Wednesday, June 18, 2008

A Lively House Price Blog Debate

Why won't home sellers drop prices? Is it just greed?

"Everywhere you go right now there seems to be ‘For Sale’ signs stacked up along every street. The worsening economic outlook and the spiralling cost of mortgages has clearly put a major dampener on people’s willingness and/or ability to buy houses - certainly at current prices, anyway."

Posted by w smith @ 07:46 AM (1079 views)
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9 thoughts on “A Lively House Price Blog Debate

  • paranoia blue says:

    I note that propertysnake.co.uk has reach another milestone – database now over 200K

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  • montesquieu says:

    My greedy soon to be ex-landlord put this place on a year ago at £499k, dropped to £475 (4% drop) in September and has left it there since .

    There are new, much larger, extra bedroom with half an acre properties on at that price now (and not selling). He is going to have to drop 20-30% – well under £400k – to shift it, taking him close to the £360k he (over-)paid for it in 2002. Meantime my £1000 a month rent isn’t covering his mortage (that’s about £1800 a month now he says) while the mortgage on his current home is also up.

    Listening to property shows, he took what he thought was a one-way bet and rented out his old place when buying another one to renovate. Now he has two albatrosses falling in value. Ouch! And probably not too uncommon a story. Thanks to remortgaging (not least to use equity to buy the second property), I actually don’t think he can afford to drop the price very much without his paper ‘wealth’ being destroyed completely – I’m sure that’s a sticking point for some sellers.

    This guy is facing this because he bought into a mass delusion back about 3 years ago. Im almost beginning to feel sorry for him – when I move out he either bites the pillow and sells cheaply (being wiped out in the process – at least some of his equity is proceeds of 20 years building up a small gas fitting business), or tries to get another tenant at more rent (which still won’t cover the mortgage – salaries round here won’t support much more than I was paying) which probably precludes him selling for at least the next year. Who knows where prices will be by then.

    Meanwhile my ‘new’ home is in a very nice part of Berkshire, similar houses going rate £600-700k over the last 2-3 years, for a modest £1600 a month. As Whispering Bob Harris used to say: ‘Hmmmm. Nice.’

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  • need-a-crash says:

    I like this comment underneath the article.

    “Don’t get confused, this is not a blip, this is not 2005 all over again, this is for real and prices in the UK, Iceland, USA, NI, Spain are all falling at varying levels. The bubble has burst and its over.”

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  • mark wadsworth says:

    Monty, good anecdotal stuff. FWIW the house we are in now was on for sale for £800k (as it the house two doors up) we are paying £20k a year rent = yield 2.5%.

    Can we have a competition for the lowest rental yield among the users of this site?

    I am sure that there are plenty of people on considerably less than what we’re on.

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  • waitingfor hpc says:

    well i live with my Mum & Dad and the house is worth £1,000,000 + and my rent is £0!!!!!!!

    bring on the crash!!

    all my mates took the p*** that i did not buy an over inflated house on a never never mortage, I am looking forward to the next BBQ!

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  • @waitingfor, totally agree with you there!

    Excellent comment in the article, “On a cold wet February morning an ice cream wouldn’t sell for 1p”. Sometimes you just can’t sell a house at any price!

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  • first post on hpc…be gentle with me !

    Now if I were an EA (god help me!), I would take a hard look at each of these chains on a case by case basis.
    From the scenarios I tested, the vast majority of people in chains would be better off after a crash (including ftb’s, upgraders and neg-equitors)
    Big losers in a hpc are the downsizers and the new-builders (and EA’s)
    Maybe a share of the total savings from the chain could be given to the downsizers as a sweetner to offset their loss and everybody wins !

    Scenario A asking mortgage equity borrow new mortgage
    ftb 0 10 90 90
    house1 100 40 60 80 120
    house2 140 100 40 160 260
    house3 200 100 100 150 250
    house4 250 0 250 -100 -100
    newhouse5 150
    total borowings 620

    Scenario B asking mortgage equity borrow new mortgage
    ftb 0 10 40 40
    house1 50 40 10 60 100
    house2 70 100 -30 130 230
    house3 100 100 0 125 225
    house4 125 0 125 -50 -50
    newhouse5 75
    total borrowings 545

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  • I was paying 650p/m for a place that sold for 250,000 (3.12% yield?)

    I am now paying 1,050 for a place that I would imagine is worth over 500,000 (2.52% yield)

    PS – Waitingfor…. your mates aren’t going to be able to afford another BBQ, so I’m afraid your opportunities to gloat may be restricted!!

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  • drewster – I’ll gladly buy an ice cream at 1p in any weather.

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