Sunday, 1 June 2008


It is extraordinary how far sentiment has turned. Previously, the Times was in the forefront of housing market hype.

Today, the newspaper has turned. It was full of dismal news for home sellers. One article reported that:

"Almost half of all properties going to auction are failing to sell on the day, as sanguine buyers wait until the bidding has ended before making rock-bottom offers on unsold lots. Behind the scenes, struggling auctioneers are urging sellers to drop their reserve prices and some investors are quietly snapping up deals for up to 40 per cent below market value."

If investors are "quietly" picking up deals at 40 percent below market value, then the UK housing market is well beyond a correction. It has slipped into a full scale crash.

The Times followed up with a second article, pointing out that second home owners are also about to start flooding the market with unwanted properties:

"One in four second-homeowners could sell up in the current downturn, prompting even more dramatic house-price falls."

Auctions and second homes may not fully reflect the housing market. In many respects, these activities were typically seen as fringe activities, dominated by speculators and misguided investors. Nevertheless, this sudden collapse of confidence contributes to the prevailing atmosphere of panic.

I am now waiting for the final collapse of the housing hype-merchants. I am waiting for the sudden disappearance of all those horrific property shows on TV. I give it three more months before Kirsty and the crew get dumped. My only fear is what will replace them; more X Factor and Britain's got talent?


aSteve said...

The phrase "below market value" infuriates me. If buyers are snapping up properties for 40% less than the asking price - then that defines the market value... not what some estate agent or vendor or auction house thinks the market value ought to be.

Anonymous said...

asteve. I was about to throw my mouse at the screen when I saw the phrase "below market value". Looks like you beat me two it.

Which bit of it do these fools not get? Market value = what somebody will pay for it.


alice cook said...

Asteve, Nick, I saw that too. Since doing this blog, I can come to realize that Journalists rarely think before they write. There is always a deadline hanging over their head. The problem lies with the general public who tend to accept this nonsense without thinking.


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Ed H said...

Britain's got talent? You saw this didn't you:

simon said...

If several houses are rejected for every one placed in the catalogue.

And only half are sold at the auction,(many/most of those must be repos.)

Then many would be sellers are refusing to accept that times have changed.

Barry said...

Alice, ASteve, Nick and everyone. As a newcomer to this blog and the world of finance I can speak for the ordinary fools who struggle to take onboard a realm of complication regarding financial matters. Spare the mouse or brick and understand that everyday speak includes endless fallacies and misunderstood terms. We use them without realising the subtlety simply because it is very difficult to come to terms with the intricacies of this complicated and turbulent world.

aSteve said...

Barry, no offence intended, but it is that only a fool would think the "market value" of anything is greater than what people pay for it.

It is partly because ordinary folk, who are not giving the subject their full attention, may be fooled by what to others is such obvious nonsense that I am am angry with the (Times) Journalist. Not only is the journalist in possession of the facts, but should also be adept at explaining these facts. Writing logical contradictions is clearly an attempt to bamboozle and defraud the reader. The fact that it is so obvious, in my opinion, does not excuse it.

aSteve said...

Correction: Barry, no offence intended, but only a fool would think the "market value" of anything is greater than what people pay for it.

Good job I'm not a journalist, eh?

Mark Wadsworth said...

What asteve and nick say.

Re TV schedules, Krusty & Phil can go round and interview all those poor young couple they've 'helped' for a new series called "Repossession, repossession, repossession".

Anonymous said...

Barry, we live entangled in webs of deceit, often self-deceit. While nobody is an expert on everything, it takes only a little intellectual honesty to sincerely TRY to be right. Journalists rarely have that and the few who do get it red penciled out of their articles by the sub-editor.

Finance isn't hard to understand but people make alot of money out of complicating it. I appreciate it's not easy when you first start paying attention to it. Perhaps to help, follow these rules of thumb:

- There's no free lunch in the market
- There IS a free lunch in socialism. You get someone else to pay.
- No cash on the table
- Debt must be repaid by future income
- Market value = what a buyer will pay
- Anything bought with leverage depends on credit availability and is hyper-sensitive to interest rate spreads
- Liquidity is a coward and disappears at the first sniff of trouble


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