Supply and demand

chucknorris

Bootski wrote: »

I know all Bears are not only desperate but probably suicidal right now!!

But not silly enough to think that prices will fall 70% from peak.

I can be quite bearish myself, but that really only comes out in boom times, obviously not during mid/late (ie not the early part) recessions when being bullish is far more profitable (eventually).

the_ash_and_the_oak

Don't really know why anyone would be suicidal imo

macaque_2

You responded to my post with this:

Anger? lol nowhere near the correction emotion, and why would I be fearfull? if they did fall 70% I still wouldn't be in trouble from a mortgage point of view, but of course the whole country would be finished, just as well the only place it will ever happen is in your mind, isn't it. Your silly talk of 70% falls is laughable, no I take that back, it's far too silly to even be considered funny.
EDIT: just to make it clear I am not calling all bears silly, just you.

But not silly enough to think that prices will fall 70% from peak.
I can be quite bearish myself, but that really only comes out in boom times, obviously not during mid (ie not the early part) recessions when being bullish is far more profitable.

Me thinks thou doth protest too much

Why would a 70% fall would "finish the whole country"? House prices have become a serious obstacle to employing good graduates in the UK.

My proposition is very simple: House prices are more than 300% above 1996 levels. Do you really think they can remain 300% above 1996 levels if disposable incomes fall below 1996 levels? You have had a rant but you failed to answer that.

IveSeenTheLight

zappahey wrote: »

But, it does, Even if many buyers are chasing one house, the price will rise to such a point that only one will be willing and able to proceed (ignoring non-price issues for the sake of discussion).

So in your example above, say there are 10 potential buyers chasing 1 house.
Does that not mean that there is demand by 10 and supply of 1.

Agreed, when it comes to the transactions, the amount of buyers must equal the amount of sellers, but in this example there is still a demand of 9 unsatisfied who will move on to the next available and suitable property.

Theoretically, there may be a large demand for property but not enough for sale or vice versa, there could be a large supply of properties but not enough buyers

chucknorris

macaque wrote: »

You responded to my post with this:





Me thinks thou doth protest too much

Why would a 70% fall would "finish the whole country"? House prices have become a serious obstacle to employing good graduates in the UK.

My proposition is very simple: House prices are more than 300% above 1996 levels. Do you really think they can remain 300% above 1996 levels if disposable incomes fall below 1996 levels? You have had a rant but you failed to answer that.

I have failed to answer because I never attempt to enter a serious debate after a bottle of wine (which I had by the time I saw your reply), but no worries I will address this tomorrow and post my reply.

Despite my bottle of wine I have spotted your 1996 selection year (rather obvious) as being the year when prices started to take off again (after a problematic 8 years in the market). Any serious arguement I would suggest should use the mid point of the last crash (ie around 1992). You obviously chose 1996 as a year which favours your line of arguement (with regard to quoting a certain percentage rise in a narrower time period).

By the way would you be willing to bet on this? We need to sort this out prior to presenting any arguement. I certainly would be willing to put my money where my mouth is, are you?

If so how much (for me to bet Martin has to hold the money in an interest bearing account) for this I am happy to donate 10% of my potential winnings to a charity of his choice, are you? I am willing to risk up to 30k on this figure ( I can deposit this within 2 weeks), but don't be intimidated if that amount is a problem, you do not have to risk that much, the rest of your '70% club' can bet too. I am not fussy who's money I take and it can be for a lot less if required. But make no mistake I am very willing to bet on this, I will even allow you to nominate which index you choose(from Halifax or Nationwide only). We will have to decide on a deadline too, over to you.

zappahey

IveSeenTheLight wrote: »

So in your example above, say there are 10 potential buyers chasing 1 house.
Does that not mean that there is demand by 10 and supply of 1.

Agreed, when it comes to the transactions, the amount of buyers must equal the amount of sellers, but in this example there is still a demand of 9 unsatisfied who will move on to the next available and suitable property.

Theoretically, there may be a large demand for property but not enough for sale or vice versa, there could be a large supply of properties but not enough buyers

For simplicity's sake, assume that all of the buyers are looking for identical houses and a number of such houses exist.

In a free market, the price of the one house available would rise until only one buyer is still willing and able to proceed.

Indeed, there are still 9 buyers who want a house but they have just demonstrated that are either not willing or not able to pay the new going rate for a house of that type so, in economic terms, there is no demand.

So, the next seller comes along, with his identical house, looks at the price the last one sold for and puts his on the market at the same price. We have seen that the 9 available buyers are not willing or able to buy at that price so the price must reduce until one or more of the buyers is willing and able to proceed and so it goes round again.

All very ideal world stuff, of course, and completely ignoring sentiment, irrationality, "not selling it for less than it's worth" and all of the other things that distort markets.

You're right that demand can never exactly match supply but, if there is an imbalance, then prices must change to correct that imbalance.

Granted, with the nature of houses, it can take a long time for price changes to become evident in response to changes in supply and demand but it does happen.

HAMISH_MCTAVISH

chucknorris wrote: »

If so how much (for me to bet Martin has to hold the money in an interest bearing account) for this I am happy to donate 10% of my potential winnings to a charity of his choice, are you? I am willing to risk up to 30k on this figure ( I can deposit this within 2 weeks), but don't be intimidated if that amount is a problem, you do not have to risk that much, the rest of your '70% club' can bet too. I am not fussy who's money I take and it can be for a lot less if required. But make no mistake I am very willing to bet on this, I will even allow you to nominate which index you choose(from Halifax or Nationwide only). We will have to decide on a deadline too, over to you.

I'd be pretty sure Martin wouldn't hold a bet....

But it may be possible to find solicitors who would hold it in an interest bearing escrow account or the like.

And I'd be happy to throw in some cash on that bet too.

I'd be delighted to take all the money monkeyboy can raise that we won't see 70% falls, or anywhere close to them.

chucknorris

HAMISH_MCTAVISH wrote: »

I'd be pretty sure Martin wouldn't hold a bet....

But it may be possible to find solicitors who would hold it in an interest bearing escrow account or the like.

And I'd be happy to throw in some cash on that bet too.

I'd be delighted to take all the money monkeyboy can raise that we won't see 70% falls, or anywhere close to them.

I don't mind you taking a little of the action Hamish, but when I tell you I held a bookmaker's permit for 30 years I am sure you will understand that I want as much of this as I can get my hands on. In that 30 years this would easily be the best bet that I would have ever made.

I think you are right about Martin he wouldn't want to touch this with a barge pole, I could easily find a few bookie friends, but macaque (undertstandably) would have 'trust' issues. As you suggest a solicitor might be the answer but personally I think macaque is going to run a mile from this bet, I hope not but I can't see me being this lucky, or him that silly. It's one thing saying daft things, it's another to put money up.

Cleaver

HAMISH_MCTAVISH wrote: »

But it may be possible to find solicitors who would hold it in an interest bearing escrow account or the like.

I'd be quite happy to hold on to any cash so that you fellas can get on with your willy waving contest.

Generali

IveSeenTheLight wrote: »

So in your example above, say there are 10 potential buyers chasing 1 house.
Does that not mean that there is demand by 10 and supply of 1.

Agreed, when it comes to the transactions, the amount of buyers must equal the amount of sellers, but in this example there is still a demand of 9 unsatisfied who will move on to the next available and suitable property.

Theoretically, there may be a large demand for property but not enough for sale or vice versa, there could be a large supply of properties but not enough buyers

If supply is 1 then the price of the house will be bid up until demand equals 1.

If supply is 1 demand can't be 10 as supply and demand must be equal in a market with prices that are free to adjust to supply and demand. If prices can't adjust then a different method of rationing needs to be found, an example being the NHS which rations by means of queue.