Crazy for homeowners to still be asking for inflated prices
The really worrying thing about the latest house price squelcher from Nationwide is that some sellers are still holding out for inflated prices.
At least, that is the conclusion that Nationwide economist Fionnuala Earley arrived at after puzzling over why, even in a credit squeeze, the number of completed house sales last month as a proportion of the available mortgages – the turnover rate – was at its lowest level since records began in 1974.
Not only that, in a market in which sellers ought to be biting buyers’ hands off the number of weeks it takes to complete a transaction has risen by more than 60 per cent compared with this time last year.
“In some ways,” said Ms Earley, with a fair degree of understatement, it might be thought, “this lack of activity is puzzling given that the last time turnover rates approached this level was in the early 1990s when market conditions appeared more hostile.”
By “more hostile” she means that in 1991 interest rates were more than double those of today, the economy was in deep recession and unemployment was above the two million mark.
OK, we have a long way to go before we see days as dark as those again. But still – you’d think some semblance of reality had replaced the housing euphoria of the past four years by now.
Asking prices have come down, but the rate of decline has been “significantly behind that of other measures” – i.e. prices.
So only those sellers willing to negotiate on price are shifting their property. Those that don’t are having to stay put. They are not only clogging up a market that badly needs liquidity, they are also locking themselves into potentially bigger falls further down the line.
After all, they are facing buyers who expect prices to come down even further and are looking to discount their paying prices even further.
That’s how markets work, after all.
It may be, as Nationwide went on to point out, that those sellers holding out for higher prices are doing so in the belief that the market will go on sustaining the silly prices that have prevailed in recent years.
On the other hand, one has a lurking suspicion that a lot of people out there have not learnt the lesson that it is best to regard your house as a home as well as an investment.
