Rising asking prices mask sharp falls in home prices

Newly listed homes in February outnumber ‘sale agreed’ 4:1 as gazundering takes hold

Charlie discusses these findings with Housing Stig (aka Alex Groundwater)

The latest weekly data from bestagent.co.uk shows average and median asking prices for Unsold homes rising, 3% in the case of median, from £304,000 to £310,000 for homes showing as For Sale in England.

The same metrics for “SSTC” homes (aka Under Offer, Sale Agreed or Sold STC) shows average and median asking prices falling slightly, which indicates weakening of demand.

The number of new homes coming on to the market in England continues to outstrip the number going “under offer” by more than 3:1 indicating a sharp rise in supply of homes for sale, which will put further downward pressure on prices.

This week supply is up sharply at 228,101 homes showing for sale in England, up 4,433 or 2.0% from a week earlier.

Median asking prices for unsold properties jumped almost 2% in the week to £310,000 (from £304,000). Average asking price was up £886 or 0.2% to £425,246.

The big change in the median might suggest house prices are rising, and in a rising market this could be true.

Gazundering returns, ‘sold’ prices fall. Supply outstrips demand 4:1.

However in this case it’s is a strong indicator of an increasing number of higher-than-average priced homes coming to market, while fewer properties are selling, and they are doing so at lower and falling values.

Data from the House Buyer Bureau shows that 3 out of 4 home sellers who experience gazundering are choosing to accept the last minute lower price.

In the same week, the number of properties showing as “Sale Agreed” or equivalent in England rose by just 960, or less than a quarter of one percent. Compared to the 4,433 homes newly listed for sale, ‘sold’ homes make up just one-fifth of the number.

Median ‘sold’ asking prices fell just £50 to £284,950. But contrasted against the sharp increase in median asking prices for unsold homes, this shows real weakness in demand.

The less useful ‘average’ asking price of ‘sold’ homes also fell, by £205 to £355,643. This is almost £70,000 lower than the average asking price of unsold homes, which rose by £616 to £425,246.

Fall-throughs and asking price drops at record levels

According to a report by Christopher Watkin using weekly data from TwentyEA a supplier of market data to estate agents, in what they call Week 7, fall throughs reached nearly 22% as a percentage of sales, a record high since they began recording this data in 2016.

They also show the number of properties showing price reductions as a percentage of listings at a record 53%.

Charlie’s Observations

“Usually, rising asking prices are a sign of rising actual prices. Most of the time, during ‘normal’ time in the house price cycle, this is true.” notes Charlie Lamdin, founder of BestAgent.

But, just as “year on year” price increases can mask month on month price falls, there are different explanations for rising asking prices when in a market that has falling transaction prices.

In January 2023, Nationwide said current house prices are showing around 1% higher year on year, yet have fallen -3.2% in the last 5 months.

The giveaway that shows that the reason for rising asking prices has nothing to do with what’s happening at the coal face of agreed home sales is a combination of two things:

  1. The falling prices of homes advertised as ‘sale agreed’
  2. The small number of newly agreed home sales, compared with the number of newly listed homes.

Then we hear reports of increased gazundering with 75% of sellers accepting the last minute price drops rather than pull out of the sale, all adding fuel to the bonfire of the industry narrative that the market is ‘surprisingly strong’, when in fact selling homes is becoming increasingly difficult.

It’s the move, not the money.

For people who need to move home, this means that it’s much more difficult than usual to hold chains of simultaneous sales together, as lenders down value, buyers pull out and realistic upsizing sellers can’t find new homes within budget because there are too many unrealistic sellers, especially as you go up the value scale, causing a standoff and risking putting the housing market into a deep freeze.

Moving is a crucially important life step for non-financial reasons. If you need to move, it’s crucial that you know how to find an agent that can get it done in tough circumstances.

BestAgent Data for England only as at 26 Feb 2023
Unsold Homes for Sale    228,101 (up 4,433)
Median    £310,000 (up £6,000)
Avg    £425,246 (up £886)
‘Sold STC’ homes         125,229 (up 960)
Median    £284,950 (down £50)
Avg    £355,643 (down £205)

Leave a comment

Your email address will not be published. Required fields are marked *