Is the housing market in the U.K. bottoming? Many pundits are talking as if it is and now we get the Nationwide data for May 2009 which shows a second rise in three months. I am sceptical that we are at a bottom, so let’s see what the Halifax data say.
Fionnuala Earley has moved on. So Martin Gahbauer, the new Chief Economist at Nationwide, has comments:
“The price of a typical house rose by 1.2% in May, providing further evidence of some improvement in housing market conditions over the last few months. At £154,016, the average house price is still 11.3% lower than a year ago, although this marks a significant improvement from the annual decline of 15.0% recorded in April. The 3 month on 3 month rate of change – a smoother indicator of short-term price trends – rose from -3.0% in April to -0.5% in May and now stands at its highest level since January 2008.
“Although the short-term trend in house prices has clearly improved from where it was at the beginning of the year, it is still too early to say that the market is turning definitively. During the downturn of the early 1990s, there were many months during which prices rose, only to fall back down again in subsequent periods. In the current downturn, the combination of rapidly rising unemployment and tight access to credit implies that the last of the price declines has probably not been seen yet. Nonetheless, the improvement in house price trends is consistent with signs of stabilisation in several other economic indicators and suggests that any further price declines may occur at a less rapid pace than in 2008.”
Gahbauer’s comments are more sceptical than Earley’s had been and rightly reflect the distinct possibility that price declines will continue, although potentially at a less rapid rate. He goes on to opine that supply dynamics may be driving the recent price action.
Supply dynamics may explain some of the recent improvement in house price trends
“The movement of house prices ultimately depends on the balance of demand and supply of houses on the market. One timely indicator of the supply-demand balance is the ratio of sales to unsold stock, published monthly by the Royal Institution of Chartered Surveyors. For most of 2008, this measure was on a steady declining trend, consistent with the acceleration of house price falls as the year progressed. Although it remains at a very low level by historical standards and continues to point to further house price declines, the ratio has recently stabilised somewhat and this probably explains some of the improvement in price trends over the last few months.
Source House Prices Rise for Second Time in Three Months – Nationwide
Originally published at Credit Writedowns and reproduced here with the author’s permission.