Mortgage News Unrealistic House Prices Fuel Slump In Housing Market
26 March 2008 / by Joy Tibbs
Home owners wishing to sell up are ignoring the credit crisis by putting their properties on the market for prices that are just not viable.
According to the latest House Price Index from Rightmove, house sellers are still asking for prices that are close to those expected during the boom last year, despite the current financial crisis.
According to the data, new house sellers have raised their average asking prices by 0.8 per cent (£1,799) since February, in spite of the credit crunch. Rightmove has never measured higher available housing stock at this time of year before, indicating a slowdown in housing market activity, which, Rightmove believes, could be partially due to unrealistic house prices.
Miles Shipside, commercial director of Rightmove comments: “Most sellers coming to the market seem to be ignoring the increased competition from other unsold properties and the challenge buyers now face in obtaining a mortgage.”
This news comes in the wake of reports from the Council of Mortgage Lenders (CML), stating that mortgage lending is on the decrease and has declined by as much as 7 per cent in the last month. With these statistics, it is hard to ignore the existing credit crisis, yet it seems this is exactly what new house sellers are doing.
According to Rightmove, prices tend to become unrealistic during a boom and re-adjust over time. Currently, sellers are only dropping their prices after a few weeks, due to lack of interest, rather than following the financial climate from the start.
This reluctance to lower prices inline with the credit crisis is causing a gap to appear between asking and sales prices. The rift has recently been reported by the National Association of Estate Agents (NAEA) and is seen as a result of a fall in housing market activity.
Rightmove statistics also show that average unsold property stock per branch has risen to 67, up from 56 at this time last year, which, according to Rightmove, gives credence to forecasts that completed house sales will total less than a million this year.
Commenting on the need for change in the housing market, Mr. Shipside concluded: “If sellers were to price more realistically at the same time as lenders were able to normalise lending criteria, we could see a speedier harmonisation of seller expectations and buyer affordability. Until then there will be a lot of sellers who can’t sell and a lot of buyers who can’t buy, and everyone sitting on their hands.”
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