think will will have more money?

The scenario you paint is only valid if you only see the house as an investment. I need somewhere to live with my wife and kids.

If I could sell the house and pay rent with the interest I would earn then fine.

But with the likelihood of getting less than 2% on my money, it's not an attractive prospect.

I'd rather have the house.

[Pent Up]

Most people who have £500K house have a mortgage and possibly are not in credit to £20K. They may have savings but they are often dwarfed by the size of mortgage.

I would like to see a significant fall myself, but it is not happening where I live (east London/essex) for the type of property I want to buy. No one is selling larger properties because of the cost of purchase. Given the choice between a £30K loft extenstion and £30K fees to move (not to mention the difference in prices) , most opt for the former. We have had about 10 extensions done in our row of 50 houses last year and at least another couple (including mine) starting soon.

The original question is will pent-up supply flood the market this spring? From what I see it won't. Volumes will remain low even if prices crash. I suspect they will crash in some areas, but not all. And falling prices won't make people sell. Only when they bottom out as they did around 1993, do properties start to flood markets.

The bubble hasn't burst, it is slowly deflating.

Where abouts are you exactly. I'm seeing an increase in properties for sale in Essex (central) as per my previous post.

The towns I monitor are:

Chelmsford/Writtle, Braintree, Brentwood, Billericay and Saffron Waldon.

I also keep an eye on Ongar although don't record data.

[winkie]

I think that the thing in people minds will be more a fear of interest rate rises rather than house price falls. And in many cases this rise doesn't necerssarly mean a base rate rise as a friend of mine recenty found out. He's coming off a 5 year IO tracker which was a good rate. Now the best rate he has been offered is double what he is currently paying. Luckily for him they allowed him to stay IO or it would have been game over and also lucky for him he has around 30% equity or the rate would not have been so favourable. He is considering selling now to rent.

+ 1 Bump....going to be a rough ride.

[Si1]

Where abouts are you exactly. I'm seeing an increase in properties for sale in Essex (central) as per my previous post.

The towns I monitor are:

Chelmsford/Writtle, Braintree, Brentwood, Billericay and Saffron Waldon.

I also keep an eye on Ongar although don't record data.

I suspect an element of both of what you are sayign is correct - house prices really ARE sticky, and somewhere like Essex with its access to the City doubly so

doesn't represent the whole country, and probably not even the whole of the South East

[arrgee1991]

I think that the thing in people minds will be more a fear of interest rate rises rather than house price falls. And in many cases this rise doesn't necerssarly mean a base rate rise as a friend of mine recenty found out. He's coming off a 5 year IO tracker which was a good rate. Now the best rate he has been offered is double what he is currently paying. Luckily for him they allowed him to stay IO or it would have been game over and also lucky for him he has around 30% equity or the rate would not have been so favourable. He is considering selling now to rent.

Big hikes in interest rates and job losses will force sales. Price fluctuation won't. It is probably fair to say that less than 5% of the population live in a property worth less than they have spent initially buying them (ignoring interest)

I bought in 1992 for £80K, then 9 years later sold for £170K to buy at £250K . My total outlay is £160K and my place is worth around £500K. I am still in profit with a 50% drop.

The flood and bubble burst won't happen until people are being dragged out of their homes. In 1992 I was driven around by EAs looking at repossession after repossession. That was due to job losses and redundancies. And that's what brought prices crashing down. This market is not there (yet).

[arrgee1991]

Where abouts are you exactly. I'm seeing an increase in properties for sale in Essex (central) as per my previous post.

The towns I monitor are:

Chelmsford/Writtle, Braintree, Brentwood, Billericay and Saffron Waldon.

I also keep an eye on Ongar although don't record data.

Wanstead/Woodford/Buckhurst Hill/Loughton

Not much new 4 bed + for sale in those areas. And what there is, is not great.

[Vagabond]

53%. But 47% of property owners believe prices will fall. And this share is increasing as we speak, well, type. And pent-up sellers are surely following the news on the subject much more closely than the polled property owners.

Some of these pent-up will decide to sell now. We just don't know how many.

What I am saying is that after 3 years of low volumes, we should have a couple of million pent-up sellers waiting around. With so many now starting to understand that prices will not "recover" up to bubble level, the main reason for delaying the sale has now gone.

I am sure we will have many more sellers this spring than we had in the 3 previous springs (and fewer buyers), we just don't know how many more. But if only half of those "47%" thinking prices will fall decide to sell in the spring market we could have some thing like half a million extra properties for sale in the spring market.

Market "sentiment" (prices expectations) are/will be key here. If we keep having negative indices and headlines, "this sucker" will start to go down this spring, Perhaps between 5 and 10%, or even more in some areas, before August.

I do actually agree with this, I just don't think it will happen so soon. The reason most people lose their shirts in a bubble is an inability to figure out they are fooked until its too late.

I'd say up to 5% by Aug is about right, then maybe up to 10% by the end of the year. I'm quite happy to be proved wrong FWIW.*

*Only on the low side though, obviously!

[winkie]

Big hikes in interest rates and job losses will force sales. Price fluctuation won't. It is probably fair to say that less than 5% of the population live in a property worth less than they have spent initially buying them (ignoring interest)

I bought in 1992 for £80K, then 9 years later sold for £170K to buy at £250K . My total outlay is £160K and my place is worth around £500K. I am still in profit with a 50% drop.

The flood and bubble burst won't happen until people are being dragged out of their homes. In 1992 I was driven around by EAs looking at repossession after repossession. That was due to job losses and redundancies. And that's what brought prices crashing down. This market is not there (yet).

What is stopping banks hoarding repossessions?, I believe that is what they are doing in parts of Europe....if the homes were released en masse onto the open market prices would plummet......drip, drip.

[Si1]

It is probably fair to say that less than 5% of the population live in a property worth less than they have spent initially buying them (ignoring interest)

no it isn't fair to say this at all

I bought in 1992 for £80K, then 9 years later sold for £170K to buy at £250K . My total outlay is £160K and my place is worth around £500K. I am still in profit with a 50% drop.

supposing your average date of putting this money down in 1996, then inflation has been a total of 40% since then, so in real terms inflation adjusted you have put down about £220k. that makes a 30k profit over 14 years, (250/220)^(1/14) gives <1% annualised asset gain, which would make it an awful investment point to point in this scenario

at 500k it is a really really good investment in this scenario factoring in implied dividend rental-savings, giving a 6% annual gain PLUS dividend

at 325k it would seem fair value with a growth of 3% per year PLUS dividends, which is close to the long term FTSE pattern, maybe 350k fairer, swings and roundabouts

but when you go on about a 50% drop leaving you in profit it begs the question - compared to what, a hole in the ground?

The flood and bubble burst won't happen until people are being dragged out of their homes. In 1992 I was driven around by EAs looking at repossession after repossession. That was due to job losses and redundancies. And that's what brought prices crashing down. This market is not there (yet).

it may never get there. it may just be a boiling frog

[Si1]

The reason most people lose their shirts in a bubble is an inability to figure out they are fooked until its too late.

great quote

[Tired of Waiting]

The scenario you paint is only valid if you only see the house as an investment. I need somewhere to live with my wife and kids.

If I could sell the house and pay rent with the interest I would earn then fine.

But with the likelihood of getting less than 2% on my money, it's not an attractive prospect.

I'd rather have the house.

The 2 scenarios were just to compare 2 forecasts: HPrices and saving rates (a real life proxy for inflation). Of course it was not to be "lived in". It was an analytical tool, and an indication that real prices will never again be as high as they are now.

You think savings accounts will pay only 2% per month for the next 10 years?!