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Lone_Twin

Price Discovery

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As posted in another thread yesterday there is some consensus that the market has already

moved enormously in terms of supply and demand levels but that this is not being fully reflected in asking prices.

.

We all know that house prices are much more sticky than say share prices due in part to trading timings and also due to the unusual way (as compared to most other purchases and "investments") people buy and hold property which will see them buy it at costs beyond their means and sacrifice many/most other out goings before they part with it.

.

The pin that pricks the inflated values put on anything is the Price Discovery Event, a thing is sold in a open market and achieves a certain price which is the lowest the buyer can get and the highest the vendor can get. This helps set price expectations in the market.

.

There are concerted efforts to stop the ocourance of PDEs which would help drive the market downwards especially in the USA: http://www.slate.com/id/2184488/

.

What methods could those with vested interests in keeping prices high use to minimise or disguise PDEs either nationally or in a given area?

.

Here's my initial thoughts on things we have seen so far.

1) New builds offering incentives like cars in place of a discount.

2) Moving PDE to an alternate market (a big reason why banks use auctions for repossessions I believe)

3) Tolerance of arrears by the mortgage lenders to prevent foreclosure.

.

ST

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I'm getting so frustrated over here (Northwood/Pinner/Ruislip)..asking prices went up again and houses are still selling..only the overpriced shit holes are not.....

Edited by Monopoly

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IMO

stagnating prices and higher credit costs, will stall consumer spending sharply.this is feeding through the whole system.Many state that house prices wont drop due to high employment, but i believe high house prices will cause the high unemployment as well as much lower buisness profits.

While consumer spending slows, credit costs are rising this is a classic destruction of spending power that can only feed through with unemployment rising.This is when the market will realy crash badly.

housing will crash as the credit crunch and stagnating house prices starts causing lower profits and unemployment.they are all gonna chase each over down.

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As posted in another thread yesterday there is some consensus that the market has already

moved enormously in terms of supply and demand levels but that this is not being fully reflected in asking prices.

.

We all know that house prices are much more sticky than say share prices due in part to trading timings and also due to the unusual way (as compared to most other purchases and "investments") people buy and hold property which will see them buy it at costs beyond their means and sacrifice many/most other out goings before they part with it.

.

The pin that pricks the inflated values put on anything is the Price Discovery Event, a thing is sold in a open market and achieves a certain price which is the lowest the buyer can get and the highest the vendor can get. This helps set price expectations in the market.

.

There are concerted efforts to stop the ocourance of PDEs which would help drive the market downwards especially in the USA: http://www.slate.com/id/2184488/

.

What methods could those with vested interests in keeping prices high use to minimise or disguise PDEs either nationally or in a given area?

.

Here's my initial thoughts on things we have seen so far.

1) New builds offering incentives like cars in place of a discount.

2) Moving PDE to an alternate market (a big reason why banks use auctions for repossessions I believe)

3) Tolerance of arrears by the mortgage lenders to prevent foreclosure.

.

ST

In terms of holding up the price of new-builds, I recall looking at prospective retirement houses for my parents around 1994/5. One of the lesser-trumpeted offers on the table at the site was "we will pay your negative equity off on the house you're selling !"

I'm sure most builders would blanch at putting that on an advert - it's sort of way too self-defeating... but it seems they were much happier to sell the new property closer to the asking price, and pay the deal-blocking NE off (subject to limits of course). I've no idea how the money worked in practise, as presumably the builder had to either subsidise the purchaser of the previous property or agree to give the prospective buyer a cheque to pay the NE off at completion.

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The better half asked me last night (whilst we were talking about eventually giving up looking for a house), if houses are not worth the prices that they are, at present, and banks are tightening up on their lending criteria then how come some of the houses are still being sold. We have viewed some of the houses that now appear on the land registry data. The prices that they have gone for we would never have offered, knowing what need doing to them.

Obviously I wouldnt know what the buyers deposit was but if things are going to get bad then why are the banks still valuing houses as being worth what they are? All I could say to him was that the land registry data was for sales that were made last year in prob Nov time.

Does anyone know if banks are now refusing mortgages to people based on the state of the house? The buyers may have the means to borrow the money and have a deposit (say 10%) but surely the banks are protecting themselves by giving low valuations on properties now?

Sorry if this was a bit waffley but I'm supposed to be working not surfing!

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The better half asked me last night (whilst we were talking about eventually giving up looking for a house), if houses are not worth the prices that they are, at present, and banks are tightening up on their lending criteria then how come some of the houses are still being sold. We have viewed some of the houses that now appear on the land registry data. The prices that they have gone for we would never have offered, knowing what need doing to them.

Obviously I wouldnt know what the buyers deposit was but if things are going to get bad then why are the banks still valuing houses as being worth what they are? All I could say to him was that the land registry data was for sales that were made last year in prob Nov time.

Does anyone know if banks are now refusing mortgages to people based on the state of the house? The buyers may have the means to borrow the money and have a deposit (say 10%) but surely the banks are protecting themselves by giving low valuations on properties now?

Sorry if this was a bit waffley but I'm supposed to be working not surfing!

Answer: The world is full of idiots. Some of them can get a mortgage.

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Answer: The world is full of idiots. Some of them can get a mortgage.

Thanks for that answer. :lol: It brightend up what has been a bit of a crappy day so far.

I should have realised the answer myself really................. it was staring me in the face all the time. A bit like the idiot I sit opposite. Always laughs a me saying that how do I expect to get the house I want for the price I'm willing to pay. I'll show him ................ one day. Might spit in his tea whilst he's away from his desk later!!!

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As posted in another thread yesterday there is some consensus that the market has already

moved enormously in terms of supply and demand levels but that this is not being fully reflected in asking prices.

.

We all know that house prices are much more sticky than say share prices due in part to trading timings and also due to the unusual way (as compared to most other purchases and "investments") people buy and hold property which will see them buy it at costs beyond their means and sacrifice many/most other out goings before they part with it.

.

The pin that pricks the inflated values put on anything is the Price Discovery Event, a thing is sold in a open market and achieves a certain price which is the lowest the buyer can get and the highest the vendor can get. This helps set price expectations in the market.

.

There are concerted efforts to stop the ocourance of PDEs which would help drive the market downwards especially in the USA: http://www.slate.com/id/2184488/

.

What methods could those with vested interests in keeping prices high use to minimise or disguise PDEs either nationally or in a given area?

.

Here's my initial thoughts on things we have seen so far.

1) New builds offering incentives like cars in place of a discount.

2) Moving PDE to an alternate market (a big reason why banks use auctions for repossessions I believe)

3) Tolerance of arrears by the mortgage lenders to prevent foreclosure.

.

ST

So you think for a 4 bed semi they will stretch to a DB9? Always wanted one.

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So you think for a 4 bed semi they will stretch to a DB9? Always wanted one.

I wonder what the terms are on the things like the cars/white goods/ etc....

.

Eg. if you got repossessed would the mortgage company have first dibs on the Car or would

all your creditors have equal rights?

.

ST

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If you sell to one of those sell and rent back companies, does that get listed as a normal sale? If so, the VIs/Government could fiddle this in some way so that it is not classed as a normal sale. Council buy-ups of newbuilds (the much predicted 'slums of the future' scenario) could also be classed as off-record sales and kept out of the stats.

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As posted in another thread yesterday there is some consensus that the market has already

moved enormously in terms of supply and demand levels but that this is not being fully reflected in asking prices.

.

We all know that house prices are much more sticky than say share prices due in part to trading timings and also due to the unusual way (as compared to most other purchases and "investments") people buy and hold property which will see them buy it at costs beyond their means and sacrifice many/most other out goings before they part with it.

.

The pin that pricks the inflated values put on anything is the Price Discovery Event, a thing is sold in a open market and achieves a certain price which is the lowest the buyer can get and the highest the vendor can get. This helps set price expectations in the market.

.

There are concerted efforts to stop the ocourance of PDEs which would help drive the market downwards especially in the USA: http://www.slate.com/id/2184488/

.

What methods could those with vested interests in keeping prices high use to minimise or disguise PDEs either nationally or in a given area?

.

Here's my initial thoughts on things we have seen so far.

1) New builds offering incentives like cars in place of a discount.

2) Moving PDE to an alternate market (a big reason why banks use auctions for repossessions I believe)

3) Tolerance of arrears by the mortgage lenders to prevent foreclosure.

.

ST

How about a planned brainwashing program over ten years? Somewhere along the line houses became seen as very very valuable assets, and many people did things to get them that they would not normaly do, and if given a scenario based question before the boom would have sworn that they would never pay the multiples they did for a house. It has happened before, people lose all sense of rationality and proportion (Jonestown, stanley milgram experiments etc) if primed in the right way and exposed to the right level of social proof People seem programed to herd with the other sheep. As discussed on here the asset class has changed, Tulips being one that we can laugh at now, but at the time getting into Tulips probably was every bit as necessary as getting into property has been for many over the last few years, and will be laughed at even harder in the future. The thing we need to be aware of is that the bread and butter of the rabble we see every PMQ`s is controling other people by your rhetoric and how you deliver it.

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The wheel has turned and the cycle has ended, nothing can change that now. There will be continuing attempts to patch the dike but they are doomed to fail. It is a myth that house prices are 'sticky on the way down' - they can no more defy gravity than did the walls of Jericho. Consider the combined global mortgage debt and ask yourself how any one person can hope to prop that up?

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The wheel has turned and the cycle has ended, nothing can change that now. There will be continuing attempts to patch the dike but they are doomed to fail. It is a myth that house prices are 'sticky on the way down' - they can no more defy gravity than did the walls of Jericho. Consider the combined global mortgage debt and ask yourself how any one person can hope to prop that up?

The market does not rely on one person but it does rely on the few...

Those at the margins.

.

If you can control or hide the marginal price setting you can control

the market. You don't have to pay everyone's mortgage just those

at risk of default.

.

Not saying it can be done in this case but market control is not impossible.

.

ST

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The market does not rely on one person but it does rely on the few...

Those at the margins.

.

If you can control or hide the marginal price setting you can control

the market. You don't have to pay everyone's mortgage just those

at risk of default.

.

Not saying it can be done in this case but market control is not impossible.

.

ST

when word gets out that houses are not a one way ticket to the end of the rainbow, the stream of defaults will shock even the most cynical poster on here.

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I'm getting so frustrated over here (Northwood/Pinner/Ruislip)..asking prices went up again and houses are still selling..only the overpriced shit holes are not.....

Where do you think people are getting the money from? How much is a 3 bed terrace in Ruislip Manor these days?

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One of the greatest ways of hiding the Price Discovery Moment is the time lag between accepted offer and the sale getting onto sites like nethouseprices. A sequence of:

Offer>Offer Accepted>Chains sorted>Contracts exchanged>Date of Completion> Solitor files Data to Land Registry> Land Registry process data > Land Registry publish data (in dollops, I think) so wait till next dollop>web sites load up the data> Folk take time to discover the new data.

How long's that? Could be 6 - 12 months.

Now, here's the interesting thing!!! This time lag will work in our favour once the correction is in motion (i.e. now).

There have been threads on here about 'how can you tell when the market has hit bottom'. The answer, of course, is 6 - 12 months after the bottom has been hit.

But.....The bottom cannot really be reached as long as the LR is reporting falling prices from a few months ago because potential buyers will keep offering lower prices based on the out-of-date data. This is what will cause an overshoot in the correction.

You will just need to use your judgement, gut feeling and a throw of the dice to spot where the bottom really is.

But remember, "The lag is your friend on the way down"

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Price discovery can`t be delayed, people already know, but because "They" and "Experts" have said that the housing market magically creates money, people will now want "them" and "experts" to sort the coming mess out. If they don`t there will be a massive kick off that makes the trouble connected to 24 hour licencing look like the teddy bears and their mates meeting to make jam(for the picnic)

Edited by dances with sheeple

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One of the greatest ways of hiding the Price Discovery Moment is the time lag between accepted offer and the sale getting onto sites like nethouseprices. A sequence of:

Offer>Offer Accepted>Chains sorted>Contracts exchanged>Date of Completion> Solitor files Data to Land Registry> Land Registry process data > Land Registry publish data (in dollops, I think) so wait till next dollop>web sites load up the data> Folk take time to discover the new data.

How long's that? Could be 6 - 12 months.

Now, here's the interesting thing!!! This time lag will work in our favour once the correction is in motion (i.e. now).

There have been threads on here about 'how can you tell when the market has hit bottom'. The answer, of course, is 6 - 12 months after the bottom has been hit.

But.....The bottom cannot really be reached as long as the LR is reporting falling prices from a few months ago because potential buyers will keep offering lower prices based on the out-of-date data. This is what will cause an overshoot in the correction.

You will just need to use your judgement, gut feeling and a throw of the dice to spot where the bottom really is.

But remember, "The lag is your friend on the way down"

people who need a mortgage can only offer what the bank is willing to lend tbem. It looks like we are going back to 3 times income? Sellers , just look upon this as a financial and life lesson.

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I wish I could agree. But comments to your post in colour.

Price discovery can`t be delayed, [yes it can. Read the examples in this post]

people already know, [i wish! But they take time to catch up. They haven't all visited this site]

but because "They" and "Experts" have said that the housing market magically creates money, people will now want "them" and "experts" to sort the coming mess out. [Not until the Price Discovery Moment has been universally acknowledge]

If they don`t there will be a massive kick off that makes the trouble connected to 24 hour licencing look like the teddy bears and their mates meeting to make jam(for the picnic) [it's about the market, not about changes to Govt laws, such as changes to licencing regulations. Doesn't affect the Price Discovery Moment]

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The market does not rely on one person but it does rely on the few...

Those at the margins.

.

If you can control or hide the marginal price setting you can control

the market. You don't have to pay everyone's mortgage just those

at risk of default.

.

Not saying it can be done in this case but market control is not impossible.

.

ST

Maybe by the Housing Plunge Protection Team :ph34r: A shadowy group of banks and mortgage companies that buy houses to keep the prices up...

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people who need a mortgage can only offer what the bank is willing to lend tbem. It looks like we are going back to 3 times income? Sellers , just look upon this as a financial and life lesson.

Interesting, but you've changed the subject to "What I can afford Discovery Moment". It will help though.]

I don't think sellers are going to be using this much for their own personal development...

"It's been so illuminating losing money on that house I bought. It's really taught me a few lessons; and I'm a much better, more rounded individual as a result."

/startsarcasm/ Yeah, they'll all be saying that in a couple of years' time. /endsarcasm/

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Ok, i'll try again.... Nobody seemed to appreciate the shear beauty of this post at the weekend. If this threads not the one either I'm going down the garden to buy an executive city centre appartment....

Don't forget that it is actually in the banks interest for their borrowers to suffer negative equity.

By way of example,

- A householder with 25% equity may pay a rate of 5%

- A householder with 10% equity may pay around 6%

- A householder with 0% equity may be considered subprime and borrows at around 7%

- Logically, then a householder with negative equity would pay 8% (well ok, the lenders SVR).

By restricting the amounts lenders are prepared to lend, the money available to purchase any given property falls. Thus the market value of the property is forced to fall.

A property which was purchased with a 100% mortgage of 100k in 2006 would by now (2008) have increased in value to a nominal 130k. The owner holds a nominal 30K or around 26% equity and would be able to borrow at 5% using the above example.

By restricting the mortgage loan available to a potential buyer to 100k, the mortgage valuation would reflect that the market is currently only able/ prepared to pay 100k. The owner possesses zero equity above the repayment made on the mortgage and must borrow at 7%.

A lender would much prefer the second situation - a 7% return as opposed to a 5% return.

Factor in house price falls and the buyers who fronted a 10% Deposit would have no equity should the market fall by 9% below there purchase price, changing the lending condition from 6% to 7% at renewal. An extra 1% in the hand.

The much discussed credit crunch means banks need to increase their cash reserves. Lending at a higher rate is one method of achieving this.

Ok, this pushes more householders towards default and bankruptcy but it seems that the current years results are significantly more important than any long term plan and it is likely to take at least a year from a borrower struggling to pay to defaulting to the point of repossession (plenty of credit cards still available despite the crunch).

Defaulting on mortgage allows extra charges, so more money for the bank. Then the banks go easy on those borrowers who may have a chance of maintaining some form of payment by moving to interest only. Some obviously go bankrupt (banks worst option), but as long as this can be minimised, the bank may survive. The longer this can be played out for, the longer the bank is being paid for a loan at subprime rates, the more capital it accrues. In a few years, when all other avenues have been explored, the potential loss from repossession is lower, and the bank is more able to do so without huge losses.

It will, however, be a very fine balancing act to achieve, and not without risk to the banks.

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Maybe by the Housing Plunge Protection Team :ph34r: A shadowy group of banks and mortgage companies that buy houses to keep the prices up...

... such as shitey inner-city newbuild blocks, at whatever the sellers think they are "worth", for relaunching as social housing because the govt. is so solicitous towards the "undeserving" poor? They wouldn't, would they, ... the b4stards ...?

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  • 294 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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