It’s time to face the music and address the house price problem

mvengemvenge

Cleaver wrote: »

I think this is the last time I'll post on this thread, but just to give it one last try...

It is not up to you, me or anyone else to decide what is a good, bad, high or low price in a market. Of course we can have an opinion, but it's just an opinion. There is no 'stupid' price, there is no 'right' price, there is no 'wrong' price. In any market with multiple assets being sold, the market will find the market value price based on a number of external factors.

So one last try. A man is selling an apple and puts it up for sale for £1. Someone offers him 50p. They barter for a while and settle on 76p. The market value of that apple is therefore 76p. It doesn't matter if you think this expensive, or that I think it's cheap, that's the market value of that apple.

Put together thousands of apple sellers with thousands of apple buyers and what you have is an apple market, where the prices of apples fluctuates from second to second based on a wide range of external factors. Let's say that an average of 100,000 apples are sold every day in this make-believe apple market for between 75p and 77p, and this has been the price range for a month. But suddenly people start buying them for 80p, then 90p. For the next months apples are bought for between 90p and 91p.

We can debate for ages whether the apples are 'worth' 90p, or whether 90p represents good or bad value, or the external factors that have caused apples to suddenly cost 90p. But none of this matters, because the market price of an apple is now 90p. It matters not whether people pay with cash or with credit, as these are just examples of external factors which have effected a price. You can shout until you're blue in the face that an apple isn't 'worth' 90p, but it is, because the market price for an apple is now 90p.

Is any of this making sense yet? It's pretty much how any market in the world works. Hamish, Generali... anyone? A little help here? Please?

My only thought on this is that selling a house you live in is not like selling an apple, or a tv or a car, etc, because so many things hang on the sale. If you live in a house and you have certain debts to clear, or need enough for a deposit on another place, etc. There can be so many things hanging on it. Just an opinion.

Cleaver

mvengemvenge wrote: »

My only thought on this is that selling a house you live in is not like selling an apple, or a tv or a car, etc, because so many things hang on the sale. If you live in a house and you have certain debts to clear, or need enough for a deposit on another place, etc. There can be so many things hanging on it. Just an opinion.

Oh, absolutely. But I wasn't really talking about the complex business of selling a house and all that entails. That's more the interesting aspects of market theory, whereas Flying Pig was questioning my definition (and usefulness) of the definition of 'market price'. I will stop saying this soon, but...

The market price of an apple is the agreed final transaction price between the buyer and the seller for the apple.

The market price of a house is the agreed final transaction price between the buyer and the seller for the house.

There will obviously be far more complexities and interesting external factors which will influence the end price of a house when compared to an apple (actually, even this is debatable), but the market price is the same thing for an apple and a house. It's the final transaction price agreed between buyer and seller.

Loughton_Monkey

mvengemvenge wrote: »

My only thought on this is that selling a house you live in is not like selling an apple, or a tv or a car, etc, because so many things hang on the sale. If you live in a house and you have certain debts to clear, or need enough for a deposit on another place, etc. There can be so many things hanging on it. Just an opinion.

That's very true for a house. There is little wonder that selling (or buying) your own house is a very important and emotive thing for all of us.

But it still doesn't change the 'facts'. We can all identify many, many, (probably different) prices for your house.

What you really, really want.
What you've ssen other houses in the area sell for (Land Regostry)
What your Estate Agent says.
What the other EA says because you told the other one to p*** off.
What you finally agree to advertise at.
What the potential buyer offers.
What you counter offer.
What you verbally 'agree'.
What the buyer comes back with after the survey showing bark beetle in your rafters.
What you counter-offer to that
What you finally 'agree'

And then...... that 'magic moment'.... after all this..... when the completion happens.... the market price.

Actually, many cars go through a very similar set of iterations. In practice, however, an apple tends not to be quite as complicated. The complications with an apple surround the concept and practice of being 30 pence each in Sainsbury's, or £1.95 a kilogramme in Tesco (but you must buy the whole bag), or £1.30 for four in M&S, but they are slightly bigger and higher quality than the Sainsbury ones.

Provided each one of them sells all their apples today, all you have is three market prices (in order):

1. The price of an apple.
2. The price of a kg of apples.
3. The price of 4 'quality' apples.

This is all very 'basic' O level economics isn't it?