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Comedy Article From The Lincolnshire Echo!

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However, in many cases this is not an example of the values of houses falling, but more a realistic approach to the asking prices.

On the way up we might have read that:

However, in many cases this is not an example of the values of houses increasing, but more an unrealistic approach to the selling prices.

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I just had a quick look to see exactly who this Andy Wilson character is and - surprise, surprise - he's not the independent observer and friend of the FTBer his letter might suggest.

His firm offers:

MORTGAGES: Residential, Commercial, 100% Schemes, Equity Release/Reversion Schemes, Re-mortgages, Competitive Rates.

I, therefore, sent a short email to him at andy@trfs.co.uk :

Dear Mr Wilson,

I write in reference to your letter to The Lincolnshire Echo and reproduced on the 'thisislincolnshire' website.

In this, you say, "The true definition of a house price fall is where someone buys a house for a certain amount but then has to actually sell the house again later for a lower figure."

You must realise that this is nonsense.

A house bought, say, in 1950 for one thousands pounds might have been valued in 2004 (based on similar recent sales) at 150,000 pounds. If it then sold in 2005 for 100,000 pounds would this not represent a house price fall?

Surely the truly accurate definition of a house price fall is when a house sells for less than had recently been achieved for similar houses in similar areas?

I certainly can find no evidence of your having objected to sales over the last few years being used as evidence of general house price rises, so why object when this same practice begins to suggest house price falls?

You also say, "...if wages increase by more than the house prices we may see first-time buyers being able to afford to buy their first homes once again."

Indeed, but you must be aware that house prices are now so out of sync with wages that (truly) independent observers suggest it would take the best part of a decade for wages to catch up. Do you seriously think it is likely that house prices can stagnate for so long?

As has ever been the case, the market will indeed, as you say, "finds its own level" - but this level may well be far below today's, and your firm's 100% mortgage deals are going to be a noose around the neck of anyone who is foolish enough to take you up on the offer.

Yours sincerely,


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"If you try to sell your house for £200,000 but have to reduce the asking price by £10,000, the value hasn't fallen at all; only your expectations, which may have been excessive in the first place."

How foolish of us all!

I propose we rename this site HousePriceExpectationCrash.co.uk. If we all started talking about how "expectations" were crumbling then the sages of Lincolnshire would no doubt agree and back us to the hilt.

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This guy has mixed up price and value. The two are different. The price is the voluntary exchange value that will clear the market. The value is a notional price that can be arrived at by some rational exercise (e.g. taking the typical rent for a house and finding the price that woudl give a 9-10% yield).

In his example we only know the price after the sale (and even then we dont know the price becasue we have to wait till the market clears - along time for houses). He is correct that the value may not have changed. But in any case it was way lower than than the price.

This is, of course, what frequenters of this site intuitively recognize. That the price of houses currently is massively out of line with any rational derivation of their value.

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That is my local wrag, Lincoln is an awful place, normal headlines are such as 'lawnmower stolen from shed' or 'Local man battles influenza'.

Basically it was a rural backwater with steady and cheap sales, but was awoken to the growth in th emarket everywhere else coupled with a doubling of the size of the University (read polly).

Things are on there **** big time here, nothing is moving. It is gonna be a big fall next year, it took me over a year to sell and the house went on in July 2003. The lower end of the market was the most bouyant with people BTL for students, now there is an oversuply. Local people here earn £15k on average, Lowest rpice livable house is around £110k.

They will do anything to revive the market. Hnece this very silly article, it is typical of the mentality here.

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