"Worst housing market for 30 years" as estate agents admit to "overpricing". House price crash on the way ?

Thats a good example of a seller chasing the market down which is something I am seeing repeated more and more again these days. =============== Hmmm, if I could be bothered I'd go and find a post from you which says that Estate agents are talking the market up and not suggesting lower prices.

rising bankruptcies are tiny from a tiner base (from the numbers you posted IIRC) ,and IMHO much more to do with the ease of declaring bankruptcy than any underlying trend. Repossessions? Post some figures.

I'm sure most of them are. It no longer seems to be in their interests to do so however, as falling sales volumes means less commission. Richard, as an ex-ea seems to agree though appears to be in a minority.

Perhaps when/if the lack of sales/commission really starts to bite we may get more ea's talking prices down in an effort (probably too late) to get the market moving again.

You imply it. If prices are really falling, but estate agents, banks, building societies and even the land registry all say they are flat, then there what is your explanation for everyone being out of step except you?

Not really true. Sometimes bubbles are caused by the participants acting rationally.

For example suppose you're Joe Sixpack in the US a few years back. You blew all your money on beer and internet stocks and now you have nothing but a car loan. A Savings'n'Loan will loan you 110% of the value of a house due to Greenspan's flood of liquidity (and he's acting rationally in doing that because he want to prevent the deflationary downside of the tech stocks crash).

So you know that 90% of the time houses go up 10% a year and 10% of the time they go down 90% (as an approximation). You take the cash and move out of the rental. The upside is that you can make 10% of 200 grand each year as prices rise. The downside is that you'll go bankrupt and be left with nothing if you hit that 90% down year. Since you start with nothing anyway, that bet is a no-brainer.

So Greenspan and Joe Sixpack are rational actors. How about Bertie banker making those 100% loans? Or Danny Depositor whose money he's risking?

Well Bertie gets paid commission and his job depends on the S&L making loans. he's acting very rationally when he gets Joe Sixpack that 220K to buy a house. Danny Depositor has little to worry about either because bertie immediately offloads Joe's loan onto Fannie Mae and so neither Danny nor Bertie's S&L are carrying either the default or maturity risk on that loan.

How about Sally Stocks, a shareholder in Fannie Mae? isn't her money at risk? Nope, not really. Fannie buys the loan, packages it up with other loans, slices and dices it into mortgage-backed bonds and sells it on to pension funds and hedge funds who are either looking for maturity-matching or paid risk. They make a profit because they're seen as government guaranteed (whether this is true has yet to be tested, but if someone with 1.4 trillion in loans on their books isn't too big to fail then it's hard to imagine who might be) and therefore pay a lower interest rate than competitors and particularly the folks they buy the mortgage from. So they mak a rather nice profit thank you (skipping the fact that Fannie and Freddie have just bean caght somewhere between being unable to count and having their hands in the cookie jar) so Sally is doing OK apart from the scandals.

Now it could be that the pension funds and hedge funds don't know what they've got themslves into and might eventually discover the reality rather too late. If Fannie and Freeddie really carry a bailout guarantee then the terry taxpayer is in for the royal shafting of all time. Those folks are however far enough down the line that they can reasonably be excluded from the calculations of the principal actors in the bubble, with the exception of Sir Printsalot, who should certainly have known better.

FoFP

Like you I can't be bothered going to dig them up. I'm sure I've posted some previously and I know that like bankruptcies they're starting to "move on up" as Curtis Mayfield used to sing.

Summary;

One of the most pessimistic forecasters, Capital Economics, revised their forecast of a drop of 20% over three years , to a decline of 5% over the next two years. And people who build houses will be making less profit on them that previously.

None of which ties in with 'house price crash on the way' .quite surprised you posted this one, have you changed your mind?

"Everyone" is not out of step except me LOL

First time buyers are down to 9% of total buyers from 35 to 40% 3 years ago and thats on sales volumes down 30% YOY according to Rightmove.

Falling sales volumes suggest that more and more people cannot afford to buy or will not buy at these prices.

Besides how can prices be "flat" when most of those indices you mention had prices rising between about 13 to 20% YOY in 2004 but only between

-2 and 5% in 2005 ?

Look at the figures then you will see that most of what follows is just sales patter.

A very 'selective summary' methinks ;-)

There are far more pessimistic (sic) forecasters than Capital Economics and M Holmes made a pertinent observation on this a few posts back: when the last bear capitulates etc

Scroll down this link for "House price predictions" to save yourself asking me to post details of "more pessimistic forecasters"....

No, I'm not Roger Bootle.

thanks for nothing, now Im going to have that dirge going through my meagre brain for the next few hours :-)

-2 to +5 is flat. End of story.

In what way was it selective? What did it miss?

I thought that line was from The Slade's "Merry Xmas Everybody"...

FoFP

In message , Hognoxious writes

In most cases it is not an estimate. The figure which the agent gives the client is generally one designed to have the best chance of getting the business. - in areas where property is fairly generic, varying in standard and specification, the agent should be able to be fairly precise with an actual valuation - Occasionally the two will be similar.

Sorry

Correct - except that, if the market is falling, the price agreed would probably be less than that of similar houses completing a sale today.

In message , Crowley writes

Neither of these need have any effect on prices whatsoever.

Neither of these need have any effect of prices whatsoever

If supply changes to meet the reduced demand, prices will not change.

MMM! If they were rising by 13% to 20% in 2004 - they were rising.

If they were rising between -2% and 5% in 2005, they were mainly flat, tending towards a small rise, but not really falling.

So... on the whole, "flat" might be a fair term for 2005

The rate of change of house price growth has obviously fallen massively, and this has been a figure conveniently used by some interested parties, and the media, to suggest that the market is collapsing.

In message , Crowley writes

What actually happens is that sellers begin to realise that the market is falling, and gradually agree to try lower asking prices.

E.g. say you have a street of similar houses, 5 have been for sale at £200,000 for a year. Then a couple of new houses come on the market and the sellers, knowing full well that they wont sell for £200,000, agree to asking prices of say, £170,000 and £177,500 respectively, and they sell.

Of the first 5, 1 might stick at £200,000, 2 might take their houses off the market, (in disgust ), and 2 might really want to sell, being happy to take a realistic price, and change their prices to around £170,000.

And so it goes on.

In an area where there are a few agents, there will usually be some who typically overvalue excessively to get the business, and the odd one or two who are typically realistic to get business which sells.

Which is probably Blairs goal, although it may also mean that he has given up on the chances of labour being reelected at the next election.

In message , Crowley writes

Not surprised - see below

You did, but they were fairly insignificant

Take your pick...........

"Construction group and housebuilder Galliford Try said that the average selling price for its houses fell 11% to £203,000 in the six months to

December 31st, from £228,000 the previous year. The value of sales currently reserved has risen by 21% to £158m - but that's due to growth in the number of sales outlets, which has also risen by 20%.

Meanwhile, fellow housebuilder Redrow said that sales in the last six months of 2005 were slightly down on 2004, while forward sales for 2006

were also down despite an increased number of sales outlets. Profits are also set to be lower than last year as its average selling price fell by 8% to £163,000 from £176,700. The group concluded: "Consumer confidence will be important in determining the strength of the housing

market in Spring 2006". Its shares fell 4% to 515p.

We believe that housebuilders are right to be cautious. Our reasoning is pretty straightforward.

The UK economy is struggling at a time when the Chancellor has spent too much money. He will need to raise more money by increasing the tax burden even more rapidly than he already has for the past seven years or so. That will cut into the amount of money people have available to spend on other things, like consumer goods and housing.

At the same time, energy prices look set to keep rising this year. Already Russia and Ukraine's gas dispute has highlighted the fragile position of countries like the UK, which rely on foreign gas imports.

And oil prices don't look set to retreat to the $40 a barrel some analysts had hoped for this year. Crude is currently above $60 a barrel

on both sides of the Atlantic. The market remains as vulnerable as it was in 2005 to shocks like hurricanes and terrorist attacks - and that's on top of the ever-growing demand from countries like China and India.

So consumers are already facing a squeeze on their pay packets from both taxation and energy costs. But that's not all.

Now consumers are also facing a big squeeze on their pensions. The move

at the end of last year by FTSE 100 hygiene services group Rentokil to close its final salary scheme seems to have started a ball rolling.

Philip Green's Arcadia - which owns high street chains Top Shop, Dorothy Perkins, Wallis and Burton - has upped the retirement age on its final salary scheme from 60 to 65. Staff are also being asked to increase their contributions from 4% to 6% of pay. Meanwhile, the Co-operative Group now wants to shut its existing final salary pension scheme from April 5 and move to a new scheme whereby payouts will be based on the average salary over an employee's career.

So at a time when we're all being told that we're not saving enough for

our retirement, employers in both the private sector, and (in theory) the public sector, are threatening the entitlements that do currently exist.

That's not good for consumer confidence.

And as Patience Wheatcroft points out in The Times, the gulf within companies between those who are still participating in final salary schemes and new entrants who are excluded is increasingly likely to become a flash point for industrial trouble.

"Some employees excluded from these schemes may soon notice that they are, effectively, being paid significantly less than those whom they work alongside but who are beneficiaries of the final-salary scheme," she says.

Public sector unions have already confronted the government over plans to change pension entitlements, and the same may well happen in the private sector. Ron Webb of the Transport & General Workers' union said

of the Co-op's decision: "This is not a good way to start 2006. The Co-op can be assured that we do not accept the closure of the final salary schemes as a foregone conclusion."

If employees are seeing their pensions slashed at a time when they feel

their cost of living - regardless of how low the official inflation figures are - is going up, that leads to people demanding more money. And when people ask for more money, inflation goes up. And when inflation goes up, interest rates need to rise.

And that spells bad news for house prices."