The Nationwide figures last week reported more evidence that house prices might be stabilising although their annual rate of change (-6.2%)seemed at odds with both the Halifax (-15%) and the Land Registry (-14%). Talk of a rises in confidence from Chartered Surveyors tries match the expectations of the summer weather but like the revised forecast from the Met Office, is the evidence of an end to the property crash something that we might have got wrong?
I attach two graphs which may help explain the current position;-
The first shows the difference between asking prices (from Rightmove) and sale prices (from the Halifax). As you will see, since January 2003 where the gap bumped along at around £28k, in the last 12 months it has risen to over £70,000.
Since the homes that sell are a subset of all the homes marketed, this might be explained if more cheaper homes were selling relative to more expensive ones but there is no evidence for this..
The second graph shows the volumes of properties coming onto the market verses the number selling every day. What is interesting to note is that the gap between the two is closing but more dramatic are that volumes of both have plunged.
If there were just one home on the market and two buyers in the whole country then estate agents and mortgage brokers would no doubt jump up and down and point excitedly to the excess of buyers and predict a rise in prices as a result. Nevertheless, there are still just two buyers and just one lucky seller. Can we really base the health of the nations housing stock on this?
The numbers of transactions and the volume of new properties coming onto the market makes it almost impossible to draw any positive conclusions about house prices. The number of new properties coming onto the market has fallen from a peak in February 2004 of over 7,400 per day to just 3,100 today.
The number of homes actually selling over that period has fallen likewise from a peak 5,200 per day in the summer of 2007 when Northern Rock imploded to just 1,300 last Christmas, recovering slightly as one would expect at the end of the spring selling season to 2,500 a day today.
Using the values that are being paid today as a model for house prices across the country is like Derek Trotter using the value of a Aston Martin sold at Christies to set the price of his Reliant Robin. I’m not convinced?