The politics of falling UK home prices

[ecoface]

Look at this report (page 8)

http://www.home.co.uk/asking_price_index/HAPIndex_AUG10.pdf

 

or perhaps we have a whizz among us who can extract the chart.

 

Thanks for this link.

 

For other's benefit (who I might add in the last 24 hours have not really digested the difference between nominal and real falls:

 

Since February 2010 asking prices for homes in England and Wales have increased

0.9%, which is in line with seasonal fluctuations. Nominal market house prices

continue to be stable, although they are still falling in real terms, when corrected for

monetary inflation. Comparing ONS’ June figures and the YoY change in asking price

figures for the same month shows that asking prices were trailing by 5.5% relative

to the RPI (ex. housing) and ca. 2.0% below the AEI (April figure from ONS

excluding bonuses). The HAPI for England and Wales now stands at 97.9 [May04 =

100].

 

How about that?

 

For the last few years each quarterly figure, INFLATION adjusted, has been -5% to -10%.

 

If you are looking for falls, then look at the INFLATION adjusted figures.

 

QE will keep nominal falls from bombing out.

 

In November the Home.co.uk report states:

 

Asking prices are still falling in real terms. When corrected for monetary

inflation, property remains a poor store of capital value as compared to commodities

or gold. Comparing ONS September figures and the YoY change in asking prices for

the same month shows that asking prices were still falling in real terms, by 4.9%,

relative to the RPI (ex. housing) and ca. 2.2% below the AEI (August figure from

ONS excluding bonuses). The HAPI for England and Wales now stands at 97.6

[May04 = 100].

[geisaver]

I think people need to remind themselves what Time-to-Sell represents. It is a ratio of Supply divided by Sales. The More supply and the less sales, the higher the Ratio goes. So what is happening now is that sales are deteriorating while supply is increasing.

Here's an excerpt from the recent November 10th Home report:

 

"Overall prices of homes on the UK market appear to be levitating... Early indications show that buyer interest is waning in the face of high stock levels on estate agent books. Price-cutting of property on the market continues to increase in frequency (a new 21 month record for October fueling the growing 'discount culture' in the UK housing market.

. . .

Typical (median) Time on Market for unsold properties has risen a further 9 days since last month and now stands at 118 days. Meanwhile the average (mean) Time on Market is also up 8 days to 192 days. These figures are consistent with the observation that somewhat fewer properties are entering the marketplace after the summer surge and those that are currently for sale are spending more time in agents' portfolios."

/source: http://www.home.co.uk/asking_price_index/HAPIndex_NOV10.pdf

 

What stopped the freight train to the downside last time was a move to ultra-low rates. That trick has been tried (along with the ramping up of Housing Benefits), and the BofE cannot cut rates to negative numbers.

 

Maybe this time prices will need to fall all the way down to genuinely affordable before the downwards momentum will be stopped.

You give your interpretation of the time on market stat but then quote an article to back you up that gives an opposing view?

 

If there were increased supply i.e more houses with 1, 2 or 3 days on the market then this would bring the average down wouldn't it? If it is going up doesn't that mean there are some properties that have been on the market long term that are now not having their high time on market negated?

e.g. I looked at a property in Oct 2007 that is still on the market so 1000+ days if one is added tomorrow the average of those two is 500+, if two are added it is 333+ increased new supply can bring down the average? So reduced supply can actually increase it?

[geisaver]

For other's benefit (who I might add in the last 24 hours have not really digested the difference between nominal and real falls:

I mentioned inflation so wondered if this might be directed at me.

 

I mentioned inflation from a sentiment point of view rather than your hard facts. It is perceived that houses are a hedge against inflation - they traditionally are. Therefore anyone with enough cash to buy could perceive houses as a safer bet than holding the cash. I expect a lot more people think that than look at your hard facts. I have a friend who bought in the 70's when we had 20%+ inflation and he keeps telling me to buy a house. As regards where I mentioned inflation - it is government policy - and must have made lots of people spend their cash on houses.

[John Doe]

I think people need to remind themselves what Time-to-Sell represents. It is a ratio of Supply divided by Sales. The More supply and the less sales, the higher the Ratio goes. So what is happening now is that sales are deteriorating while supply is increasing.

Dr B,

 

I think people need to realise it is the median time on market you need to look at, and these figures are no where near as bad.

 

Also, you have just contradicted yourself.

 

Typical (median) Time on Market for unsold properties has risen a further 9 days since last month and now stands at 118 days. Meanwhile the average (mean) Time on Market is also up 8 days to 192 days. These figures are consistent with the observation that somewhat fewer properties are entering the marketplace after the summer surge and those that are currently for sale are spending more time in agents' portfolios."

/source: [url=http://www.home.co.uk/asking_price_index/HAPIndex_NOV10.pdf]http://www.home.co.uk/asking_price_index/HAPIndex_NOV10.pdf[/url

 

What stopped the freight train to the downside last time was a move to ultra-low rates. That trick has been tried (along with the ramping up of Housing Benefits), and the BofE cannot cut rates to negative numbers.

 

Wouldn't put it past them

 

[ecoface]

I mentioned inflation so wondered if this might be directed at me.

 

I mentioned inflation from a sentiment point of view rather than your hard facts. It is perceived that houses are a hedge against inflation - they traditionally are. Therefore anyone with enough cash to buy could perceive houses as a safer bet than holding the cash. I expect a lot more people think that than look at your hard facts. I have a friend who bought in the 70's when we had 20%+ inflation and he keeps telling me to buy a house. As regards where I mentioned inflation - it is government policy and must have made lots of people spend their cash on houses.

 

Not directed at you personally.

[drbubb]

MISLEADING WORDS MUST BE READ CAREFULLY

 

Dr B,

I think people need to realise it is the median time on market you need to look at, and these figures are no where near as bad.

Also, you have just contradicted yourself.

How have I really "contradicted" myself?

I think may be confused (and perhaps I should not blame you.)

You need to get ahold of the Bigger picture, not simply look at a few misleading words in Home's article.

 

Perhaps you spot an apparent contradiction in these words:

+ "somewhat fewer properties are entering the marketplace after the summer surge" (Home)

+ "what is happening now is that sales are deteriorating while supply is increasing" (my words),

 

I am making two points with my statement: SUPPLY is definitely increasing from where it was when price were rising in Q1 and Q2. As Home has stated, New supply surged in the summer, and it may or may not be increasing since then (see below), but we do also know that sales are continuing to deteriorate. (Since I do not have the hard data on Supply, it might have been slightly more accurate, if I had said: "what is happening now is that sales are deteriorating after supply was increased" - lower prices have not yet boosted sales. My statement may be accurate as it stands. The Home statement looks intentionally misleading to me, and needs to be read very carefully.)

 

Let us analyze the Timeline a bit more carefully:

 

1/ Supply rose fast in the summer (per Home)

2/ Prices fell sharply in September (per Halifax)

3/ Vendors pushed up asking prices in October (per Rightmove)

4/ Sales fell sharply as Buyers resisted the higher prices (per many sources)

 

THE RATIO (Supply/Sales- which is "inventory days on hand", a frequently used accounting ratio) pushed upwards month-by-month as a result of these developments. I don't see how prices can be sustained, and they are weakening on a three months trend. When we see the next more rapid burst of supply, it should push prices down even faster. I reckon that these dollops of supply tend to come in seasonal waves. Maybe someone here can say more about the seasonal pattern of when supply normally gets released to the market.

 

Read these words carefully again: "somewhat fewer properties are entering the marketplace after the summer surge". What this actually says is: NEW SUPPLY IS ENTERING the market (still), but the actual RATE at which it is entering the market has declined "somewhat". Since SALES HAVE DROPPED so dramatically, I think you may find that SUPPLY may have gone on increasing even though the words used at first sound like supply is not rising.

 

On the other hand, even if supply has fallen in the last month or two, the slowdown in buying demand evidenced by the rise in the ratio suggests "buyer resistance to current prices" and that the market prices are going to keep falling.

[Van]

Typical (median) Time on Market for unsold properties has risen a further 9 days since last month and now stands at 118 days. Meanwhile the average (mean) Time on Market is also up 8 days to 192 days. These figures are consistent with the observation that somewhat fewer properties are entering the marketplace after the summer surge and those that are currently for sale are spending more time in agents' portfolios."

 

I don't see how you can use the median figure as proof that it's not that bad. The mean time to sell is by up 4.16%; the median time to sell is up by 7.62%.

 

It's getting worse any way you cut it.

[John Doe]

I don't see how you can use the median figure as proof that it's not that bad. The mean time to sell is by up 4.16%; the median time to sell is up by 7.62%.

 

It's getting worse any way you cut it.

Woah, wait a minute, I never said it was good, just no where near as bad as the "average" makes it look on the graph.

 

Yes, the median is up over the last few months (I actually said that), but it's also lower than at anytime before that (on the graph).

 

 

[drbubb]

Tomorrow's Halifax number may show us whether or not:

 

The UK is still "on pause", or is headed into a "Crash Cruise speed" phase, with year-on-year Negative growth.

 

I did read an article somewhere from one of the Agebts that spoke about London luxury prices being UP in November. That doesn't sound right to me (given the bearish context), but there are sometimes surprise like that.

[John Doe]

MISLEADING WORDS MUST BE READ CAREFULLY

 

How have I really "contradicted" myself?

 

I think may be confused (and perhaps I should not blame you.)

Very well, as was also pointed out by Mugged Saver

 

You stated quite clearly in your earlier post that

 

I think people need to remind themselves what Time-to-Sell represents. It is a ratio of Supply divided by Sales. The More supply and the less sales, the higher the Ratio goes. So what is happening now is that sales are deteriorating while supply is increasing.

Here's an excerpt from the recent November 10th Home report:

 

and then quoted the following

Typical (median) Time on Market for unsold properties has risen a further 9 days since last month and now stands at 118 days. Meanwhile the average (mean) Time on Market is also up 8 days to 192 days. These figures are consistent with the observation that somewhat fewer properties are entering the marketplace after the summer surge and those that are currently for sale are spending more time in agents' portfolios."

/source: http://www.home.co.uk/asking_price_index/HAPIndex_NOV10.pdf

 

That is quite clearly contradictory, can we please move on now before we loose sight of the thread?

[fexx]

Tomorrow's Halifax number may show us whether or not:

 

The UK is still "on pause", or is headed into a "Crash Cruise speed" phase, with year-on-year Negative growth.

 

The second one... (now YoY negative)

 

http://www.reuters.com/article/idUSLDE6B80GE20101209

 

[John Doe]

The second one... (now YoY negative)

 

http://www.reuters.com/article/idUSLDE6B80GE20101209

Yep, down 0.1% mom and less properties coming to market.

 

Still looks like a 5 to 10% fall over the next year or so, perhaps less.

 

It will take a major shock to get a crash (perhaps lond bonds?)

[Van]

Nice to see YoY go negative, although I would've hoped for a slightly bigger fall.

 

I do expect that we will see further short term weakness in the UK housing market with the recent snowfall and then new VAT increase and 6% rail fare increases in the new year.

 

Halifax YoY should continue to turn more negative for at least the next two months as they were still recording rises in Dec/Jan 09 (in fact, prices peaked in Jan-09). Still by their weird 3mMA calculation of YoY then even with flat prices we should we should still be getting increasingly YoY negative until Feb/Marc 2011.

[neil324]

What was non seasonally adjusted about -1.2

[Van]

The raw NSA YoY fall was -1.39% to Nov 2010.

 

With another couple of months of weakness, we could be looking at a healthy -4 or -5% YoY. Add in the +3% CPI inflation and we have a real fall of -7% or -8%. To address the original post, this seems to me the most politically acceptable way of bringing houses back within the reach of ordinary people by the time of the next general election.

[drbubb]

BINGO !

The days of illusion are ending. Reality is back (& Brown is a fading memory.)

What was non seasonally adjusted about -1.2

Even more than that !

Here's the actual NSA data :

 

Mo. Year Index %.chg Std Price

Nov 2009 536.0 +1.7% 165,617

Dec 2009 541.3 +5.6% 167,260

2010

Jan 2010 535.7 +3.6% 165,514

Feb 2010 537.2 +4.3% 165,997

Mar 2010 543.1 +6.8% 167,808

Apr 2010 552.7 +8.7% 170,772

May 2010 547.6 +5.2% 169,204

Jun 2010 538.5 +4.8% 166,395

Jul 2010 544.8 +4.8% 168,331

Aug 2010 546.6 +4.3% 168,889

Sep 2010 529.6 - 0.7% 163,639

Oct 2010 534.9 - 0.1% 165,275

Nov 2010 528.4 - 1.4% 163,268

==========

 

This is the lowest figure of the year, 2010.

In fact, you would need to go back to Aug. 2009 to find a lower figure.

The 2009 low was Feb : 157,066, and Nov.2010 is only 3.95% above that.

 

This should undermine psychology, since no one can say UK home prices are rising any more,

and just a 4% drop, would wipe out the entire "Dead Cat bounce rally", and that could happen by

Q1 or Q2 next year.

 

The -1.4% drop in Halifax's November NSA index is a big score in the Bear's column.

 

By my reckoning, the H&N Index was down -0.9%, and we have moved into Crash Cruise speed !

 

Mon.: Rt'move : London : Hometrack chg./ Na'wide H.old.SA Hali.SA Hali.nsa: H&Nindex : mom :DelusIdx

2010

S. : : 229,767 : 399,019 : 157,600*-0.4% / 166,757 = n/a = 161,974 163,639 : £165,198 :- 1.49% :139.1%

O : : 236,849 : 418,778 : 156,200* 0.9% / 164,381 = n/a = 164,949 165,275 : £164,828 :- 0.02% :143.7% : Hi Delus.

N : : 229,379 : 417,279 : 155,575 - 0.4% / 163,398 = n/a = 164,708 163,268 : £163,333 :- 0.91% :140.4% :

=====================================

mom: -3.15%: - 0.36% : Est.DI: 139.2 % / : -0.60%: = n/a = : +1.82%: -1.4% : - 0.91%

[drbubb]

This should help to undermine psychology, since no one can say UK home prices are rising any more,

and just a 4% drop, would wipe out the entire "Dead Cat bounce rally", and that could happen by

Q1 or Q2 next year.

 

The -1.4% drop in Halifax's November NSA index is a big score in the Bear's column.

 

By my reckoning, the H&N Index was down -0.9%, and we have moved into Crash Cruise speed !

Here's the latest (twisted) spin from the association of Estate Agents:

 

"The average estate agency branch had 241 house-hunters on its books during the month, up from 218 in October, according to the National Association of Estate Agents (NAEA).

 

But the rise in demand was not matched by an increase in sellers, with the number of people putting their home up for sale dropping for the second consecutive month, leaving the average branch with 64 properties. The dip in sellers is not unusual for the time of year, as people traditionally put off selling their home until after the festive season, as they do not want to disrupt their family over Christmas.

 

The NAEA said many homeowners also continued to have unrealistic expectations about the value of their property, and were likely to be holding off selling in the hope that prices will rise again next year.

 

The shortage of buyers relative to stock levels had put purchasers in a strong negotiating position, exerting downward pressure on prices.

 

Sales levels remained unchanged for the fourth consecutive month during November, despite the seasonal slowdown, with estate agents selling an average of seven properties per branch."

/source: http://www.guardian.co.uk/money/2010/dec/0...mber-low-prices

 

What thye mean to say is:

THERE ARE BUYERS OUT THERE, but the vendors have to cut their unrealistic price ideas to catch one.

If I was a buyer, I'd adjust my target price DOWNWARDS after this number.

 

How useful is a "registered buyer", if he is only willing to pay a price that vendors will not match?

[drbubb]

Realist Bear's inability to dig-deep into the figures, and see the -0.9% drop (in the H&N Average),

have left him stranded on a remote Planet called "Unrealistically Optimistic":

 

(he really should change his name - or learn how to find his way to a more analytical website):

 

Mike Slade Says It's Time For Property Investors To 'buy Like Hell' / Realistbear

 

Mike Slade says it's time for property investors to 'buy like hell' as Helical Bar raises £29m

 

MIke Slade's Helical Bar has raised £29m from shareholders after the veteran property chief executive said market conditions presented an "ideal backdrop" for investment.

 

By Graham Ruddick, Property & Industry Correspondent 6:00AM GMT 09 Dec 2010

In a vote of confidence in the UK property market, Mr Slade urged investors to "get on the train before it leaves the station".

==

 

"A fool or a smart fellow?

 

What with Osborne's billions to boost the economy (HPI) and Halifax's pathetic drop of 0.1% it may be time to buy overseas."

- RB

 

"Halifax's pathetic drop of 0.1%" - in reality was -1.4%, and H&N was -0.9% on the month.

 

[tallim]

...

 

Mike Slade says it's time for property investors to 'buy like hell' as Helical Bar raises £29m

 

Mike Slade's Helical Bar has raised £29m from shareholders after the veteran property chief executive said market conditions presented an "ideal backdrop" for investment.

 

By Graham Ruddick, Property & Industry Correspondent 6:00AM GMT 09 Dec 2010

In a vote of confidence in the UK property market, Mr Slade urged investors to "get on the train before it leaves the station".

==

 

"A fool or a smart fellow?

 

...

 

Helical Bar, they're in commercial really, I'd say Smart move. Raise the capital now and then be ready to sweep up the best crumbs early in 2011 when we should see retailers relying on a bumper Chrismas go bust. I'm not saying it won't be a bumper Christmas, just that it won't be bumper for everyone. Get your profile raised now so the liquidators know your name and that you have proper money behind you.

 

Nothing to do with Residential though.

[drbubb]

Helical Bar, they're in commercial really, I'd say Smart move. Raise the capital now and then be ready to sweep up the best crumbs early in 2011 when we should see retailers relying on a bumper Chrismas go bust.

Exactly.

You need to have a story to tell, when you go 'round the city asking for money.

== ==

 

Here's the BULLISH FLY in the ointment: Homebuilder stocks.

 

They have shown a nice pop up in recent days, and the charts look like an important bottom has been made.

 

/ SEE: BDEV/Barratt :

 

Others: PSN/Persimmon : BKG/Berkeley : TW/TaylorWoodrow

Perhaps that is what RB is looking at.

 

Frankly, I don't have an explanation for this price move - it may be partly seasonal.

But it does suggest these stocks need watching. A further upmove would or should make me less Bearush.

 

They are typically an accurate early warning sign.

[fexx]

Frankly, I don't have an explanation for this price move - it may be partly seasonal.

But it does suggest these stocks need watching. A further upmove would or should make me less Bearush.

 

They are typically an accurate early warning sign.

 

Also seems counter intuitive to me, perhaps this is the key??

Bellway Plc led U.K. homebuilders higher in London trading after saying first-half pretax profit will increase as much as 20 percent.

 

Bellway, which focuses on first-time buyers, advanced 9.8 percent, the most since Feb. 25, 2009.

 

or to put it another way, selling cheaper properties = lack of affordability + the last few bullish buyers???

 

http://www.bloomberg.com/news/2010-12-07/u...tax-profit.html

[fexx]

This is a very optimistic rally for the homebuilders and I think we will soon see a reversal.

 

- The rally is (apparently) led by Bellway, who sell properties at the lower end of the market.

 

- The lack of affordability due to mortgage lenders requirements of a larger deposit would naturally drive buyers towards these sorts of developments.

 

- The Bellway developments for sale now (that I am familiar with) are built on plots which were purchased by Bellway around 2004. (Compared to other builders, they seem to be quite a lot slower!!). Obviously, this is anecdotal but could be one explanation of their high profits. Bellway properties also seem relatively inexpensive when compared to similar properties on the market.

 

- The other builders don't seem quite as strong. Less than a month ago, BDEV reported a weaker than anticipated autumn http://uk.reuters.com/article/idUKTRE6AG1EQ20101117

 

This was all BEFORE the YoY falls of (at least) 1.4% PLUS (an even more optimistic) 3% CPI. (Although you would imagine this to be 'priced-in' to this rally, I wouldn't bet on it.)

 

 

Another point here - are homebuilders more realistically pricing properties than private sellers/amateur developers who are still asking over the odds?

 

 

 

[No6]

Here's the latest (twisted) spin from the association of Estate Agents:

 

"The average estate agency branch had 241 house-hunters on its books during the month, up from 218 in October, according to the National Association of Estate Agents (NAEA).

 

But the rise in demand was not matched by an increase in sellers, with the number of people putting their home up for sale dropping for the second consecutive month, leaving the average branch with 64 properties. The dip in sellers is not unusual for the time of year, as people traditionally put off selling their home until after the festive season, as they do not want to disrupt their family over Christmas.

 

The NAEA said many homeowners also continued to have unrealistic expectations about the value of their property, and were likely to be holding off selling in the hope that prices will rise again next year.

 

The shortage of buyers relative to stock levels had put purchasers in a strong negotiating position, exerting downward pressure on prices.

 

Sales levels remained unchanged for the fourth consecutive month during November, despite the seasonal slowdown, with estate agents selling an average of seven properties per branch."

/source: http://www.guardian.co.uk/money/2010/dec/0...mber-low-prices

 

What thye mean to say is:

THERE ARE BUYERS OUT THERE, but the vendors have to cut their unrealistic price ideas to catch one.

If I was a buyer, I'd adjust my target price DOWNWARDS after this number.

 

How useful is a "registered buyer", if he is only willing to pay a price that vendors will not match?

 

There are many potential buyers out there, but it is false demand at current prices because the majority cannot get mortgages. The housing market VI's tend to blame the FSA for this because of the new regulations, but they are never clear on whether they want a return to pre 2007 type mortgage lending. Bring back self-cert and we will get higher prices, but anyone with half a brain (or less if you are an estate agent) will know it's a fraud. We could all buy several if they bring back self-cert, after all, if it goes wrong the BoE and Gov' come to your rescue at the expense of the honest.

[Meralti]

Helical Bar, they're in commercial really, I'd say Smart move. Raise the capital now and then be ready to sweep up the best crumbs early in 2011 when we should see retailers relying on a bumper Chrismas go bust. I'm not saying it won't be a bumper Christmas, just that it won't be bumper for everyone. Get your profile raised now so the liquidators know your name and that you have proper money behind you.

 

Nothing to do with Residential though.

 

 

As stated this company is dealing in commercial property, which is around 45% down from peak. If residential property was 45% down from August 2007 prices I'd be pretty relaxed about buying the place I'll live in for the next 15 years. I guess that they will be borrowing at record low rates locked for a long period and buying close to bottom. In order to exploit this fully they need to act now before rates raise, secure the funds and then buy as they see fit.

 

 

"A fool or a smart fellow?

 

I say a good move for commercial property, if it's for the long term.

[drbubb]

... the majority cannot get mortgages.

Can someone enlighten me about this?

 

Does this mean:

+ They cannot get a mortgage at all (even for 50% or 60% LTV), or

+ They cannot get 80% or 90% LTV mortgages?

 

If the second is true, then the Mortgage market has merely returned to sanity,

and maybe property prices will slide back down to where they should be and there will

be a reasonable balance between prices ande incomes ... eventually.

(There is nothing to complain about. People should learn to save and be patient, and

look forward to a more sane property market, where only those who have reasonable

amounts of equity can buy.)

 

If the first is true, and people cannot get mortgages at all, what is wrong with the banks?