Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

UK House Prices Falls Accelerate to -8.1%

Housing-Market / UK Housing Jul 31, 2008 - 02:13 PM GMT

By: Nationwide

Housing-Market

  • Best Financial Markets Analysis ArticleThe price of a typical house fell by 1.7% in July
  • The price of a typical house is now £15,000 lower than this time last year
  • Housing purchase activity reaches a new low
  • Weakening economic conditions raise the likelihood of earlier interest rate cuts

Headlines July 2008 June 2008
Monthly index * Q1 '93 = 100
336.3
342.0
Monthly change*
-1.7%
-0.8%
Annual change
-8.1%
-6.3%
Average price
£169,316
£172,415


* seasonally adjusted

Commenting on the figures Fionnuala Earley, Nationwide's Chief Economist, said: “The price of a typical house fell by 1.7% in July, bringing the annual fall to 8.1%. This brings the average price to £169,316, almost £15,000 less than this time last year and its lowest level since August 2006. House prices have now been falling for nine consecutive months, but on average are still almost £11,000 higher than three years ago."

Economic conditions weaken…

“The latest batch of economic data has been fairly poor. GDP estimates for the second quarter show a slowing in each of the main economic sectors. Retail sales collapsed in June, reversing May’s surprisingly strong outturn, and confirming the view that consumers are tightening their belts in the current climate. Inflation remains well above target and is expected to continue to rise this year and the labour market is also showing signs of deteriorating. The claimant count measure of unemployment increased for the fifth consecutive month in June to 840,000. Although it is 2.7% lower than this time last year, the Bank of England Agents’ Report shows a fall in employers’ employment intentions, which would suggest that the situation is unlikely to improve in the coming months. The risk of an economic recession in the UK is now clearly rising.

“Continued mild wage growth and the sharp fall in retail sales in June will give the MPC some comfort, as will the slide in oil prices in the last week. But, the impact of the sharp rises in food prices and further news of rises in gas and electricity prices have the double edged effect of pushing up inflation while at the same time slowing the economy as disposable incomes are squeezed. In our view the latter effect will begin to dominate, eventually giving the MPC enough comfort to begin cutting rates.

... but swap rates have fallen

“While the economic conditions are not looking good, there is some encouraging news for the housing market. With poor economic news, the sentiment around interest rates has become much less hawkish. Only a month ago the market was expecting the MPC to increase the Bank Rate twice this year: they now expect no change. The encouraging news is that this has filtered through to the swaps market. Swap rates have fallen which has allowed new fixed mortgage rates to come down.

Housing market activity at new lows

“Household goods suffered in the collapse of retail sales in June. This is hardly surprising given the sharp slowing in housing market activity this year. House purchase transactions fell to 36,000 in June, only a third of the level of this time last year. Difficulties with credit availability are likely to have had some effect, particularly at the higher end of the loan-to-value range (LTV). Indeed the proportion of loans completed at higher LTVs has come down disproportionately in the last year. This will reflect the fact that some lending is not taking place, but the distribution of the remaining loans may suggest some further displacement to the LTV bands below 90%, encouraged by better pricing at these levels.

Credit availability is holding activity back …

“The Bank of England Credit Condition Survey still signals tight credit conditions ahead. 22% more lenders expect that there will be less credit available to households over the next three months and this could limit a recovery in transactions. The cost and availability of funds is part of the issue, which James Crosby hopes to address, but general macroeconomic conditions and risk management are becoming more important.

“The Bank’s survey revealed that credit scores are expected to tighten, and that lenders’ views about house prices are an increasingly significant factor affecting the availability of credit over the next three months.

“But other factors aside from the supply of credit are also important for activity levels. There are around 41% fewer first time buyers now than at the same time last year. This may be due to their own desire to delay purchase because they expect prices to continue to fall, or frustration in obtaining finance, but the impact on the market is likely to be the same. That is that chains become longer and have a greater propensity to break down.

… but indicators suggest low levels of forced sales

“Estate agents are reporting up to 40% of transactions falling through and the average number of sales per surveyor is at its lowest ever level. This could be partly due to the availability of finance but the Bank of England Agent’s report suggests that this may also be due to the reluctance of sellers to accept lower offers. While this does little for liquidity in the housing market, it does indicate that sellers are largely not in a position where they are forced to sell.

“As the cost of mortgages begins to come down, activity could be bolstered and restore some liquidity to the housing market. However this is not likely to happen overnight. Overall the weakening economy and poor housing market sentiment do not suggest that the market will recover quickly. But, if oil prices continue to fall and the MPC is satisfied that its inflation credentials are intact, the possibility of earlier rapid cuts in interest rates increases, which would be good news for borrowers.”

For further information please see our July 2008 report (PDF 54KB).

Fionnuala Earley
Chief Economist
Tel: 01793 656370
fionnuala.earley@nationwide.co.uk
Chris Bennett/Zoe Stevens
Media Relations Manager
Tel: 01793 656517
chris.bennett@nationwide.co.uk

Notes: Indices and average prices are produced using Nationwide's updated mix adjusted House Price Methodology which was introduced with effect from the first quarter of 1995. Price indices are seasonally adjusted using the US Bureau of the Census X12 method. Currently the calculations are based on a monthly data series starting from January 1991. Figures are recalculated each month which may result in revisions to historical data. The Nationwide Monthly House Price Index is prepared from information which we believe is collated with care, but no representation is made as to its accuracy or completeness. We reserve the right to vary our methodology and to edit or discontinue the whole or any part of the Index at any time, for regulatory or other reasons. Persons seeking to place reliance on the Index for their own or third party commercial purposes do so entirely at their own risk. All changes are nominal and do not allow for inflation. More information on the house price index methodology along with time series data and archives of housing research can be found at www.nationwide.co.uk/hpi

http://www.nationwide.co.uk/

Nationwide Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in