House price cuts helped sales surge by nearly 10pc last month

joguest

HAMISH_MCTAVISH wrote: »

Ah, OK then.

So supply is whatever random figure you claim it to be in order to support your absurd theory.

Oh how I miss the rolleyes smiley.....

Of course back in the real world, supply is the number of houses on the market that are listed for sale.

Whether that be the million plus houses listed in 2007, or the 600,000 odd houses it fell to by 2009.

And what we have seen is that in the event of price falls, supply also falls, as houses are taken off the market when it's no longer viable to sell at the lower price for a large number of owners.

We've also seen that supply rises when prices rise, and selling becomes more viable for a larger number of owners.

This was clearly the case in 2007/2008/2009/2010, and without a major change in forced sellers from rate rises, this will likely remain the case for the foreseeable future.

If people take their house of the market because the price has fallen then that is emphatically not a decrease in supply. Supply is a function of price. As their behaviour is a function of price, supply is not decreasing. It was demand that decreased in 2008 (the curve shifted dramatically to the left) and volumes dropped significantly because of the elasticity of supply.

Things haven't changed much since we reached bottom in early 2009 - we've had a bit of a demand-led rally, but that's petered out. Given that demand is so constrained by rising taxes, spending cuts, higher unemployment, etc, then the only way we're really likely to see any movement in price/volumes is if supply changes.

Supply increases with forced selling, but the elasticity of supply will also decrease with a change in sentiment - i.e. if people think prices aren't going to go any higher/will go lower, and therefore decide to get out now. There are numerous people in this position who have willingly delayed selling over the last 3 years.

Stagnation (unlikely), slowly declining prices (most likely), big sell-off (not impossible) are the most likely outcomes over the next few years unless something dramatically changes, such as a wage-inflation surge.

Really2

joguest wrote: »

"I meant in the article, Sales had increased 10% you could say demand was up based on that."

But if sales increase and prices go down then it implies that the market is dominated by an increase in supply.

Where are you getting data for September that prices went down? LR Figures are not out yet?

Or are you implying it from a 9 month average, not relating it to the current data you are quoting.

Every bear on here seems to say less sales = lower house prices
More sales = higher house prices.

They use 2007 as the proof. So good to see every base is covered now.;)

wotsthat

Sometimes it pays to take a step back.

Prices being 2.3% lower than this time last year led to a 9.5% increase in sales a year later? There's a link between price and sales but this has the look of lazy journalism i.e. take the increase in sales and find an easy answer.

According to Devonian economics houses are 40% overvalued so a 2.3% decrease should have only a miniscule effect.

joguest

Really2 wrote: »

http://www.investopedia.com/university/economics/economics3.asp#axzz1akHcnRcg
Supply represents how much the market can offer.
http://economics.about.com/od/supply/p/supply.htm
Economists describe supply as the relationship between the quantity of a good or service consumers will offer for sale and the price charged for that good. More precisely and formally supply can be thought of as "the total quantity of a good or service that is available for purchase at a given price."

I would give up if I were you.

No hypothetical number, it is Goods available to buy at any one time, stock. Or in housing terms, numbers of houses for sale is supply.

Eh, that's exactly what I said it was (Their definition, not yours)!

It seems to have escaped your notice that not all the houses on the market get sold at their asking price and that the difference between asking price and sales price can vary. This has happened recently with the abolition of HIPs - there are lots more people putting their houses on the market because the cost of doing so has been reduced. However, most of these potential vendors have no effect on the equilibrium supply/demand position, given their prices are unrealistic. So in this instance, the increase in the number of houses on the market has not led to an increase in supply.

However, what we can tell about supply and demand is discerned from changes to the prices and volumes. If prices fall and volumes increase then supply has increased (or at least it is more dominant than any change in demand).

wotsthat

joguest wrote: »

According to the Guestians supply is highly elastic, so a small decrease in price leads to a larger percentage change in volumes.

I wouldn't call supply in the UK housing market highly elastic.

I think my idea is closer to the truth. Sales are up significantly (in a single month) and the Guardian have decided it's because houses are a little cheaper than a year ago without any further analysis.

joguest

wotsthat wrote: »

I wouldn't call supply in the UK housing market highly elastic.

I think my idea is closer to the truth. Sales are up significantly (in a single month) and the Guardian have decided it's because houses are a little cheaper than a year ago without any further analysis.

If supply isn't predominantly elastic (at least over the short term) then why did volumes drop more rapidly than prices in 2008?

joguest

wotsthat wrote: »

I wouldn't call supply in the UK housing market highly elastic.

I think my idea is closer to the truth. Sales are up significantly (in a single month) and the Guardian have decided it's because houses are a little cheaper than a year ago without any further analysis.

I agree with you about the article being based on a hastily jumped-to conclusion.

However, my point about volumes increasing with decreasing price still stands (i.e. that such a thing is possible and it would be driven by an increase in supply/decreased elasticity of supply). We've got a very mixed picture across the Country with sales volumes slightly down over the last 12 months. However, it tends to be areas of the north where volumes have picked up over the same period (see http://www.planetpropertyblog.co.uk/wp-content/uploads/2011/10/transactions2.jpg)
and where prices have dropped more rapidly over the same period. It is places like Houghton le Spring and Consett (in Co Durham) where the biggest price falls in england and wales have occurred (down 28% from 2007 peak) and where volumes have recovered most in the last 12 months (albeit from a v low base).

Aberdeenangarse

I'm going for a little lie down now, this is all getting a bit too much for me! I thought I only had one PC, but I appear to have another screen and a pink elephant......:rudolf:...............oh no bloody rudolph as well.....:grouphug::grouphug::grouphug:..........oh gawd now I'm remembering why I was sent home early from work.

wotsthat

joguest wrote: »

If supply isn't predominantly elastic (at least over the short term) then why did volumes drop more rapidly than prices in 2008?

I didn't say supply wasn't elastic - I said it's not highly elastic.

To take 2008 and to try and build a theory about sales volumes and prices would require some special analysis. Wasn't there a multitude of other things happening that might have impacted?

It would be like trying to explain why sales of houses 'surged' due to a small and gradual increase over the previous 12 months without taking account of other factors such as better mortgage deals or people just being sick of waiting. Maybe FTB's who were unable to get a mortgage due to deposit requirements have finished saving and are entering the market.

Really2

wotsthat wrote: »

I think my idea is closer to the truth. Sales are up significantly (in a single month) and the Guardian have decided it's because houses are a little cheaper than a year ago without any further analysis.

Indeed most people who seek crashes always linked higher and lower transactions with rising and falling prices.
http://economy.twobeachbums.com/citygent/uk-house-prices/sales-volume-drops/
Drop in Sales Volume Signals House Price Falls

Seems that when volumes drop people accept prices fall, But what when volumes rise, price rises?

So as I pointed out earlier and you rightly pointed out, we have no idea on the price as it has not been released and an average over 12 months is not indicative of this month in question.

So if it turns out prices did rise, the rise was on the back of and falling stock (as reported by RICS).

The white elephant to all of this was prices, they have fallen on average over a 12 month period, that 12 months does not mean that month had to follow suit.