Best of the Week
Most Popular
1. Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - P_Radomski_CFA
2.Fed Balance Sheet QE4EVER - Stock Market Trend Forecast Analysis - Nadeem_Walayat
3.UK House Prices, Immigration, and Population Growth Mega Trend Forecast - Part1 - Nadeem_Walayat
4.Gold and Silver Precious Metals Pot Pourri - Rambus_Chartology
5.The Exponential Stocks Bull Market - Nadeem_Walayat
6.Yield Curve Inversion and the Stock Market 2019 - Nadeem_Walayat
7.America's 30 Blocks of Holes - James_Quinn
8.US Presidential Cycle and Stock Market Trend 2019 - Nadeem_Walayat
9.Dear Stocks Bull Market: Happy 10 Year Anniversary! - Troy_Bombardia
10.Britain's Demographic Time Bomb Has Gone Off! - Nadeem_Walayat
Last 7 days
Handy Ways to Boost Your Home Income - 26th Mar 19
US Treasury Bond Yield Inversion and Political Fed Cycles - 26th Mar 19
Golan Heights Oil all about the Shekels - 26th Mar 19
Falling Yields a Catalyst for The Gold Catalyst - 26th Mar 19
Can We Lock Up Rachel Maddow Now? - 25th Mar 19
Real US National Debt Might Be $230 Trillion - 25th Mar 19
Friday's Stock Market Sell-Off - New Downtrend or Just Correction? - 25th Mar 19
20 Days Left to Find Buying Opportunities In Gold - 25th Mar 19
Will the Historic Imbalance in Gold Stocks to Gold Price Resolve ? - 25th Mar 19
EasySMX Wireless Games Controllers Review - 25th Mar 19
Stock Market Short-term Top - 25th Mar 19
UK Population Growth - Latest ONS Immigration Statistics and Consequences - 24th Mar 19
The Fed Follows Trump's Tweets, And Does The Right Thing - 24th Mar 19
Yield Curves, 2yr Yield, SPX Stocks and a Crack Up Boom? - 24th Mar 19
Risk/Reward in Silver Favors Buying Now, Not Waiting for Big Moves - 23rd Mar 19
Similarities Between Stock Market Today and Previous Bull Market Tops - 23rd Mar 19
Stock Market DOW Seasonal Trend Analysis - 23rd Mar 19
US Dollar Breakdown on Fed Was Much Worse Than It Looks - 23rd Mar 19
Gold Mid-Tier GDXJ Stocks Fundamentals - 23rd Mar 19
Which Currency Pairs Stand to Benefit from Prevailing Risk Aversion? - 23rd Mar 19
If You Get These 3 Things Right, You’ll Never Have to Worry About Money - 22nd Mar 19
March 2019 Cryptocurrency Technical Analysis - 22nd Mar 19
Turkey Tourist Fakes Market Bargains Haggling Top Tips - 22nd Mar 19
Next Recession: Finding A 48% Yield Amid The Ruins - 22nd Mar 19
Your Future Stock Returns Might Unpleasantly Surprise You - 22nd Mar 19
Fed Acknowledges “Recession Risks”. Run for the Hills! - 22nd Mar 19
Will Bridging Loans Grow in Demand and Usage in 2019? - 22nd Mar 19
Does Fed Know Something Gold Investors Do Not Know? - 21st Mar 19
Gold …Some Confirmations to Watch For - 21st Mar 19
UKIP No Longer About BrExit, Becomes BNP 2.0, Muslim Hate Party - 21st Mar 19
A Message to the Gold Bulls: Relying on the CoT Gives You A False Sense of Security - 20th Mar 19
The Secret to Funding a Green New Deal - 20th Mar 19
Vietnam, Part I: Colonialism and National Liberation - 20th Mar 19
Will the Fed Cut its Interest Rate Forecast, Pushing Gold Higher? - 20th Mar 19
Dow Jones Stock Market Topping Pattern - 20th Mar 19
Gold Stocks Outperform Gold but Not Stocks - 20th Mar 19
Here’s What You’re Not Hearing About the US - China Trade War - 20th Mar 19
US Overdosing on Debt - 19th Mar 19
Looking at the Economic Winter Season Ahead - 19th Mar 19
Will the Stock Market Crash Like 1937? - 19th Mar 19
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast March to September 2019

UK House Prices Bottom or Temporary Summer Bounce?

Housing-Market / UK Housing May 14, 2009 - 04:24 AM GMT

By: Nadeem_Walayat

Housing-Market

Best Financial Markets Analysis ArticleUK House prices have now fallen by more than 22% from the peak and down 13-16% over the past 12 months with the most recent data across a series of house price indexes such as that of the local government & communities, Nationwide and even the Halifax suggestive of near term support for UK house prices as we move into the seasonally stronger summer months.


The unprecedented UK house prices drop of 22% to date has definitely sparked interest amongst prospective home buyers to venture out into the warm summer months after having held off from viewing / purchasing during the past 12 months. This new demand is reflected in data from estate agents who report a surge in the number of new buyers registering with their agencies to the highest numbers in 10 years. This is backed by Chartered Surveyors data (RICS) which show 70% of surveyors report a surge in new buyer inquiries.

Therefore the UK housing market is definitely seeing liquid buyers return to the market which 'should' be reflected in rising house prices during the summer months that undoubtedly will increasingly be taken by the mainstream press to conclude that the house prices have bottomed.

However the flaw in the analysis for those that will jump onto the bandwagon of a bottom in UK house prices is the fact that the UK economy continues to contract lower towards my forecast of -4.75% for 2009, with the Bank of England admitting yesterday that it is totally clueless as to what will happen next after having failed abysmally to manage the financial system and wider economy during the past 12 months, which has resulted in unemployment that looks set to continue rising to a break above 3,000,000 this year.

Affordability

One of the key drivers of the housing bear market is housing affordability levels which remain at extremely high levels which implies we are perhaps just past the half way mark in terms of house price trend as the below graph illustrates.

Interest Rates

Yes, base interest rates have crashed to an unprecedented level of just 0.5%, however this is NOT translating into mortgage rates of anywhere near 0.5% with SVR's stubbornly remaining above 5% and many fixed deal offerings in the region of 4 to 5%. All of which is accompanied by ever tight lending requirements. On top of this we have the governments huge issuance of gilts this year well north of £220 billion that has resulted in the other unprecedented policy of Quantitative Easing aka Money printing to buy up the bonds the effect of which is inflationary as despite the short-term bounce in sterling it will put the British Pound under increasing pressure hence implies higher interest rates.

Mortgage Market

The tightness in the supply of mortgages is reflected in the data, that is at near 1/3rd the level of the recent bull market peaks.

Repossessions and Negative Equity

Whilst the number of repossessions is forecast to hit a high of 75,000 this year, matching the the early 1990's peak of 75,000, however this masks the impact of all of the government initiatives and bank arm twisting measures in an attempt to artificially keep people in their homes by a variety of means such as the "Mortgage Rescue Scheme" in the run up to the 2010 general election. This therefore means that reported repossessions data such as that from the Council of Mortgage Lenders (CML) will tend to under-report the true state of the impact of repossessions on the UK housing market as the reported repossession figures will mark but the tip of a much larger ice berg that could run to as much as a million home owners in arrears and helped to stay in their properties in one shape or another that will continue to impact negatively on the housing market price trend due to the supply of negative equity over hanging the market, that eagerly await a return to the housing boom to sell into.

UK House Prices Forecast

This therefore supports my recent in depth analysis which concluded that UK house prices could experience a technical summer bounce, however this bounce will not be sustained as once these new buyers have bought, the overwhelming bearish fundamentals will reassert themselves with the bear market resuming with a vengeance later in the year.

So yes, UK house prices will perhaps moderate towards a 2009 decline of -10% from the forecast of -16%, however the downtrend is expected to continue for many more years at a shallower pace as the housing market depression will see house prices drift towards the forecast for a peak to trough contraction of approx 38%.

By Nadeem Walayat
http://www.marketoracle.co.uk

Copyright © 2005-09 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on the housing market and interest rates. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 250 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Kate Faulkner
14 May 09, 17:15
UK Housing Market Forecast

Dear Nadeem,

I'm fascinated to understand why you thought 'panic' would set in to the property market this year? I predicted that supply would start matching demand around April this year, which it has, but agree with you that the market isn't going to suddenly 'move forward', we can't begin to recover in housing until 90% good rate mortgages come back in. So my prediction is that this is a flurry and then we'll slow back down July/August, another flurry Sept/Oct and then slow again Nov/Dec. I've lots of property price predictions, so be keen to get together at some stage to compare methods!


Nadeem_Walayat
14 May 09, 18:53
UK house prices
Hi Kate

The UK housing market entered the panic stage in April 2008 - UK House Prices Plunge Over the Cliff, as warned off on 10th Nov 2007 - Crash in UK House Prices Forecast for April 2008

The rate of decent in house prices after the new buyers are done will be determined by the rate of accent in unemployment which actually makes housing affordability worse as it does not factor into the X3.5 salary or even my own more sensitive affordability index.

A short-term oversold bounce could carry for several months.


J.
15 May 09, 06:44
Just a thank you note

Just a quick acknowledgment to you Nadeem who helped a struggling first time buyer.

After being in rent for many years, I watched prices spirral out of control. Upon reading your reports over the last year, it gave me the insight to secure a mortgage tracker deal at 0.9 above base rate with a 10% deposit before the historical turn of events. As the market dried completely up, I was in a position to obtain a 25% reduction off an asking price. This has allowed me to obtain a home (which is all I wanted to do and not as a strict investment) and has put me in good stead for the future (to tackle the interest rate hikes)

Your market predictions helped me to see around the corner. Thank you.


Mark Foster
18 May 09, 11:36
Mortgage rates / First time buyers

As a first time buyer with just over a 10% deposit I have to agree with Kate's comments that I can't see the market moving forward until LTV and rates being offered on mortgages improve. Current fixed deals are 6% + and likely to go up over time, if the market will further decrease by another 20% there is no incentive to purchase. Nadeem - do you see a sweet spot on the horizon (2010/2011?) where affordability and loan deals come together?


Post Comment

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

6 Critical Money Making Rules