Pricking the residential housing boil

This rise in house prices is not a bubble - it's a boil.  

Bubbles are nice, clean floaty things with a rainbow of colours on the outside.   When the time is right - they pop.  Children squeal with delight. 

Boils are horrible things that fill with angry pus until they have no choice but to burst.  When they do, it's repulsive and there's an awful mess.   Eww.

I wish I could do just one thing.   And that one thing may help prick the boil.


Before I tell you that one wish, allow me to explain why I think the whole business of buying/selling a house is a bit shabby at the moment.    

If you want to talk to someone about *perhaps* buying a house, you would, quite reasonably, talk to your bank or a real estate agent.    These guys are in the business and will offer good sensible advice...won't they?   

Well...

Right now, real estate agents are having a great time, sensing that while the sun is shining - it's time to make as much hay as possible.  Agents can have long periods of barren times.   In a way, you can't blame them for making the most of it.

Banks are offering the lowest of interest rates and all kinds of incentives.   Banks will not stop doing this.   Home loans are very profitable and banks have highly focused sales people, targeted to sell as many of them as possible.   Previous boundaries of sensible lending are being tested - again.


Right now, both of those parties have too much of a vested interest in getting that loan and that house purchase done for you.   In this current environment, you should not expect a balanced chat with either the bank or agent about whether this is the right thing to do.


Once upon a time, buying a house was quite civilised.   If the parties couldn't agree on price/terms,  then it was never "meant to be".   This is the right outcome for both buyer and seller.   

Agents prefer auctions.   Most of them push this option now, to the exclusion of every other method.

With auctions, a sale (any sale) happens far more often.     In the high pressure environment of the auction room, a bidder may get carried away, or there is an ugly silence.  The reserve price is not met and the seller feels forced to accept a subsequent lower offer rather than go through the humiliation (and cost) of an auction all over again.   

Either way, there's a sale.   

That's good for the bank and good for the Agents.   They don't necessarily care that much about whether the actual sale price was $50K higher or lower.   It makes very little difference to the agent's commission or the bank's lending targets.  

Yes, more houses get sold - and the market therefore seems to be buoyant.   I think it's a murky business and I feel that the public are corralled into situations that make them pressurised, stressed and vulnerable.

So my wish is to stop banks lending for properties that are up for auction.   Or at least make the lending much harder to arrange.