Housing Market Tea Leaves

Judging the mood of the British housing market is never easy not least because there is a torrent of information every month that tries to capture the latest moves in average prices, property transactions, asking prices and expectations and confidence among buyers and sellers.

Hometrack issued data today that said that property prices in England and Wales fell for a fourth consecutive month in January. This took the annual rate of house price inflation to its lowest in 19 months. The Head of Research attributed this to a fall-back in confidence among would-be home buyers. One indicator of the strength of activity in the market is the length of time it takes to sell a property. Hometrack estimate that this has now reached a seven year high.

I have selected four housing market charts all of which reinforce the sentiment that the market is already in a very clear slowdown mode – perhaps the worst is yet to come.

National average house prices have now fallen for four consecutive months according to Hometrack

Despite a late upturn in new buyer enquiries towards the end of 2007, the Royal Institute for Chartered Surveyors data shows a downward trend in price expectations – these are often self-fulfilling.

The asking-price trend is also heading lower – this is an indicator of the relative strength of sellers versus buyers in the market. When demand is weakening, sellers may have to accept a lower price that the one advertised.

The volume of property transactions is down quite a lot – partly the result of the spike that came prior to the introduction of Housing Information Packs.

The speculative froth in the vast majority of the UK housing market is disappearing at a rate of knots. There is a very real chance of a housing recession in the second half of the year unless of course the Bank of England makes decisive moves on interest rates in the near term. But perhaps even that will not be enough?

Housing Charts