MSE News: Rise in housing market asking prices

Emy1501

Harry_Powell wrote: »

Plenty of people on here recently boasting about large discounts on ASKING prices who have access to these same tools. The allure of knocking 35% of a ludicrous asking price is clearly too much for some people.

How do we know the asking prices were nonsense?

ModernSlave

a 2-bed 60s terrace i know of (in Twickenham) was bought for 220k in 2005.

today, they're asking 350k for it.

Is it worth it?

ukcarper

What do you do if you are going to put your house on market? You only have to read here and house buying forum to see that people are expecting a big discount on asking prices so sellers are building that into asking price.

Harry_Powell

Emy1501 wrote: »

How do we know the asking prices were nonsense?

How do we know they're not?

dopester

Harry_Powell wrote: »

Is it not simply the case that a lot of people have been wanting to move, but have held back because of worries about the economy and job security? Perhaps now that we are out of recession and there are positive news stories about the economy, people are gaining enough confidence to move home?

Not many people believed that there was a crash building in 2007 and I suspect even fewer people think there is another crash in the wings now, so your theory about people crashing in before a second crash just doesn't seem feasible, certianly not in the volumes we're seeing. Even on here, many of the most bearish people are buying. It seems to be a much smaller minority of hard-core bears who still believe we'll see a large fall. Joe public seems content to just get on with their lives.

Harry_Powell wrote: »

If they were frightened then why would they go to the expense of moving home, wouldn't they just sit tight to see what happens? As they did during the HPC and recession?

You've got a point about inflated asking prices, but less of a point about sitting tight and riding it out. The HPC was simply put on hold with many measures to try and prevent it. Not all sellers can continue to sit tight, even with many of the supports to prevent a house price crash remaining in place.

Some people have changes in circumstances. Anything from taking on way too much debt and struggling, losing an income from a two-income household, pay-cut, or baby-boomers who own outright looking to sell to significantly downsize and release some money for their retirement.. who can comfortably afford to drop their asking prices on £mega-value homes in order to do that.

As this seller says:

“I think there will be a little more incentive out there then for people to want to buy,” says Claire, 51, who renovated the house and is hoping to start an interior- design business. “People won’t rush back into the market, but life goes on and people can’t keep things on hold for ever.”

There are buyers keeping things on hold, but it's the same for sellers.. keeping things on hold when their homes aren't selling at the asking prices they would like. Some sellers also want to sell. They can't keep things on hold forever either, holding out for their asking price. More likely than not, other sellers will cut their asking prices making their "sit tight" asking price look ever more poor value.

Not keeping things on hold doesn't mean people will happily borrow/stump up to meet the sellers' inflated asking price of £1.4 million (was £1.7 million) on a home they bought for in October 2006 for £750,000.. to which they've only added some value by planning permission, a little extending with outbuildings, and maybe interior design flashness. Same is true if it wasn't inflated asking price but is too much for the market.

That example counters both your arguments. People can't keep things on hold forever, and that includes sellers at both highly inflated and regularly expensive asking prices. Buyers don't have the same access to easy credit nor can be certain their jobs/pay are as secure as in the boom. Many areas of upper end houses are going to get completely slaughtered in value. Fewer people will want their main asset of value in the £1.5m - £2.5m+ range, with a rapidly diminishing pool of fearful buyers at such levels, when they could release it and have a very nice home for a lot less money.. with that money released in financial savings.

Harry_Powell

I don't agree that your rather abstract example counters both my arguments. With all theories there are exceptions, but generally I believe that my arguments are correct for the majority of people and it's the majority that rules the market.

Do you really believe that the majority of sellers are trying to sell million pound houses with a bit of planning permission or are oldsters who are downsizing and desperate to give houses away that they worked long and hard for or consist of overstretched debtors who are one step away from repo?

Do you really?

dopester

Harry_Powell wrote: »

I don't agree that your rather abstract example counters both my arguments. With all theories there are exceptions, but generally I believe that my arguments are correct for the majority of people and it's the majority that rules the market.

You're so wrong about that, Harry, imo. The majority are the ones who get carried up in the good times, but stuffed by the market on values in the bad times.

It's the minority on the margin who set the prices and the values.. the sellers and buyers who are actively transacting in the market, and the prices they trade at, which impacts on the market values of the majority who own something similar, but are not themselves selling. Or those who are "riding it out."

I guess the level of values comes back to the supply and demand thread. What the floor is with more properties coming on to market.. what would-be buyers are willing and able to pay, with increasing supply coming onto the market.

Asset prices rise not because of "buying" per se, because indeed for every buyer, there is a seller. They rise because those transacting agree that their prices should be higher. All that everyone else - including those who own some of that asset and those who do not - need do is nothing. Conversely, for prices of assets to fall, it takes only one seller and one buyer who agree that the former value of an asset was too high. If no other bids are competing with that buyer's, then the value of the asset falls, and it falls for everyone who owns it. If a million other people own it, then their net worth goes down even though they did nothing.

Two investors made it happen by transacting, and the rest of the investors made it happen by choosing not to disagree with their price. Financial values can disappear through a decrease in prices for any type of investment asset, including bonds, stocks and land.

Only a very few owners of a collapsing financial asset trade it for money at 90 percent of peak value. Some others may get out at 80 percent, 50 percent or 30 percent of peak value. In each case, sellers are simply transforming the remaining future value losses to someone else. In a bear market, the vast, vast majority does nothing and gets stuck holding assets with low or non-existent valuations. The idea that it had a certain financial value was in his head and the heads of others who agreed. When the point of agreement changed, so did the value. !!!!!!! Gone in a flash of aggregated neurons. This is exactly what happens to most investment assets in a period of deflation.

dopester

Harry_Powell wrote: »

Do you really believe that the majority of sellers are trying to sell million pound houses with a bit of planning permission or are oldsters who are downsizing and desperate to give houses away that they worked long and hard for or consist of overstretched debtors who are one step away from repo?

Do you really?

Anecdotes I'm receiving tell me there are increasing numbers of retirement flats standing empty in retirement blocks in our area. Maybe some of your older owners are delaying selling their homes (not giving it away mentality - despite many having seen their homes frequently x50+ in value from the 1950s/60s/70s.. or some multiples again if they traded up over the years.. say in the 80s or 90s.)

If there is anything in the anecdotal stuff coming my way, I'm not sure whether the ever increasing number of beneficiaries of these flats, from those who have passed on, are going to keep these flats empty, holding out for peak or near peak prices - under what were very different market conditions.

What is certain, is those who do lower their asking prices, or accept lower offers, will bring down the market values for those who hold out for stupid money asking prices. How many sellers and how willing they are to accept lower offers, versus those in the market waiting to buy, is something many of us disagree about.

Sometimes I think you expect them to wait for another round of house prices trebling, and even then you'd think they'd be giving them away if they put them on the market for £10 less other homeowners think they're worth because they've worked so hard for the added inflated value. For some there comes a time when it makes sense to sell, even if it's significantly below peak price.

treliac

dopester wrote: »

Anecdotes I'm receiving tell me there are increasing numbers of retirement flats standing empty in retirement blocks in our area. Maybe some of your older owners are delaying selling their homes (not giving it away mentality - despite many having seen their homes frequently x50+ in value from the 1950s/60s/70s.. or some multiples again if they traded up over the years.. say in the 80s or 90s.)

Do you think that there is possibly another reason for empty retirement flats?

Perhaps there are fewer and fewer retirees who can afford them as they are priced, especially since they tend to come with exhorbitant and ever-rising charges relating to management staffing costs, heating, lighting and maintenance of communal areas, gardening etc. They are an expensive way to live.

Emy1501

Harry_Powell wrote: »

How do we know they're not?

You are suggesting they are I'm not suggesting thery are or not.