Yesterday the NZ Herald was running a story about how house sellers had the upper hand because there were so few houses for sale. Today the story is a bit different. Spring fails to bring listing leap
Real estate agents are complaining about a shortage of listings, saying the warmer weather usually makes people think of shifting. But not this year.The reason so few people are selling is simple, they can't clear their mortgage at the current market price for their house.
Realestate.co.nz, jointly owned by the Real Estate Institute with a group of large agencies, complained about the lack of the anticipated spring pickup in a monthly update issued yesterday.
In July, 10,733 houses were put on the market but last month there were only 10,644 new listings.
This was below the expected level anticipated as a result of the spring seasonal upturn.
Right now, thousands of kiwis are waking up every morning knowing that they are renting from the bank and that the day they sell their house they will be destitute, they will have no home and the bank will have taken all the selling price, then probably demanded more. They have finally reached the moment when they have accepted the consequences of their previous dumb decisions about how much debt they could carry.
Right now they need a miracle and its not coming.
And here's another data point.
The agents are blaming the lack of new listings partly on flat prices. National house prices have fallen 7 per cent since the market peaked in October 2007 when the asking price was $403,107, the agents said.The prices are flat because there is no longer the kind of overheated demand for houses as "investment vehicles". Perhaps we are drifting towards a point where a house is a place to live and bring up your family. Once we take the wide boys out of the system, and especially as people lose the ability to go racing all over the landscape looking for the next bit of margin or the next job that has a better car in the "remuneration package", the need and desire to be a nomad is fading.
And here's the last bit of delusion.
Alistair Helm, chief executive of realestate.co.nz, predicted the listing drought could eventually push up prices.Using what? Those smart enough to be able to get a loan from the bank to buy houses at even slightly inflated prices are smart enough to know that more debt is the problem not the solution. And those who might be stupid enough to take that risk wont get a loan from the bank any more to indulge their delusions.
Almost nobody has any pricing power any more, company tax takes around the world are dropping like rocks, the UK is down nearly 50% and the real kicker is the UK VAT take which is down about 37%.
Deflation is when the amount of money in the system is too little for the available products and services. Since money can be anything we agree on, from gold to conch shells to big round rocks on the seashore, we agreed that debt was money and for the last decade especially we created vast amounts of this apparent money and used it buy things.
Then we stopped agreeing that debt was money.
If all you can give me for my house is debt, I no longer accept it, and anyway your friendly local bank wont create any more for you. So the total amount of "viable" debt" - ie, has some chance of being repaid before the heat death of the universe, has collapsed. And since debt was the vast majority of the "money" we used, the perceived value of the assets denominated in debt has also collapsed.
When I can't afford to sell my house, its monetary value is zero. Simple really.