It's obviously overpriced

HAMISH_MCTAVISH

neverdespairgirl wrote: »

In the short-term, probably not.

Short term could be many years.....

In the medium to long term, they are going up. the only way is up!

True, but they may not go up very far.

Many analysts, indeed, even the BoE itself, now think the new neutrality point for interest rates is around 2.5% to 3.0%, versus 5.5% or so for the last decade.

It is entirely possible, many think probable, that we won't see 5% base rates in the next decade.

Thrugelmir

pararct wrote: »

Once they start to rise it will affect the stalemate in the market!!

Ultimately the property market is moved by the 3 D's.

Death, divorce and distress.

So a "stalemate" won't last for long as movements created by the 3 D's reset market prices. .

neverdespairgirl

mudshark wrote: »

I think some people often miss a rather important point - a house isn't just worth what a buyer is willing to pay for it, it is also worth what the owner thinks it's worth to them. So if my house can only find a buyer at £150k but I'm not willing to sell for less than £200k I must accept that I can't sell it;

That's all true. But it doesn't mean that the house is valued at £200k.

HAMISH_MCTAVISH

Thrugelmir wrote: »

Ultimately the property market is moved by the 3 D's.

Death, divorce and distress.

So a "stalemate" won't last for long as movements created by the 3 D's reset market prices. .

Except that we have just seen full well what happens to a market only moved by the 3 D's.

Supply rapidly falls off a cliff, and the 3 D's do not provide eough supply even to meet the reduced demand levels caused by withdrawal of 70% of mortgage funding.

Prices then rise rapidly again, until supply increases and equilibrium is reached.

Essentially, where we are now, with the indices all pointing to stagnation.

HAMISH_MCTAVISH

neverdespairgirl wrote: »

That's all true. But it doesn't mean that the house is valued at £200k.

It also doesn't mean the house is valued at 150K.

As value requires a price set by a willing buyer AND seller.

HAMISH_MCTAVISH

bullau wrote: »

There will always be exceptions, I had not considered this.

Fair enough.

Simply not true, I cant even be bothered. How many empty homes are there in the uk?

According to the empty homes agency, around 1 million. However, also according to the empty homes agency, half of those are only empty for 6 months or less due to reasons such as probate, renovations, etc, before being put back into use.

Of the remainder, most are derelict or simply in the wrong place.

For example, there are currently around 1600 empty houses in Caithness and Sutherland, at the very northern tip of Scotland.

What use are those homes to a teacher or fireman looking for a house in London?

In order for an empty house to be considered useful to someone needing a house, it must meet the following criteria:

1) Be available to rent or buy.
2) Be inhabitable.
3) Be in a place where it is in demand.

If an empty house does not meet those criteria, it may as well not exist at all.

The shortage of houses is very real, but it can more accurately be described as a shortage of houses, of the type people want to live in, in the places where people want to live, and where the employment exists to support them.

Those that come to view are the ones that are specifically interested in your property. I dont go looking at flats if I want a farmhouse. I do not go looking at a terraced house if I want a 4 bed det with a big garden. The potential buyers have weeded themselves out and those that view are the ones interested in what you have, whatever that may be.

I understand the point about uniqueness but do you not understand that potential buyers coming to view have come specifically because of that?

I see your point, but the point I am making is that for many types of properties there is a very limited pool of buyers at the best of times, and sales can take 3-12 months in "normal" times, let alone in the middle of a mortgage famine.

If there are no proceedable buyers looking for a house of my type, in the area I live, in the first month it's on the market, then knocking a few tens of thousands off the price is not going to help. Because there are still no proceedable buyers looking for that type of house in that location.

If you've waited around for a year or two and it still doesn't sell, perhaps that is a different story.

Price clearly was the deciding factor. Buyers felt they were priced reasonably so they bought them. What are you struggling with here?

I'll rephrase.

Price reductions were clearly not the deciding factor, as there were none. Even after 11 months.

HAMISH_MCTAVISH

bullau wrote: »

Agreed.

This agreement thing is becoming contagious.:D

From a purely factual and market fundamental point of view this is just wrong. Maybe the limited pool of interested buyers won't be found in that time and maybe the price would be entirely unacceptable to the vendor but the fact remains that if it does not sell then it is overpriced for the potential buyers at that time. Knock 50% off and buyers will be coming out of the woodwork.

Well yes, if you knocked 50% off then I would have bought in in cash. And rented it out achieving a 16% yield.

Equally, I have no doubt if you knocked 90% off, it would sell in a matter of minutes, probably sight unseen.

But as that would clearly not be acceptable to any sane or rational vendor, it seems pointless to consider that a normal or likely component of the market.

There were simply no proceedable buyers, at any reasonable price.

Price reductions were not needed though as the places sold and buyers obviously felt that the houses were reasonably priced.

I think this statement is at the core of the differences between our perspectives.

The prices involved for all three houses were significantly (10% plus) higher than 2007 prices.

There are far more people who feel todays prices are "reasonable" than there are proceedable buyers.

There is no "buyers strike", there is no "mass revulsion" over house prices (in most of the country).

There is however a forced restriction on the number of proceedable buyers because banks must ration limited availability of mortgage finance through excessive deposit requirements.

So when there simply are not enough buyers to go around, then reducing price by any "reasonable" level is a pointless exercise.

(yes, we all accept that if prices were reduced by 90%, you could sell any house in a heartbeat, but that's just not going to happen)

Maybe the one that took 11 months was not so reasonable but he held out and found someone in the end. You doubt that if he had dropped his asking price it would have sold well within those 11 months?

No, I don't think so. Or at least, not by any reasonable amount.

Of course, if he dropped by 50%, some vulture (like me) would have bought it instantly.

But that is not a sane course of action when you can wait a few months or years longer and get full price.

HAMISH_MCTAVISH

bullau wrote: »

Maybe you got a good price when you bought. Maybe people feel that they are a good price now and assume that they must have been much more in the past. Sentiment is everything and they sold because buyers felt the price was acceptable.

Sentiment is not the factor restricting the number of buyers.

House prices are not the factor restricting the number of buyers.

Mortgage rationing is the factor restricting the number of buyers.

Even if prices dropped by 50%, you could not achieve 2007 transaction volumes.

If you gifted a million FTB's a 25% deposit tomorrow, banks would immediately raise the deposit requirement to 35% to ration their available funds, because they simply could not provide a million mortgages under any circumstances.

For the vast majority of potential FTB's this crash has been utterly pointless and self defeating. Because even when prices fell 23%, putting houses within reach for so many, the banks moved the goalposts and they couldn't get the mortgage funding.

There could well be although I think that sentiment has turned downward and many are waiting with held breath.

I think there are a million or more potential FTB's who could afford the mortgage payment, who would buy tomorrow if the banks started lending again.

What had prices done during those 11 months? Did he put it on at too much and then after 11 months of rising prices the market met with him and made it reasonable?

I still find it hard to believe that something like a 10% reduction wouldnt have got rid of it quicker even in a flat market.

Prices up here pretty much stagnated. The average price today is within a percent or two of all time peak, and higher than 11 of the 12 months in 2007. The seasonal variances became far more pronounced though, so perhaps bad timing had something to do with it.

But clearly, with hindsight, waiting for another 11 months was worth it to gain 25K.... And now those precedents have been set, where people expect a quick recovery, it will be even harder for prices to fall significantly again.

dopester

mudshark wrote: »

I think some people often miss a rather important point - a house isn't just worth what a buyer is willing to pay for it, it is also worth what the owner thinks it's worth to them.

The prices what active buyers and active sellers are transacting at in the market, sets the implicit value of similar property in the area, for other owners. Including owners who don't even have their property on the market up for sale.

It's how markets work. It might be in your head that once people would be prepared £200,000 for your house. Due to easy credit and no recession conditions that once existed.

Hold out for your £200,000... but it doesn't mean it's worth it if next door or across the road or up the street begin selling near identical houses for ever less money over the months and years. Other sellers and buyers who are transacting at ever lower prices than in previous months and years, impacts on the market value of those not selling their property as well. It's how markets work, when they are going up in value, and when they are falling in value.

dopester

Markets and value discovery, explained clearly for simpletons.

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.