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House price hysteria hits the headlines
9th April 2008
“House prices tumble” reports the Telegraph. “House prices plunge 2.5% in biggest monthly fall since 1990s’ crash” screams the Daily Mail. Sounds like the end of the world if you are a homeowner, particularly if you have just taken out a mortgage on an over-priced property. But is the hysteria justified?
It is just one house price survey, but the data is certainly newsworthy. Even Gordon Brown felt to compelled to comment. Halifax, the UK’s largest mortgage lender, has reported that UK house prices fell 2.5% in March 2008. I understand that this is the second largest monthly percentage fall since Halifax began their house price index.
It means prices fell 1.1% in the first quarter of 2008 to an average of £191,556 – just 1.1% higher than this time last year.
Both the Halifax and Nationwide (who also produce a monthly house price survey) are now predicting that house prices will fall during 2008.
So is this the start of the house price crash that the papers are heralding? It is almost as though they want it to happen! The Daily Mail in particular seem to revel in any bad economic news for middle England - a question of the glass being half empty rather than half full?
Well possibly this is the start of the correction, though surely a price fall of a few percentage points isn’t the end of the world given that house prices have jumped 171% in the last decade.
In the US, the housing market is in a troubled state. House prices are already about 10pc down with no sign of stopping. The initial evidence in the UK is of prices that have started to edge down, but so far the fall has been small.
We’ll see the tabloid (and broadsheet) press pick up on any evidence that the crash is starting - and we shouldn’t expect much in the way of cautioning against reading too much into just one month’s survey results.
Personally, I’m waiting for at least a quarter or two of house price surveys before confirmation that a house price correction is underway. I have little doubt that this happen. House prices are far too high by any sensible measure (for examle, prices to average earnings). But let’s exercise some caution about reading too much into the results of just one month’s survey.