Some stuff on house prices

Graham_Devon

UK housing is struggling again – the Halifax House Price Index gained just 0.1% in May after a sharp 1.4% fall in April. The trend is clear: house prices in the UK are falling at their fastest rate since late 2009. Investment bank Morgan Stanley forecast a poor outturn for 2011 earlier this month and is rare among forecasters to warn that we could see a 10% drop by the end of 2012.

Yet, even now, the bad news is being glossed over by rosy-eyed commentators. Everyone, it seems, wants to talk up house prices.

When reality sinks in, the surprise will be all the greater. Instead of rising 10% over the next 18 months, they could fall by just as much. Banks will need to step up their provisioning, and this will call into question the Government’s austerity plan.

The three-month price average already shows a falling trend, down almost 5% year-on-year. Previous hopes of stable prices this year, followed by a pick-up in 2012 now look unrealistic, although few analysts have officially cut their forecasts.

The housing market attracts little consistent independent research. Most commentators seem to have an agenda to talk the market up.

The variability of the data helps the optimists. House prices tend to be volatile month by month, with transactions impacted by holidays and weather, and the various indices often contradict. In April, for example, despite Halifax reporting a fall, the Land Registry believed house prices rose. This gives scope for commentators to project almost any trend from the short-term noise.

Recent optimism for the sector seems barely credible – overall actual transaction volumes are weak. In April, mortgage approvals hit their lowest, measured on a monthly basis, since records began in 1992.

Although holidays impacted the figure, remortgages continue to be soft. Low activity by itself suggests confidence is weak, and that the figures may not be very reliable.

Dunno who the bloke is, but I rather like his thoughtpath.

And now, I leave you guys to make a mockery of it

http://www.efinancialnews.com/story/2011-06-13/housing-time-bomb-ticking-banks?mod=promos

Pimperne1

Well Land Registry and Nationwide are 1.3% and 1.2% down YoY and that is with an unexpected surge in prices up to about June last year so the prices went down from then. It will be interesting to see their YoY later in the year when these outliers have been rubbed out. A 10% drop by the end of 2012 - that will hardly be Armageddon will it (since there were 40% - 50% drops forecast back in 2004 at those prices). Someone will pop up with a comparison to "real" prices some time but unless your wages or interest is keeping up with inflation then you should concentrate on "notional" prices.

DervProf

It won't be "Armageddon", but it will be a continuation of a longer term correction in prices. Effectively it might be a sign of a "crash", but a longer, more drawn out one.

I suppose you could argue that it is therefore not a crash.

Pimperne1

DervProf wrote: »

It won't be "Armageddon", but it will be a continuation of a longer term correction in prices. Effectively it might be a sign of a "crash", but a longer, more drawn out one.

I suppose you could argue that it is therefore not a crash.

If it were to happen - but that's quite a big if.

RenovationMan

I wonder if the author of that piece, Colin McLean has a vested interest in a housing price collapse?

Colin McLean's Overview

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IveSeenTheLight

Pimperne1 wrote: »

Well Land Registry and Nationwide are 1.3% and 1.2% down YoY and that is with an unexpected surge in prices up to about June last year so the prices went down from then. It will be interesting to see their YoY later in the year when these outliers have been rubbed out. A 10% drop by the end of 2012 - that will hardly be Armageddon will it (since there were 40% - 50% drops forecast back in 2004 at those prices). Someone will pop up with a comparison to "real" prices some time but unless your wages or interest is keeping up with inflation then you should concentrate on "notional" prices.

You've hit the nail on the head.
The linked article has cherry picked the Halifax index as currently showing the worst outcome but has not realised the effect of the peak last year.
come September, we'll see if he releases a similar story...... I doubt it.

DervProf

Pimperne1 wrote: »

If it were to happen - but that's quite a big if.

Well, it does seem we are in the midst of a drawn out "crash". Where are prices now compared to 3 or 4 years ago ?

Yes, yes, London and all that, I'm talking about it the majority of the UK. I reckon prices have hardly moved, if not fallen a little. If this were to continue for the next year or two, property prices will have taken a large pause for breath, which I think they needed to. What happens after that, I certainly don't know.

StevieJ

The commentator obviously hasn't a clue how these things work and the basis for the LR and Halifax calculations.

The variability of the data helps the optimists. House prices tend to be volatile month by month, with transactions impacted by holidays and weather, and the various indices often contradict. In April, for example, despite Halifax reporting a fall, the Land Registry believed house prices rose. This gives scope for commentators to project almost any trend from the short-term noise.

Really2

Graham_Devon wrote: »

Dunno who the bloke is, but I rather like his thoughtpath.

Are you sure you do GD, I thought this was rubbish?

House prices tend to be volatile month by month, with transactions impacted by holidays and weather

I suppose it is Ok when the argument suits.:)

nembot

Pot, Kettle, Black....

Who'd of thought that?

chucky

DervProf wrote: »

It won't be "Armageddon", but it will be a continuation of a longer term correction in prices. Effectively it might be a sign of a "crash", but a longer, more drawn out one.

I suppose you could argue that it is therefore not a crash.

close the forum down please.

Dervprof has just developed the skill and ability to confirm what will happen in the future. #visionary