Best Financial Markets Analysis Article The Halifax's latest house price data shows that the housing market crash continued to accelerate into August, plunging by 1.7% that saw another £3000 wiped off house prices following the £3,300 write off for July to stand at down 12.8% on the year to August (on a non seasonally adjusted basis). UK house prices have now fallen by more than 8% since April. If a fall of 8% in 4 months cannot be considered a crash in UK house prices than I do not know what can. No wonder Chancellor Darling virtually threw in the towel during the weekend in his famous "I give up, please let me spend more time with my family" speech.

The housing market's near 13% plunge in 12 months is having a severe impact on the whole of the UK economy, as falling house prices are directly impacting on the Uk economy in a like for like basis, after the Financial Sector those sectors closest to the housing market contracting the sharpest, followed by consumer sector and eventually echoing out through the economy. The only glimmer of hope is for the exporters as the British Pound itself crashed during the past few weeks.

Britain is facing the the PERFECT STORM of DEFLATION as the housing bear market erodes home owner equity by several thousands of pounds every month, and INFLATION in the input and output prices surging to 20 year highs. This has meant that instead of taking action to save the economy, save the housing market, the Bank of England has been paralysed since April of this year into inaction.The fact is the Bank of England does not have a clue of what to do so seeks to do nothing as the situation is far more complex than it appears on face value given the hidden fact that most of the banks are bankrupt, insolvent !, its just that no ones going to tell the public, instead the banks coast from quarter to quarter announcing ever larger bad debt provisions and calls for government tax payers cash in exchange for near worthless mortgage backed illiquid toxic putrid slime that continues to smear itself right across the whole financial and economic system. Therefore Britain is being pushed into a deep dark stagflationary recession which we look set to enter by the end of THIS year.

In the meantime, Gordon Brown in a panic and in the face of open rebellion from cabinet members such as his own right hand man Chancellor 'Et tu Brutus' Darling to introduce emergency measures in an attempt to halt the crash in UK house prices so as to prevent the meltdown in the UK economy and with it any hope of Gordon winning the next general election.

Where Do House Prices Go From Here?

The current crash in UK house prices has been fore warned by myself several times during the last 12 months, right from before the housing market peaked in August 2007 as the following articles illustrate.

22 Jul 2008 - UK House Price Crash of Summer 2008
11 Jul 2008 - UK House Price Crash In Progress!
02 Jul 2008 - UK House Price Crash is Here as Forecast!
08 Apr 2008 - UK House Prices Plunge Over the Cliff
10 Nov 2007 - Crash in UK House Prices Forecast to begin April 2008
25 Sep 2007 - UK Housing Market on Brink of Price Crash - Media Lessons from 1989!
22 Aug 2007 - UK Housing Market Crash of 2007 - 2008 and Steps to Protect Your Wealth

The existing forecast for a minimum fall at the rate of 7.5% per annum as of August 2007 is now due for imminent update to extrapolate a trend for UK house prices for at least 2 years forward, in additional to and preceded by updates to the UK interest rate and inflation forecasts.

Whilst these are yet to be fully completed and published , I can give a quick outlook for UK inflation and interest rates and that is for inflation to peak later this year which will be immediately followed by deep UK interest rate cuts into late 2009. The outlook for UK house prices is much trickier and I will leave the conclusions for the published article as the housing market has to contend with multiple factors each tugging house prices in both directions for instance, sterling falling by 10% in a month is highly inflationary and would tend to support house prices as your house in dollar terms has not fallen by 1.7% in August but rather 11.7%!. Another positive factor in terms of nominal house prices is the impact of the panicking Brown governments interventions into free market pricing by engineering a bottom in nominal house prices. More on these and other factors in the forth coming housing market forecast.

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

Nadeem Walayat has over 20 years experience of trading, analysing and forecasting the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 150 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.

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Comments

jonathan davis
15 Oct 08, 15:56

uk hpc

Where's your forecast? I can;t see the updated one anywhere.

Nadeem_Walayat
15 Oct 08, 16:56

HPC and Credit Collapse

Credit collapse has led to a delay due to both trading activity and analysis of the ongoing financial collapse comprising some 40 articles since this article was published.

Major items remain pending so the earliest for the HPC will be next weekend.

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