***House prices up 1.2% in May***

Xinpei

Monthly figure contribute to the quarterly - so perhaps it does matter? It may not matter as much as the yearly or quarterly but it could add up.

Sunshine all weekend and till at least Tuesday as well! Could it make people buy houses? hmmmmm

princeofpounds

I don't normally post in this part of the forum, but I was interested in today's numbers. I'm a financial analyst by profession and got to say sometimes I despair at the low level of public understanding of house prices and monetary policy.

The poster above saying MoM is basically noise is correct, and it's worth remembering that in the last HPC there were about 75 months from peak to trough and of those 24 were up months.

But I wouldn't be surprised if we see a period of stable to rising prices, purely as a result of central bank measures. Let's not kid ourselves - the economy is being 'artificially' propped up by money printing right now, and that is always going to reflect in the prices of speculative, geared, real assets like real estate. Nominal prices are all in the gift of monetary policy makers, not markets, so the question is still open on what path is chosen.

The scary part of this is that nominal house prices are going up, because no matter what happens with money printing or supply *real* house prices as determined by the market will continue to fall for some time to come. It's effectively impossible for them not to do so, thanks to unemployment, the lack of economic growth and the fact that they have been way out of a sustainable range. The reason it's scary is because if this is the case, then sooner or later we will get inflation as a corollary of this general rise in nominal prices.

No matter what the central banks do in such circumstances, market interest rates will spiral and that will suddely turn very, very painful (Your mortgage is priced on an interest rate at the long end of the curve, not the bank rate). You can see hints of it in failed bond auctions for sovereign states, but for now the deflationary forces keep in in check. Unfortunately in the long term, inflation is probably the only way out of this debt mess.

But anyone who thinks that rising house prices right now are a good thing needs their head checking. It's a classic example of money illusion - just because the central bank prints more money does not make anyone richer, does not make land and real estate more economically productive, the only fundamental econonmic reason it should appreciate. It might make the next few months more comfortable but don't kid yourself there aren't problems to come.

An in fact, anyone who thinks that high house prices are a public good is also a fool. You would not be happy if tinned bean prices soared, bottled water skyrocketed and you gas bill tripled. So why the price of shelter should be any different to food, water and warmth as a basic human necessity is beyond me.

ruggedtoast

In my area of NW London pretty much everything thats been hanging around for months on Rightmove for £200k or less now has Under Offer or Sold STC on it.

That really is quite a lot of activity as nothings been moving for the last year.

I dont really think this augurs the beginning of another boom however, nor should it as in the long run it benefits no one.

System

princeofpounds wrote: »

An in fact, anyone who thinks that high house prices are a public good is also a fool. You would not be happy if tinned bean prices soared, bottled water skyrocketed and you gas bill tripled. So why the price of shelter should be any different to food, water and warmth as a basic human necessity is beyond me.

Because houses aren't something you buy every week. If I had 1,000,000 cans of beans stashed away and they doubled in price one month then I'd obviously be delighted.

ad9898_3

Lets not make excuses, we got to take it on the chin, if they are bollox on the way up, they are bollox on the way down, so no complaints from me today, plus it's sunny today and is going to be hot all weekend. .

Congratulations to the bulls on the board, although I think this figure is entirely predictable, my only surprise is that it didn't happen last month. Having said that I'm still to see any price rises on Rightmove, and certainly no sales from house that have had their prices put up, but hey, the figures say they are up, so somewhere in the country, they indeed must be up.

setmefree2

princeofpounds wrote: »

Let's not kid ourselves - the economy is being 'artificially' propped up by money printing right now, .

Only to take the place of credit that has been sucked out of the market by the credit crunch. The credit that has gone is greater than the money being printed surely?

whathavewedone

Don't worry Ad - Halifax's figures will probably be 2% down!

chucky

ad9898 wrote: »

Lets not make excuses, we got to take it on the chin, if they are bollox on the way up, they are bollox on the way down, so no complaints from me today, plus it's sunny today and is going to be hot all weekend. .

Congratulations to the bulls on the board, although I think this figure is entirely predictable, my only surprise is that it didn't happen last month. Having said that I'm still to see any price rises on Rightmove, and certainly no sales from house that have had their prices put up, but hey, the figures say they are up, so somewhere in the country, they indeed must be up.

there's nothing to congratulate anyone here - if you don't need to or want to sell it's just an indicator. my only interest in this is the month on month non-adjusted figure. is this moving up?

PasturesNew wrote: »

Tis but a flesh wound.

there's a bit more to be had both negative and positive on this roller-coaster. timing of purchase will be everything, as well as your mortgage rate of course...

ad9898_3

setmefree2 wrote: »

Only to take the place of credit that has been sucked out of the market by the credit crunch. The credit that has gone is greater than the money being printed surely?

I think this is a fair point, however a lot of the money that has been sucked out is still there, it's just in the form of huge debts.

whathavewedone

Isn't the Nationwide based on sales in the south of England? I have heard from friends of mine that live in London that the market is picking up in areas like Hackney with flats going quickly for the asking price. Could be a bull trap I suppose...I don't know.

I don't think this recession can be compared with the 1990s recession where prices fell very slowly. I think it's more like the early 80s recession personally. Still I can't see where hpi can come from - my gut feeling tells me that we are pretty close to the bottom and will be scurfing along there until about 2012. Unless labour get in at the next election of course in which case god knows what will happen to the economy...