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Will there still be enough wealth at the bottom of the chain?
It’s really about availability of debt rather than wealth.
If bank lending multiples went back to 3-4x earnings rather than 5x+, you would see a fall in prices. Whether this happens is anyone’s guess
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I think @Señor_Bear made a fair point that sellers are not generally known for turning down higher offers which come in at the last minute in overheating markets.
You mean gazumping? That's shit behaviour. They've looked someone in the eye, agreed to something, then reneged on it because they could come out the other side better off if they trade their honour for a few £.
If you mean they try to get the most for their gaff before accepting an offer, then sure, of course they do. The have the asset, other people want it and you can’t magic another one from a factory. It's not a balanced situation, the seller has all the power. That others will offer £x + 1 is pretty great evidence that the place is worth at least £x +1.
And to expect things that were negotiated before we got to this point to proceed without any adjustment seems unrealistic.
Yeah I mean people are going to do dumb things like try to renegotiate on deals they've already agreed. But how much less should they now offer? And what puts them in a position to decide? Only the fact that they have the seller trapped, and that they can play on their fear. Some might think that it's balanced the situation, but I don't. It's shit behaviour.
I really wanted to pull out of my sale in 2007 but my GF at the time persuaded me otherwise, one year later I was sitting in a house worth 35-40% less than we paid and there were tons of far nicer houses on the market with garages(i didnt have one but really wanted one) that I had no chance of getting
8B's example above shows that even after a downwards negotiation buyers can still inflict a large amount of self harm upon themselves by proceeding.
Better to apologise and sack it off if you can't handle it. And that's how the readjustment will come.
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NickCJ
Howard
@ChasnotRobert
I think @Señor_Bear made a fair point that sellers are not generally known for turning down higher offers which come in at the last minute in overheating markets.
Mostly, I'm glad that I don't need to buy or sell a house right now so I do feel for people on both sides of transactions at the moment.
However, to me it's really clear that the world has massively changed in the last 4 weeks. And to expect things that were negotiated before we got to this point to proceed without any adjustment seems unrealistic. I fully appreciate that the way this adjustment has been approached in the original post is pretty shitty, and deserves a similar response.
On the supply drying up; I don't see any reason why supply side will be worse affected than demand. Economic damage will be massive. Many people won't have jobs. Money will be scarce.
Home owners who have been prevented from moving will want to move when things get "back to normal". Will there still be enough wealth at the bottom of the chain?
We don't know but my guess will be it will take a hit.