Now this is intentionally a controversial title for a post, but hear me out. I’m not saying that we no longer need people who know stuff, in fact we will need them more than ever before – but what I am saying is that information and expertise is becoming so ubiquitous (through the Internet) that some of the models for profiting from expertise and insider knowledge are rapidly becoming redundant.
So back to the post. Let’s start by a poignant example. Here in the UK estate agents have been running amok with property prices of late and been trying their best to prop up property prices all around the country. Why? Because the higher the sale price, the better their fee (as it is often calculated as a percentage of the final sale price). So whether you like it or not, it is in estate agents’ interests to get as high a price for a property as possible. [Don't even get me started on whether it is reasonable to pay half a million pounds for some house built over a century ago, where heating mostly benefits the pigeons outside and no angle in the house is 90 degrees, making office chairs on casters spontaneously migrate to one corner of the room.]
Anyway – the game has been that of poker: If we tell you the price is going up and you better get on the property ladder soon, (pandering to the human weakness of dreading to lose out) people invariably believe it and more often than not in recent years, have been extending themselves far more than what could be recommended to just get on that property ladder.
Interestingly this began changing not too long ago, first with Nethouseprices, an on-line facility that keeps track on the actual price for which a property was sold. Certainly this began drawing a lot of interest and curiosity from people, but there was still room for estate agents to jump in the middle and say – ‘weeeelll, that was then… this is now and I tell you it is hotting up big time!’. What do I mean? Well, the prices listed on Nethouseprices are lag measures – they only tell you the news AFTER it has happened. It’s like saying – I would like to lose weight and tracking your weight only by getting on the scales every morning. The scales will tell you your weight at that precise moment in time, but not whether you are likely to be losing some weight anytime soon.
Well, I hear you ask – how could you measure the likelihood of losing weight? By finding a lead measure instead. So if you measured how often you took some exercise and how many calories you burned every time you exercised, offsetting that against how many calories you took in and going on the theory that if you burn more calories than you eat – you will find that sooner or later you begin losing weight. That’s a lead measure. Keeping track of that will tell you before you get on the scales what the scales are likely to tell you. How does this apply to the housing market?
The fact is that the housing market is catching up too and instead of reporting lag measures (i.e the price at which properties were sold and no use to you since the property is no longer on the market so you can’t jump in and buy it instead!) we, the consumers are beginning to have a chance to peek into that precious secret folder that only estate agents and individual sellers had access to before – that is, how much the price is coming down WHILE the property is still on the market. Ooops! The emperor no longer has any clothes as PropertySnake, interestingly named to be the opposite of the property ladder, will show. PropertySnake tracks how much prices of properties have fallen over time and by looking up areas by post-codes you get a good sense of the overall trend in that area in addition to what is happening to a particular house. If you then are so intrigued by what you find, you can look up with what estate agent that house/flat is listed with by clicking on the listing.
It is also a step on from traditional price comparison sites, which have mushroomed recently, because again – although those sites compare the prices right now, they seldom give you any indication of where the market is going. The same phenomenon is what happens at Ebay – because everyone can bid whenever they like and only by keeping track of something over time can you see whether the demand for that is heating up or not, it means your powers of detecting broader trends are limited to your own power of observation and whatever little software widget you might have that gives you the bids that are just about to close so you can bid in the last few minutes.
All those are still tactical tools, and up till now the strategy has been left to experts, but as we begin to see with house prices and no doubt with other areas too – the last vestiges for insider knowledge is becoming undone.
