Something extraordinary has just happened. The phone rang. I picked it up and found myself talking to an estate agent who had just taken on a house she thought I might be interested in. You might think that is of no interest whatsoever – after all until a few months ago we were in the market for a house. But it is interesting simply because when we where looking no one ever called us with a house.
Not only did estate agents not bother to call us after a viewing to see what we thought, they didn’t bother to call us when something new came on the market. They waited until we saw it on the property websites or in the paper and called them.
So what’s changed? The balance between supply and demand. When we were looking there was very little supply. So if something good came up it sold itself. Today there is plenty of supply. Back in early 2009, the average estate agent had around 62 properties on its books. Last month that number was near 80. That means that the agents left on our high streets are back to having to work if they want to sell.
The problem? It is very hard work indeed: not many of the 80 sellers per agent are prepared to cut their prices to levels that make their houses an easy sell in these mortgage-tight times. Indeed, in the face of all logic, Rightmove reports that the average vendor actually increased his price by 3% in October.
If I was selling a house at the moment I’d probably be dragging my feet a little if I could, too. After all, if you do manage to sell and you then suddenly find yourself with a big pile of cash, what on earth are you going to do with it? If you put it in a savings account, you will get a 100%-guaranteed negative real return after tax and inflation. And if you put it in any kind of financial asset, you’ll run a very high chance of making more than just a nominal loss. No wonder transactions are down around 7% on last year.
But the key to what will happen next is surely the fact that not everyone has the luxury of feet dragging. A year ago, Shelter reported that 10% of mortgage holders were “constantly struggling” to meet their payments. This year, the same survey puts the percentage at 18%.
Repossessions haven’t been as high as expected when the financial crisis first kicked off (thanks to super-low interest rates), but they are still running at the highest annual levels since the mid-1990s. And the number of people more than 12 months in arrears has trebled in two years. And with food and energy prices rising (thank you quantitative easing…) there is every reason to think it might treble again.
Not all would-be sellers are desperate, obviously. But more and more look like they are becoming so. Maybe they’ll cut their prices? Or if they don’t, maybe the banks will cut the prices of the repossessions they will eventually have to sell on.