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Could it be that the fact that first time buyers are at their lowest in well over a decade means that the cheaper houses are not the ones that have been sold?

In other words:

the kind of homes that a first time buyer would buy - at the bottom of the ladder -have largely dropped out of the turnover of house sales which the Halifax and Nationwide's figures report. Thus a larger proportion of the houses used in their indices are the larger more expensive homes which people in their middle ages (having already been on the 'ladder') are selling (and buying). Hence the indices have not fallen as much as the reality they profess to represent (obviously there are other factors as well - i.e. they are lagging indicators reflecting 3-5 months ago)

Does that make sense? - or have I missed something?

:ph34r:

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I agree with the analysis but it goes a number of different ways though.

Imagine that we are in a bull market ... everyone piling into the market buying small flats that can be rented out.

If more small properties were being bought and sold than the large properties, the average asking price indices and the actual achieved prices indices will all show a low value (maybe lower than the norm where the high priced houses affect the prices). Would we say that that was a bear market? no, because we would/should all know better...

Statistics are meaningless without an understanding of the trends, the spread of the statistics, the timescale it covers etc... (which, I know, is your point).

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Could it be that the fact that first time buyers are at their lowest in well over a decade means that the cheaper houses are not the ones that have been sold?

In other words:

the kind of homes that a first time buyer would buy - at the bottom of the ladder -have largely dropped out of the turnover of house sales which the Halifax and Nationwide's figures report. Thus a larger proportion of the houses used in their indices are the larger more expensive homes which people in their middle ages (having already been on the 'ladder') are selling (and buying). Hence the indices have not fallen as much as the reality they profess to represent (obviously there are other factors as well - i.e. they are lagging indicators reflecting 3-5 months ago)

Does that make sense? - or have I missed something?

:ph34r:

Yes BT their methodology has always puzzled me but i think it does allow for the size of houses in the sample............However i have always wondered whether areas are given weightings according to the NUMBER of houses in the area rather than just those sold.......You see an area still rising will have more tranactions than a similar-sized area where the market is stagnant or falling thus giving it a greater influence on the national figure....

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Another reason could be that every index we look at Halifax,Nationwide,OPMD,Hometrack,RICS and Rightmove have a massive interest in keeping the market rising!

Wot taking a lead from there leader Mr Blair and cooking the books, never ! :lol:

starting to sounds a bit like my tax return were I try my best to starve them of funding

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Its likely that case also that collapsing chains are distorting the figures.

Halifax, Nationwide and Hometrack use figures from sales agreed at the mortgage approval stage of house buying. These do not represent actual sales though when the chain collapses. You might expect collapsing chains to:

a)be the ones with higher agreed sale prices

b)be devoid of the cheaper properties which FTBs typically buy

compared to completing chains. This would bias the indices upwards.

This seems reasonable but could be wishful thinking. It'll be interesting to compare these indices with Land Registry figures (which do represent genuine sales) for 2004Q4, due soon.

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Guest wrongmove
Could it be that the fact that first time buyers are at their lowest in well over a decade means that the cheaper houses are not the ones that have been sold?

Most of the figures are "mix adjusted" which should remove this sort of influence.

Could it be that only "greatest fools" are left. Anyone buying now is still bullish, and probably think they have a bargain because they managed to knock 1% off the asking price.

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I maintain that the overinflated figures from NW and HF are simply because their indices are a reflection of the properties that are still selling - the desirable stock, rather than the dross that nobody wants. BTL is dead, so it is only homes rather than investments that are being sold - that means houses in good areas in mint condition that buyers genuinely have their hearts set on - and are willing to pay that little bit extra for.

75% of properties are dross and have already lost 10% or more from peak value - but this will not show up on HP indices simply because they are not selling and therefore not contributing to the figures!

One thing that Rightmove is great for (and especially so in the last 4-5 months) is that many more instructions have extra interior pictures. Pre-summer 2004, EAs wouldn't need to bother with that - a house would sell itself - so it's a sign of the times. Just looking at the majority of them is enough to put you off - garish colours, nasty patterned wallpaper, tatty furniture, etc. It's amusing when you see a 170k house for sale and the interior looks like a B&B.

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Not forgetting that, at peak, vendors could expect maybe 100% - 120% of the asking price for their home.

We (well, those of us who did not buy property last year) might well look back at this and wonder if it was a fantasy, visions of Kirsty and Phil saying "gotta move quick, it'll be gone by tomorrow" - and indeed sometimes it was.

Now it's more like 90%. A significant drop, it's often quoted that HPs don't fall say 10 - 20% "overnight". However that's pretty much what happened - not overnight, but in a very short space of time.

If HPs are "down 4%" versus peak (example) than does that mean they're actually "down 14%" versus peak?

Asking prices haven't moved very far yet (down 10 - 15% locally, we had a later peak) but actual sale prices seem to be doing so judging by the data.

In real terms, a vendor on this estate will in theory have lost about 20% versus peak already. This in a market where the fundamentals are apparently 'sound' according to the VIs and rates are very low. Thoughts...?

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If you look at our house as an example (we rent it so it's actually our landlords).

Last year a simular house sold in our street for £233k (June '04), up for £250K. Needed work doing to it whereas ours had been refurb'd by the landlord. This prompted our landlord to put the house on the market for £250K in July.

The house is now multi agency and been reduced to £228K then £215K. He won't get more than £200K according to the EA who took it on as a mutli agency in October, so he'll probably realise less now.

It's only when stock like this starts to sell will the average price start to fall. Where we are in Chelmsford we keep an eye on all the property within 1/2 mile radius using rightmove. Very little has sold over the last six months, due to vendors keeping last years peak prices. Something will give eventually.

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Most of the figures are "mix adjusted" which should remove this sort of influence.

Could it be that only "greatest fools" are left. Anyone buying now is still bullish, and probably think they have a bargain because they managed to knock 1% off the asking price.

Nah, can't be true. Spencer and Alsop knocked 1% of the house they 'negotiated' for a couple to buy on Lx3 last week, and they're no mugs! :lol::lol::lol:

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The quality of analysis on this site has really taken a tumble. can all you newbies try a little harder to keep up the standards? You can't forever rely on the old lags to keep correcting and informing you.

Here's what you should have looked up:

HALIFAX METHODOLOGY:

"The indices calculated are 'standardised' and represent the price of a typically transacted house. The need for 'standardisation' arises because no two houses are identical and may differ according to a variety of characteristics relating to the physical attributes of the houses themselves or to their locations.

In summary, prices are disaggregated into their constituent parts using a commonly used statistical technique called multivariate regression analysis. This allows values to be attributed to the various qualitative characteristics (type of property, region, etc.) and quantitative characteristics (age of property, number of habitable rooms, garages, bathrooms, etc.) of a property."

As to why Halifax keeps a marching, it is well known (apart from amongst you newbies) that Halifax has a Northern bias. Go figure.

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