Wednesday, 5 August 2009
They report house prices rose 1.1% or £1747 for the month or down 12.1% annually, but they calculate this using this quarter against the quarter a year ago.
The true yearly drop is actually a drop of 10% on a seasonally adjusted basis. House prices peaked in August 2007 at £199,612 against £159,623 for July 2009. A drop of £39,989 or a fall of 20%.
House prices are now at their highest level since February 2009 although the last 23 months has seen the biggest falls ever from the Halifax. It took from May 1989 to July 1995 for house price to fall 13.21% that is 74 months and the bottom of the last housing slump.
With another positive month from Halifax it does seem that the government and Bank of England intervention has succeeded in slowing the rate of house price decline. Halifax acknowledge that the house price to earnings ratio is still above trend by around 10%.
I agree with Halifax's assessment that we are entering a phase of volatile house price data before settling at the end of this year and entering a subdued growth period.
During the last housing market crash between 1989 and 1995, there were 24 +ve months and 48-ve months.
We are now entering a key phase of the housing market. On the positive side - interest rates are low, confidence is returning, lenders will be inclined to increase the Loan to Value (LTV) on mortgage deals as the economy recovers and house prices have fallen 20%.
On the negative side - As the economy recovers so interest rates will rise and reduce mortgage affordability, the regulator is investigating a cap on lending based on earnings which if set too low will cause further falls, we have still not seen major defaults on our sub prime loans due to the slashing if interest rates which has only postponed the problem, unemployment has yet to feed through to mortgage demand, mortgage demand remains low and finally house prices are still around 10% above their trend.
This leads me to conclude that my prediction from 2 years ago is still correct. (As if I would say any different) Although I am sticking with the bottom value I should really push the date back to Q1.
Crown prediction is still house prices to continue falling with the Halifax index bottoming at £140,000 in Q4 2009. A fall of 30% or £59,600 from the peak in August 2007. That would be house prices returning to levels last seen in Q4 2003.
I would be inclined to push this low for the housing market on to Q1 2010 still at £140,000. I then expected the housing market to resume a normal trend of increases of around 3%-6%. I now expect house prices to remain subdued for several years afterwards as interest rate increases constrain affordability.
Posted by CROWN at 07:26