I had forgotten just how slow house price downturns are to gain momentum....

We are in a complete standoff at the moment. Most of the agents in my town are still ramping like there is no tommorow but they appear to be selling very little. I continue to give competitive valuations, am selling the vast majority of what I am able to get but cannot get nearly enough volume at the right prices to keep the corporate bosses happy. I pride myself on giving factual evidence based valuations, so when i do manage to get one on the market it is generally the right price and therefore sells even in this market. I have had to put the fees back up to a no compromise 2% sole or 3% multi agency to compensate for the reduced volumes. Most agents must be hoping for a Spring bounce , that is the only possible reason for continuing to stockpile masses of overpriced houses, hoping I suppose to stay in business long enough to talk the vendors down to sensible money. When the Spring bounce fails to materialise the long anticipated large scale job culls from our industry will begin in earnest.

Small example to illustrate. The town where I currently work has a large sector of Victorian 2 Bed Terraced housing, the value of which is very easy to determine at any given time due the number of comparables available. In the peak of the market last Summer, a nice example was touching £150000 with around 6 on the market to choose from at any given time. By the end of 2007 these were sellling for £140000-145000 with around 20 to choose from. Today there are nearly 40 of these near identical places available for sale with all agents big and small priced variously between £135K and £145K. What do you think a professional agent acting in his clients best interests should be advising on price in the context of this market? I had a client today who was a preferential seller completely disregard my competitive valuation of £135000 in favour of a rival agent who looked her in the eye and told her with total conviction but no hard evidence that it would sell for £155000 ! The HPC is going to be exceedingly slow at this rate of progress. These houses will rent for £600 pcm and I reckon we will have to talk them down to below stamp duty (125K) before it looks attractive for a FTB to buy rather than rent. We have not registered a buy to let investor for many months now so the ramping effect from this sector has been all but eliminated locally. Sellers do not realise this yet , and are therefore expecting prices to remain consistent with last year or marginally down, when in reality, the bottom of the market is now being supported ONLY by demand from First Time Buyers who are not able to pay anywhere near these levels, are relatively few in number and understandably very hesitant to enter the market. A correction is therefore inevitable, it is just a case of how long it takes us to get there. There are some distressed sales coming through, but yet in sufficient numbers to force the market down to the level we require.

At the other end of the market, a quality 1930s 3 bed family home in a stable neighbourhood near good schools attracts 12 viewings on the second day on the market with the vendor being in the happy position of having 3 offers very close to the asking price to choose from as I left the office today.

Completed on my STR in JAN after a 6 months and 2 broken chains. Many of my estate agency collegues think I am completely mad. Now completely debt free with a tidy lump sum in the bank, hoping I am able to steer my family through what I expect to be fairly choppy waters ahead.

Good to hear from you again HonestEA.

Ahhh...the voice of reason.

How refreshing amidst all the realistbear-isms of doom and gloom!



You and 90% of the HPC'ers...



- Would be interested to hear your opinion/ speculative opinion on how long this will take. One year? 18 months?

- Regarding the collapsed chains; whats the feedback?
Credit (cant get mortgage) problems? Buyer-cant-sell problems? Buyer-getting-cold-feet problems? What are you hearing from surveyors?

Good luck with the STR'ing.

Thanks, this made my day.

Good post. It takes time for the market adjust to the new credit market conditions but it will.

Great post. Thanks for taking the time to write.

honest EA.

whilst I appreciate this is an anecdotal.I believe it deserves to be on the main board.A wider audience will appreciate it.

very interesting what you say about FTBs propping up the market and no BTLs

Very much agree, I don't consider this to be just anecdotal.

Well for the vested interest point of view of continuing to earn a living in estate agency, I need this crash to be quick and large enough to attract enough first time buyers back into the market so that volumes are restored to more normal levels quickly. The reality is that without more forced sales to drive down the prices, it could be a long drawn out process which may take years to reach the bottom , similar to the last one. Very many estate agencies who do not start to help to drive down the prices now will not be in business in 6 months at current sale volumes in my opinion. The Spring selling season this year or lack of it will decide the pace of the correction. Many sellers are absolutely convinced that the market will recover as we move into Spring. If this fails to happen and more become forced sellers, then the prices will start to come off more quickly. In my town I reckon we will finish down around 10% this year which is not really a crash in the context of recent rises, but the downward trend will have started and will be just as hard to change the market sentiment on the way down as it was on the way up.

Whilst I can mitigate the fall in volumes by raising my fees to some extent, the biggest problem is the broken chains. Chains are falling apart at the bottom left, right and centre for all of the reasons that you have just mentioned. When you work in the industry and see people who would have got a mortgage no problem six months ago now getting turned away, you see the reality of the credit crunch taking its toll at first hand. We have an in house mortgage advisor so I can see all the products being withdrawn and ammended on a daily basis. We are constantly reselling the same houses only for them to fall through and start over. So we are working quite hard to achieve considerably less in terms of income which only comes from the sales that do actually complete.

The STR was a pragmatic choice to deal with a situation where my income ( which is performance related to completed sales volume) was falling and my outgoings were increasing. We decided as a couple that having tried for 15 long years to start a family that my wife would stay home and look after the child. To pay the mortgage and have any kind of quality of life on one income was becoming impossible, like many I was funding the deficit by borrowing and this is obviously unsustainable in the long term. To downsize would involve buying a house in an area that I did not particularly find inspiring, so we are now living in a far better neighbourhood in a larger house than we sold for £300 per month less than the old mortgage with no debts at all and the good lady is actually the happiest I have seen her in years. I dont think any honest man can put a price on that.

Good luck with everything!

People also thought I was mad when I left agency in 2005 and STRed in 2007. I now rent a barn conversion that would have been outside of my wildest dreams to buy ever.

Honest EA.

You write very well (which I know takes time) and make some excellent points (which takes intelligence!). So many thanks for the efforts.

Good chap

Thanks HonestEA, you just got my vote for post of the year!

Honest EA
If you don't mind would you answer these few Q's for me , just quick short answers will do thanx in advance.

What are sales volumes like overall in your office to say 12 months ago ?

What area are you based in , county will do ?

If someone walked into your office and wanted 20% off a family house , not a timewaster , was a cash buyer and could move in weeks how would they be treated overall by you and local EA's , would they be greeted or shown the door ?

The spring bounce as we all know isn't happening , when will the majority of EA's accept this 6-8 weeks time ?

'downsize would involve buying a house in an area that I did not particularly find inspiring, so we are now living in a far better neighbourhood in a larger house than we sold for £300 per month less than the old mortgage with no debts at all and the good lady is actually the happiest I have seen her in years. I dont think any honest man can put a price on that.'

nice one.


have to agreeon the STR.people thought we were mad a year back but now the first signs of slump are showing and I notice people beign alot less judgemental.

-35%

Medway towns, 1 hour train journey and 30 miles from central london on the North Kent coast.

We have spare roll of red carpet in the back office which I personally would be prepared to roll out . I would also be prepared to drive around to the vendors house and put the offer to them in person, especially if they were a seller of necessity. Waste of time if they were a preferential seller, would probably result in a disinstruction if I were to strongly recommend acceptance at the moment. Indicating to you which were the sellers of necessity and which were the preferential sellers would not be something I personally would feel comfortable with. Cannot speak for other agents in the High Street however.

Thanx Honest EA , yes i do remember your posts now , quite long and well thought out , i can understand you not telling buyers who needs to sell and who doesn't , that would be up to me and other buyers to assess vendors when viewing , most vendors let something slip when viewing anyway . Gravesend , Chatam etc. not a area i'm buying in though
Well done on your STRing and thanx again .

'Sellers do not realise this yet , and are therefore expecting prices to remain consistent with last year or marginally down, when in reality, the bottom of the market is now being supported ONLY by demand from First Time Buyers who are not able to pay anywhere near these levels, are relatively few in number and understandably very hesitant to enter the market. '

EA,this post has been on my mind.I really appreciate the reports from the coalface you get on here from Converted lurker,buytoilet=mortgage brokers,but we don't have many EAs at all.


In terms of the victorianteraces you referrred to,do you know what the typical budget for a FTB is?How far are we from a firm floor?

In terms of forced sellers,what are the reasons driving their sales on the whole? Is this a phenomenon you see increasing a lot or is it the normal level of people who've loaded up on debt?

Well the average price of £140000 equates to a a repayment mortgage of around £1000 per month, say £800 for interest only compared to £600 pcm for the rental of the same house. A 12% reduction to an average of around £125000 would close the gap enough for many local FTBs to consider it seriously provided they can raise the required deposit. My senior negotiator with 5 years experience is a typical FTB I reckon. He takes home around £30000 gross per annum in his late 20's and has said he will buy into the market when they reach the stamp duty threashold because the desire for a place of his own outweighs for him the possibilty of negative equity. He currently rents a 1 bed starter home for £400 pcm. Also at this price point, buy to let starts to hit break even again if you have a reasonable deposit provided the finance is still available. The rental price of £600 pcm has remained static for at least 3 years ironically due to oversupply from the buy to let sector.

The forced sellers are a mixed bag of repossessions, over extended BTL and overloaded "must have it all now" generation. There are always forced sellers at any time in the market cycle. They are the most prized instructions in the marketplace right now because they will listen to professional market advice and market their properties accordingly which leads to real income for the estate agent. The numbers are creeping up but are yet to become the dominant driving force in the market. Until they do, this standoff will continue with an attritional drift downwards in prices in the order of around 1% per month which seems barely noticeable when you are working in the market on a daily basis. Most agents will give marketing price advice within a 5% range so the picture can be very confusing for the layman trying to get a feel for the market.

Fascinating stuff.
Main Board Now!
please

I was just wondering where HonestEA had gone. His posts were always fascinating and certainly appeared honest as his name suggests.

Thanks for your great posts Honest EA. Can you shed any light on the current health of the South London market, if that is part of your company's patch? It seems to be moving slowly from what I can tell, but there are also some signs of a spring bounce. Thanks in advance

He works the Medway towns.
The Spring Bounce is hamsprung.

Am assuming he's a bloke.
And you'll get my pun.

Here's an idea. Why don't you drop your fees to 2000pound flat fee and watch the business roll in as you out compete the other estate agents?

BUMP - great post.

Very interesting thread - well done HonestEA.

A member of my family had his own EA business - and sold it on just over 18 months ago as he saw this coming.

One of his frustrations with the last down-turn was exactly as HonestEA is describing - many owners not understanding his realistic evaluation - and other EAs quoting ridiculous figures they could achieve despite the downturn.

Result of that was - he lost the business - and the others got it - but houses stayed around for a year and more - and had to drop in the end when they realised they couldn't sell - but ironically they dropped to close to his original evaluation - but stayed with their new EA.

A few did go back to him - and over his 20 years in business - always went back to him for selling and buying again.

It was the one frustration he had with the industry as a whole - that they didn't all pull in the same direction - to price things realistically.

Then when things went on the up - he was giving realistic evaluations and advising people not to take out more than 3.5 times their salary - they too had an in-house mortgage fixer - and although they could fix 5-7 times more than salary they were constantly advising clients this was not a wise move and to sit tight - and be prepared to let a property go.

Clients weren't prepared to let their "dream" property go - and would go beyond prices affordable.

Recently, the most depressing thing that pushed him into selling the business on was the shared-ownership schemes - which initially he thought were a good idea and he became a main seller for some of the many sites springing up.

However, the houses/flats he viewed if sold at real value were well beyond what most first time buyers could afford and the valuations were set by the Shared-Ownership Scheme (he tried to dispute some of them - and failed) - and he was dealing with parents remortgaging their houses and giving away their pension savings for their kids.

At this point he decided it was not the business he wanted to be in.

Was he an HonestEa?

I can honestly say that this person has a natural mean streak - he's no pushover - and no-one can push him about - he's been like that since a kid - and a business deal to be done - he would achieve it. Not quite sell your own mother - but bordering on it - so he wasn't some kind nice person who just gave up because he was a nice guy.

But it got to him - and in the end he decided it wasn't worth it - and set-up a new business with the proceeds of selling the business on to a bigger fish (at a good price) - and is doing great in his new career.

Great anecdote, deserves a topic of it's own

Commercial suicide for the large corporates to do this in a reducing volume environment. We have much higher fixed costs than small independent operators which I am still managing to cover with the higher fee strategy. The public wants ever more professional, well trained estate agents providing a fantastic service but at an ever reducing cost which is impossible to do in my experience. To take out the competition on fees alone we would need to be nearer £1000 than £2000, my average fee is just over £3000 at the moment which most people seem happy to pay for the service we offer. I would need to sell 3 times the amount of houses just to make the same amount of money, there is simply not that many sales to be had in the current marketplace even if I got to 100% marketshare which is never going to happen in the real world unless I am the last surviving agent in town. I can't deny that the cheap fees route works in a booming sellers market where the properties sell themselves. Every listing then is a virtually certain payday. In a buyers market you actually need to employ decent salespeople who can actually sell and with the average length of time on market extending to 63 days and rising according to Rightmove, the actual cost of marketing each individual property set against the fee returned starts to become critical.

Thanks for the very interesting thread. And also your initial one about the guy coming in with a war-chest to buy from distressed sellers. Without looking it up, I think that you said that six months on (which we must be at about now), you might give your distressed sellers different advice. Have we reached that point in the game yet?

Just as a matter of interest, how much does marketing a property cost, roughly? I'd be particularly interested to know about rightmove: do they charge per listing? per listing per day? or some such.

Thanks again,


Peter.

Yep, same with me i'm afraid. Haven't posted on here for a while, but thought i'd have a look to see what's been said now things seem to be biting!
At the end of last year I started giving some fairly honest advice and watched nearly every client i saw go on the market with another agent at about 10% over what i'd recommended!! Having realised this approach wouldn't work i've gone back to pricing up, working on the theory that it's better to have a house on the market that you have a chance to get the price down and earn a fee at some point rather than watch another agent do exactly that and my pockets remain empty!!
Sooner or later enough sellers will HAVE to sell and reduce prices to a level where buyers will start offering, but it ain't happened yet!! (except in a small number of cases, and those vendors have found buyers!!)

OOoooh, I'm one of your would-be first time buyers that isn't holding the market up.

Please don't tell me you're working for those idiots Spicer McColl. We viewed some houses with them in August. ALL of which were horrible concrete blocky buildings just after Cecil road. Nasty concrete 1950s builds ridiculously expensive.

Even some of the nice victorian 3 bed (small gerden) terraces we saw are sill on the market which we are suprised about a bit. But then - Medway is a bit of a hole - but is all we can afford - having lived in london and worked here all my life, it also has high unemployment which I'm sure doens't help. So I doubt the locals can afford what should really be just under london prices for a flat/ terrace.



The spotty youth taking us round was adamant that they were a "bargain". Nice to see them dropping in value ( I love property-bee

C'mon - do you seriously expect him to say who he works for? I' m just glad he's posting here - Ron

Of course I don't! It's a rhetorical question really, Just part of my rant really! I'm just venting cos the above mentioned estate agent really pissed me off. We were taken round some nasty mouldy repossession falt that basically needed gutting. You could smell the mushrooms and see the cracks on the wall as you walked in - it was literally falling down. This proerty was on the market for about 150k and WELL overpriced, although it was larger than most.

I mean FFS, we're first time buyers - not f-ing builders and while we can probably cope with fitting a new kitchen/bathroom and a new paint job, a whole gut out and rebuilding the walls of a house is completley beyond our comprehension.

All the spotty youth kept saying was "ahh, but if you do it up then it will be worth at LEAST 180k. At which point I thought "********". What a timewaster. I'm never going back to them - I'm quite principled like that see.

This is by far the most interesting thread currently on the forum and really should be moved onto the main page. Estate agents are always vilified but the ones I know personally are actually quite nice chaps just doing a job - much like HonestEA.

It is interesting that HonestEA concentrates so much on forced sellers. This is something I have been banging on about for ages. Prices will only really start sliding when people who have to sell reduce their prices to attract a quick sale. If one person in a street accepts an offer of 20% below asking price then he immediately knocks around 20% off the value of every other house in his street. This is how the crash will unfold. The key people are the forced or distressed vendors.

It is also very interesting that HonestEA stresses agents' roles in persuading vendors to lower their expectations. It is commonly thought that estate agents have a vested interest in high house prices. In fact their vested interest is only in selling houses. In the current stalemate they are earning nothing - commissions will only start to flow when prices fall and buyers re-enter the maket.

Far from being the enemy of HPCers, estate agents like HonestEA are our new best friends!

This is certainly the most useful and, indeed, the most grown-up thread on the board. And probably the most useful thread for quite a few months.

Main board fodder, definitely, however there it will be swamped by Crash2006's postings on German banker scandals etc.

If one person in a street accepts an offer of 20% below asking price then he immediately knocks around 20% off the value of every other house in his street.'

that's it.with nethouseprices etc it's eay for people to see the real price if they have the nouse or the inclination

Very interesting thread.

We are in the process of buying and selling at the moment. Our agent and seemingly most of the others in our area have been talking the market down gradually. They've been giving more realistic valuations to new instructions and asking current vendors to reduce to just above the lowest amount they would accept. It appears that whilst they are not selling in droves they are experiencing a mini spring-bounce. It's got us a buyer anyway.

Meanwhile, in the area we are moving to they have been marketing new instructions at ever increasing figures, even though most of the stuff marketed last year is sticking at a lower price! Most of the stuff from last year hasn't been reduced, not even by £1K. It turns out a few of them had chains starting to build and they think that means they can wait for the chain to be complete and hey presto they will get the price they were initally offered.

I've been ear bashing every agent I've spoken to over there about the price ramping, actual LR figures and the lack of SSTC boards. Interestingly several of them have been agreeing with me, and have hinted that the ramping has not come from them, but from the vendors. I know that EA's are likely to tell a potential buyer anything they want to hear at the moment, but our negotiations have been very telling indeed.

We have been put in a very good position (we have a cash buyer) we decided to offer, we set a maximum we were willing to spend (a good reduction on the asking price). Initially the vendor was being very arrogant about it, but we refused to budge and OH expected us to be told to get lost. I dug my heels in and the EA did the rest, they were not going let vendor ego get in the way of a sale. That particular agent has gained a lot of respect from me.

I don't know how Estate Agents work. But is it possible that EAs are trying to pursuade their clients to lower prices when, if the seller held his nerve, he would get his higher price (albeit in a few months time)? Does an EA think "well, this house could sell for £190k in March, or £200k in May, but I might be redundant in May, so better to aim for a quick sale to help my company's cashflow, and to keep me in a job." Is that how it could work? We're about to put our house on the market and have had very differing valuations, so are not sure what to do.

We're planning on renting for 6 to 12 months before buying again. What I don't want to do is sell our house for £190k after taking expert advice from an EA, only for in the summer him to think, "great, we've made a few sales, cashflow crisis avoided, I'm still in a job, lets get those prices back up to £200k again." - leaving me with a 10k loss when I want to get back on the ownership ladder. Is that how it could work?

As an IT contractor I can tell you it is better to be in work for 6 months at 200 per day than be out of work waiting for 6 months for that 210 per day contract.

Also, having been out of work for 6 weeks in the summer of '06 where our reserves were somewhat reduced, the prospect of another period of the same 3 months later wouldn't have appealed.

I would think the same is true for an EA.

Great thread btw and thanks to honest EA and others EAs who I always like to see posting.

Ultimately you have to make the decision yourself the EA can only advise/suggest to you , it's no good looking for a scapegoat if things go wrong .
Look at the current market for your chosen area and the current economic and financial situation and make a calculated risk assessment for your own personal circumstances , financial reward in markets often involves taking some risk .

This thread is full of really good anecdotal evidence. I'd like to suggest that all posters on this thread give some indication of where they are in the country, if they are willing.

You could just edit this into the bottom of your post if you like...

I'm in SE London.

Agree with bubble face , imo it should be made compulsary , county at least .

All this talk when people say "in my area" or " my local EA office " or " bla bla bla "....... worthless without a area imo.

I'm not looking for any scapegoats, I'm seeking an understanding of the possible tactics and mentalitiy of estate agents in order to interpet the advice they are currently giving me. I can do as much research as possible, but only estate agents can tell me what offers they have received this year, how many people have looked round houses they are selling, and the value of offers that have been accepted this year. Only they can really know what the market is currently doing.

I would argue that a good indication is the SSTC boards. Which agent has actually got any/most, but even those are not an indication of whether that particular EA is pushing his/her vendors to accept well below asking.

LR data whilst useful is only a picture of what happened 3 months ago.

If you are worried about an EA's valuation being low, just to get a sale, then market the property higher and be prepared to drop the price if/when viewings and offers fail to materialise, it's the only hard evidence you are going to be able to gather for yourselves about your property. The only problem with taking this approach is that you might end up chasing the market down, and whereas you could have got your £190K by pricing to sell straight away, you might end of taking £180K or lower in a few months time. You're not alone, it's a discussion OH and I had before putting ours on the market.

In our case the lower end was what we ended up dropping to. It got us someone who could actually buy, instead of the queue of people who told me they loved our house, but hadn't actually had a sniff of an offer on their own property.

I wanted to rent and sit it out for 2 years, but we have children who need to be settled. We are increasing our mortgage a little to buy the next house but it is bigger and in a nicer area, the mortgage will be smaller than renting a smaller house than our current one. OH's fuel bills for commuting are currently enormous, and the drop in that will be bigger then the increase in the mortgage, council tax and bills. Whilst it would be great to think that we had played the property market and gained, we have to take other things into account, and the decisions we have made suit us.

Only you can make a final call about what you think is best.

Apologies, I'm just a little nervous about giving away too much detail with everything still in progress.

We are in Derbyshire and moving within the county. East Midlands - the hard end of the crash!

Once everything is done and dusted I'll be happy to post more details/links of some of the silly behaviour in the new area.

That made my afternoon!

In general people only want to hire in work IT contractors so it is almost always better to be in work somewhere. Employers are a bit like birds, they find contractors that are already take and have had a good track record of partners much more attractive.

The problem is, if there is a 12% drop in asking prices you will find sentiment will have changed and a lot of FTBs will hold off at 125K (or not be able to raise the credit) waiting for prices to drop further. Yes house prices are sticky on the way down, at least before panic sets in and people understand the game has changed. At the moment people are still very much into the houses only ever go up 10-20% per year and will have a hard time adjusting to the new reality.

Speaking as an investor, for a 600pcm rent I wouldn't pay over 90K, which is why I've not bought since 2001. There may be some convergence of rents and prices meaning 100K is realistic but deflation tends to take on a life of its own. Worst case those 2 bed terraces will be around 60K by 2012 in today's money. Remember that for me, living in Switzerland and hedged between the CHF, EUR and UKP, UK house prices have already dropped 10-12% over the last 12 months.... you need to stop thinking purely in UKP but in terms of what your currency is worth globally.

I think there will be some unforseen events over the next 12-24 months that will completely change perceptions. Already the House Price bulls didn't see the credit crunch saying that only a hike in interest rates or a recession could trigger a HPC.

No need really to apologise , it was just a observastion as it's good to read anecdotes but can be a tad frustrating on not knowing where the area is . Would be interested to know this from you , how much % did you get knocked off..........