Time to buy index for December 2008

In December the index stands at 208 unadjusted(U) and 292 adjusted(A)

This gives a guide that house prices are around 20% over valued and that market sentiment pushes that to 29% over valued. DO NOT BUY

That is not to say that house prices will fall by either, but it gives an idea of the direction.

House prices have fallen this month which has reduced the index. Residential rates and buy to let rates have fallen, although the rates for first time buyers are high in comparison to other rates.

Although Bank of England rates have fallen, new mortgage deals are being priced at pre-cut levels.

The price to average earnings ratio has also fallen this month and is still indicating house prices are 10% above trend on this indicator.

Many buy to let deals have been withdrawn now and those that remain have seen a lowering of the Loan to Value needed. Credit remains tight.

The unadjusted index is now down from it's peak of 645 in July 2007

PREDICTION

House prices to continue falling with the Halifax index bottoming at £140,000 in Q4 2009.

In my opinion mortgage lending criteria has pretty much returned to normal even though lenders are still lending above average multipliers and mortgage rates have again returned to a longer term normal level.

The end of irresponsible lending means that lenders will never be returning to the days of lending with no deposit or waiving income checks.

House prices are still suspended about 20% above the level of finance that the banks are willing to give out.

Buy to let as one of the key drivers of house prices still does not makes economic sense at current rates. This sector will most likely never return to the heady days of 2007 as the age of irresponsible lending is over.

First time buyers are the main driver of the bottom of the housing market. First time buyers have rightly taken the view that it is best to wait out this drop before entering the market.