Transactions Hit Lowest Level Since Records Began - R I C S

[Realistbear]

http://www.telegraph.co.uk/money/main.jhtm...5/ymrics115.xml

Housing transactions slump to lowest in 30 years, says RICS

By Paul Farrow

Last Updated: 7:59am BST 15/07/2008

The number of homes changing hands has slumped to its lowest level since records began 30 years ago.

According to the Royal Institute of Surveyors, estate agents sold an average of just 15 properties each during the three months to the end of June - the lowest level since the Royal Institution of Chartered Surveyors (RICS) began collecting data in 1978.

RICS said that stricter lending criteria from banks and building societies have left many people unable to get a mortgage. Estate agents now have an average of 84 unsold properties on their books, compared with just under 90 in May, after new instructions fell for the sixth month in a row.

Prices falling at fastest rate since 1990s...../

"Sellers are reluctant to reduce prices and are under no real pressure to sell. Buyers are sitting and waiting. The net result is very few transactions."

What RICS say is probably true. Sub-prime loans have all but gone, banks are insisting on sensible down payments and job losses loom on the horizon. Add to that the now general awareness that prices are indeed falling and you quickly see why no one is buying. However, there will soon come a point when houses MUST be sold. Re-sets, job losses, credit crunch etc. will all combine to cause sellers to dump their properties as quickly as they can causing a stampede as each seller chases the market down. We are yet to see the credit crunch have its full impact on the wider economy as the last vestiges of Brown's miracle slowly begin to flicker and burn out.

We should see a large number of EAs shut shop harvest time this Autumn and the cold chill of winter starts blowing an ill wind.

Edited July 15, 2008 by Realistbear

[uptherebels]

A "selling frenzy" would surely be spun as a buying frenzy.

[Realistbear]

A "selling frenzy" would surely be spun as a buying frenzy.

The selling will probably be back to the building societies who will either have to hold them for better times or they will go to auction for pennies on the pound. NuLabour had better be ready with mass social housing to place the sellers who had to sell or who were evicted as part of reposession.

[General Melchett]

Got up this morning and flicked on the radio in my kitchen.... It had been left on Magic last night..... Before I could retue to the Humph, the two muppets on there were coming over all happy-DJ-like about how the RICS report was showing a house price recovery in London 'because more properties were coming on the market.' If this is representative of the thought processes in the general population...... I'm shocked, dismayed, depressed, fearful for our future as a country............

[Objective Developer]

So, the standoff begins. Who flinches first?

I think the banks will have the final say on this. When sellers have reduced asking prices to an acceptable level (of risk to the bank) then they will open the market again.

I for one don’t see that happening any time soon as most of the banks have some serious housekeeping to do at the moment; the last thing they need is to add to the trouble by lending into a falling market will a backdrop of rising unemployment and a deflationary recession (if that is what will happen?).

What a mess.

[alabala]

Got up this morning and flicked on the radio in my kitchen.... It had been left on Magic last night..... Before I could retue to the Humph, the two muppets on there were coming over all happy-DJ-like about how the RICS report was showing a house price recovery in London 'because more properties were coming on the market.' If this is representative of the thought processes in the general population...... I'm shocked, dismayed, depressed, fearful for our future as a country............

Friend of mine jut told me this morning how the Property Market is recovering, listening to these Muppets...This is Criminal what they are doing...

Just look at the US, it's not a matter of Sub-Prime, everything is falling apart, and yet in Britain we have recovery already, what a joke...Listen to the radio and buy, buy, buy...

[ParticleMan]

However, there will soon come a point when houses MUST be sold.

RB - when you consider how much of the real economy has been hoovered up by this bubble in collatoralised lending (and its evil twin, consumption spending - a polite way of saying household deficit spending) - you'll realise that the norm in the new distribution will be "must sell" rather than "won't sell" (the latter is just as likely to be a statistical outlier as "won't buy" was, in the run-up).

To put it another way, is there any sector of employment which has not tracked its growth along this function (of artificially boosted leverage levels) in the last half decade? It doesn't take too many neurons to work out what happens as the bubble deleverages...

[Guest pioneer31]

There was a (P)RICS guy on Breakfast News this morning, trying desperately to underplay the state of affairs.

Yes it's bad but the lower prices are opportunities for FTB's and investors.

He also mentioned 'bargains'.

We're light years away from Bargains

[right_freds_dead]

Goto last unread Transactions Hit Lowest Level Since Records Began - R I C S

The lull before the sell-off frenzy begins

and how are the buyers going to pay for all these distressed sales ?

[interestrateripoff]

However a must sell price is going to leave huge losses. When I bought my first house I put down 10% deposit which was about £3500 now if your looking for that level of deposit house prices are going to have to fall by massive amounts as people simply haven't got 10% deposits for houses costing £150K.

If the banks are going to take huge losses they won't have the money to fund the new sale. It's a catch 22, to sell the house you need a low price, a low price gives the banks a big loss, if the bank loses money it won't have the money to lend meaning the sale won't be made.

I think we may see something even worse than a crash complete stagnation of the market with no houses selling. If the banks repossess what are they going to do with empty houses?

Empty houses breed crime so a lot of estates are going to see a huge crime wave and we may see what's happened in the US empty houses getting stripped of copper pipes, which gives the banks an even bigger headache.

Greed you gotta love it.

[ParticleMan]

if the bank loses money it won't have the money to lend

Central banks are absolutely committed to keeping the (banking) system liquid. This is precisely what the BOE's new facility is all about - exchanging illiquid securities for liquid securities.

edit to add: I'd consider it highly likely that banks lending to new borrowers will boost yield (lending rates) to compensate for the impairment to existing asset prices

Edited July 15, 2008 by ParticleMan

[pepsi]

However a must sell price is going to leave huge losses. When I bought my first house I put down 10% deposit which was about £3500 now if your looking for that level of deposit house prices are going to have to fall by massive amounts as people simply haven't got 10% deposits for houses costing £150K.

If the banks are going to take huge losses they won't have the money to fund the new sale. It's a catch 22, to sell the house you need a low price, a low price gives the banks a big loss, if the bank loses money it won't have the money to lend meaning the sale won't be made.

I think we may see something even worse than a crash complete stagnation of the market with no houses selling. If the banks repossess what are they going to do with empty houses?

Empty houses breed crime so a lot of estates are going to see a huge crime wave and we may see what's happened in the US empty houses getting stripped of copper pipes, which gives the banks an even bigger headache.

Greed you gotta love it.

I think you are right. For there to be massive reductions someone has to take the loss. I'm not sure that the banks are in any position to take the hit without the whole system going down. There is some manoeuvring to get a better position (e.g. to persuade people to take their potential bad debts elsewhere - as in the Northern Rock "rescue plan"). I think there will be a reluctance to force re-sale if it looks like the returns are going to be small. Currently there is just a rush to find anyone to off-load some of these assets to.

Sadly I think that there is a chance that the whole pack of cards is going to come down.

[interestrateripoff]

Central banks are absolutely committed to keeping the (banking) system liquid. This is precisely what the BOE's new facility is all about - exchanging illiquid securities for liquid securities.

But it isn't working is it? They have upped the lending criteria so much people now can't afford to borrow. So to bring the balance house prices are going to have to drop through the floor. This would mean my old house which was on the market the last time I looked for £135k is going to have to drop to around the £40k-£50K bracket to get a sale, they paid me £124k for it, that would mean them taking a £75k+ loss you seriously think individuals have that sort of money to lose? Your telling me people would accept paying £75k back to the bank for something they don't own?

Edited July 15, 2008 by interestrateripoff

[Icantbelieveitsnotbutter]

Every bear market has a succession of failed rallies - hope springs, money goes in, the rally faulters, prices slip, hope springs....etc. Each time there is less appetite for the rally...

So easy money gets sucked in to a succession of failed rallies, until we reach a floor which is absent any speculation or hope, just need. As each attempt to rally the market fails, existing owners one by one lose hope and drop prices to find the new clearing price. Normally the process only starts once an economic slowdown has begun in earnest. It has started early this time as excess speculation runs for the doors first. We have yet to see the main event, the mainstream market succumbing to the economic downturn, after a lag to allow the reality to sink in and bad debts to mount.

We are still in the early days. Without several failed attempts to rally the market we won't see the reality sink in.

[ParticleMan]

But it isn't working is it? They have upped the lending criteria so much people now can't afford to borrow.

Indeed. However, the loss associated with the existing borrower's over-leverage isn't the bank's problem. The associated asset can be reliquified and re-lent. If the loan defaults, it becomes a charge on bad debt provision. If bad debt provisions are insufficient, the bank must raise additional capital (dilute shareholders). Also, per late edit above, the bank can (and I think, likely will) boost yield on new lending to cover asset impairment (unanticipated LTV rises) on existing lending.

Plenty of people going to get their fingers burnt. But the banks have other sectors which (now that the music's stopped) are still in need of capital, and will still offer better (risk-adjusted) yields than lending into real-estate. Once the real-estate market adjusts to this new reality - we will be at capitulation.

edit: and the point of the first post is that people's wants won't enter the bargain; economic realities will force their hand - nobody wants to crystallise a capital loss, but as the bubble (in collatoralised lending and household deficit spending) deflates, an inability to cover their repayments will force the situation; a painful lesson in how leverage brings both future profit and future risk into the present...

Edited July 15, 2008 by ParticleMan

[Bankside]

I think you are right. For there to be massive reductions someone has to take the loss. I'm not sure that the banks are in any position to take the hit without the whole system going down. There is some manoeuvring to get a better position (e.g. to persuade people to take their potential bad debts elsewhere - as in the Northern Rock "rescue plan"). I think there will be a reluctance to force re-sale if it looks like the returns are going to be small. Currently there is just a rush to find anyone to off-load some of these assets to.

Sadly I think that there is a chance that the whole pack of cards is going to come down.

Edited July 15, 2008 by Bankside

[Doom Lord]

But it isn't working is it? They have upped the lending criteria so much people now can't afford to borrow. So to bring the balance house prices are going to have to drop through the floor. This would mean my old house which was on the market the last time I looked for £135k is going to have to drop to around the £40k-£50K bracket to get a sale, they paid me £124k for it, that would mean them taking a £75k+ loss you seriously think individuals have that sort of money to lose? Your telling me people would accept paying £75k back to the bank for something they don't own?

Of course not, I would expect them to sit tight until prices recovered. However there will be sellers that brought before the boom or sellers that are being forced to sell. It is these properties will be sold at the new market value.

Edited July 15, 2008 by Doom Lord

[Imp]

Slightly macabre, around half a million people die each year. A good proportion of these will have owned a house as a couple, either keeping it until they both pass away or selling it to move into nursing home/old age person's accomodation.

So there are around 250,000 forced sales a year by the estates.

There were 40,000 mortgages approved last month = 480,000 mortgages per year at the current rate.

so for every mortgage approved there are 480,000/250,000 forced sales = 1.92

This compares with 4.32 in a normal housing market.

So, I recon in six months, HALF of all sales will be forced sales, which just has to drag the rest of the market down.

[ElPapasito]

Slightly macabre, around half a million people die each year. A good proportion of these will have owned a house as a couple, either keeping it until they both pass away or selling it to move into nursing home/old age person's accomodation.

So there are around 250,000 forced sales a year by the estates.

There were 40,000 mortgages approved last month = 480,000 mortgages per year at the current rate.

so for every mortgage approved there are 480,000/250,000 forced sales = 1.92

This compares with 4.32 in a normal housing market.

So, I recon in six months, HALF of all sales will be forced sales, which just has to drag the rest of the market down.

Crikey I hadn't seen it like that. Unstoppable price declines to ensue

[Follower]

I agree reposessions will rise sharply which will allow those of us with CASH to bag a bargain but the housing market will remain stagnant while the lenders continue to restucture themselves.

At this time there are very few buyers even when a property is a absolute bargain, but even LESS sellers, those moving for work are renting to rent.

I am sorry to say those of you that see a glut of cheap properties being snapped up by huge numbers of buyers are wrong. Most people need a mortgage to buy a house and where are they going to get it from.

[Moo]

Sticking with my "2009 will be The Year, and 2010 will be The Other Year" guess\prediction.

Shifting prices down significantly is like drowning kittens. Just because the bag's underwater, doesn't mean Kitty's gone to Kitty Heaven. It needs to be kept there for a bit, and right now, that cat ain't dead.

However a must sell price is going to leave huge losses. When I bought my first house I put down 10% deposit which was about £3500 now if your looking for that level of deposit house prices are going to have to fall by massive amounts as people simply haven't got 10% deposits for houses costing £150K.

Spot on, meethinks. All costs included, the cost of throwing a double six to start in much of the South East at the moment has got to be at least £20k, and for most people, that takes a hell of a lot of saving... especially with the cost of basics going up rapidly.

[dances with sheeple]

But it isn't working is it? They have upped the lending criteria so much people now can't afford to borrow. So to bring the balance house prices are going to have to drop through the floor. This would mean my old house which was on the market the last time I looked for £135k is going to have to drop to around the £40k-£50K bracket to get a sale, they paid me £124k for it, that would mean them taking a £75k+ loss you seriously think individuals have that sort of money to lose? Your telling me people would accept paying £75k back to the bank for something they don't own?

As I understand it thats the position they are in. No one forced them to buy an overpriced asset. If a critical mass of people reach this position then a political solution will need to be brought forward, hence Flint etc talking about buy and rent back, but I couldn`t see the government/HA`s buying at the inflated prices the sheeple bought for! an "arrangement" will be worked out on the rest of the debt where it is written off or made into tiny monthly payments for the rest of your life, and your descendants can inherit it. Remember there are a lot of people who are credit worthy, who save, who own their house outright, who rent , who are just leaving school, who stay with parents etc. they are the buyers of the future, but at sensible prices, which is what the banks will have to accept if they want to partake of the lending business. The housing market will live again, at correct multiples, silly prices are dead.

The sheeple who have busted themselves to get on the ladder are like the child at a party who makes themselves sick on jelly and ice cream, only to realise that there is a course of trifle being brought in which their friends can enjoy, but they can`t cos they have ruined their guts for the day. The banks have a problem in that as people realise just how much they are going to have to pay back for a house that is losing value, there could be large defaults. On the other hand, as prices drop people will be fighting each other to get credit to buy in, and the banks can manage this as they see the market develop. I predict the market prices dropping to 1997 levels, and lending at that level ticking along, some banks will be bought over, and enough sheeple to cause a political stink but not a Mad Max stink will be repo`d.

Edited July 15, 2008 by dances with sheeple

[jm78]

On the news this lunchtime they are saying that this report says that Estate Agents have sold 15 properties per agent in the last 3 months. I wonder what the figures would be per month. i suspect June has seen NO sales.

[Follower]

On the news this lunchtime they are saying that this report says that Estate Agents have sold 15 properties per agent in the last 3 months. I wonder what the figures would be per month. i suspect June has seen NO sales.

CORRECT AND SAME FOR JULY AUGUST no buyers and no sellers and NO MORTGAGES

[dances with sheeple]

Of course not, I would expect them to sit tight until prices recovered. However there will be sellers that brought before the boom or sellers that are being forced to sell. It is these properties will be sold at the new market value.

All the threads being gathered by the storm tell us prices never will recover though. The one off credit event that we have seen is not coming back for the masses in our lifetimes. House prices just have to drop and stay dropped, anyone not sold yet doesn`t get the free money they thought they had "earned", but as we are still a relatively civilised country they get a council house and a very bad credit rating.