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Housing Market Indicators

Friday, 13 January 2012

HMI December 2011

A look back at the struggles within the economy and property market throughout 2011 creates concerns regarding the future as we move into 2012. Instead of bringing hope and promise, the New Year seems to have adopted the unpredictability and instability which characterised 2011. Quick Move Now's summary of the housing market looks to key institutions and market indicators within the finance and house sectors to gain an insight into where the market is and where it is heading.

House Price Index Halifax -0.9% (monthly change) -16.29% (fall since peak) -1.3% (annual change)
House Price Index Nationwide -0.2% (monthly change) -11.954% (fall since peak) +1% (annual change)
CML-Mortgage Lending £12.9bn +4% (annual change)
Interest Rates 0.5%
Quick Move FTI 29.16%
Inflation 4.8%
Economic Growth +0.6%
Unemployment 2.62 million

*Information compiled from various sources. Quick Move Now takes no responsibility for its accuracy. Last updated 11/01 /11.

House Sales
2011 was an unpredictable year for the housing market with decreasing property values and less property sales. 852,000 house sales were set to go through before the end of the year compared to the 885,000 which went through in 2010. This downward trend is expected to continue into the New Year.

For 2012, the Council of Mortgage Lenders (CML) is predicting that just 825,000 homes will be sold in the UK as “economic uncertainty will continue to deter buyers.” If these predictions materialise, house sales will be at their lowest since modern record began in 1978. The CML says that the prospects for the housing market are “highly uncertain” because negative financial news is putting homebuyers off. With buyers reluctant to proceed with purchases, another decrease in the number of house sales seems highly likely for the coming year.

House Prices
The value of property decreased in 2011 and the end of the year brought even tougher conditions for home sellers. The winter months are traditionally quiet but were even quieter than expected in November and December which means that vendors may have to adjust their asking prices for the New Year to reflect the difficult situation within the market. Unfortunately, the initial feed back for January reveals that a usually busy month is getting off to a slow start – perhaps potential buyers are reluctant to commit to sales because they do not know what the year will bring and how the start of the year will pan out. Concern amongst property commentators in 2011 regarding house prices centred around unrealistic home sellers and inflated estate agent valuations so drastic changes will have to be made if the market is to stand any chance of recovery. The market cannot withstand unrealistic asking prices as well as a lack of buyers.

Many property commentators are warning that, even if fears of a housing shortage materialise, prices will not be pushed up. The boom and bust of the market is dictated by the amount lenders are willing to lend; with the average property costing more than seven times the average wage (property has been three or four times the average wage historically), the predictions are that house prices will keep falling until wages and property price are back in line. Experts are predicting that house prices will continue to fall for several years which indicates that 2012 could bring just as much uncertainty and instability as its forerunner.

Fall Through Rates
Quick Move Now’s fall through rate increased in December to 29.16%. Overall, fall through rates were higher but total sales were lower which shows that it is very difficult to find a buyer and even more difficult to keep a buyer. Fall throughs can occur for many different reasons ranging from a lack of confidence in the market and mortgage difficulties to economic problems at home and abroad. Unfortunately, all contributing factors are out of the control of the home seller: vendors are at the mercy of the market. As a business, we have a dedicated team managing the sales. Even with this experienced team in place, sale abortions are unavoidable, showing that the chance of fall through would be a lot higher for homeowners. If fall through rates continue to increase at the same rate, we could see a repeat of the beginning of last year when rates soared above 30%.

Repossessions
Due to the difficult economic climate, more and more people have been struggling to get on the property ladder, let alone afford their mortgage repayments and the associated costs long term. Following their recent whole sector analysis, the Financial Services Authority (FSA) reported that: almost 1 in 10 mortgage holders struggles to pay their monthly bill; up to 9.2% of all home loans have payments overdue; in the next 10 years, 1.5 million interest-only mortgages worth around £120 billion will be due for repayment but 78% of all interest-only mortgages had no reported plan for repayment. These statistics are troubling and spell further difficulties for the mortgage and property markets over the coming year. Unfortunately, mortgage difficulties became out of control and resulted in repossession for 37,000 homeowners in 2011. The CML expects repossessions to increase to 45,000 in 2012.

Unemployment
UK unemployment levels are at a 17-year high. From October to December 2011, unemployment increased from 2.57 million to 2.62 million. We are currently experiencing the highest unemployment rates since 1996 and the number of unemployed people is the highest since 1994.

So much job uncertainty and such high unemployment causes a lack of confidence within the housing market as many people cannot afford to buy, those needing to sell struggle to find a buyer and the few buyers who are able to proceed are reluctant to commit to sales. In December alone, the number of people claiming job seeker’s allowance increased by 5,300 to 1.6 million and experts fear that 2012 will bring further financial concerns and constraints.

It is predicted that unemployment levels will increase to 2.85 million in 2012 and the number of people in work will fall by 120,000. A change of this scale would cause even more instability, especially as youth unemployment alone stands at 1 million; if the up and coming generations cannot afford a property, there will be no buyers to stoke the bottom of the market and recreate the flow of buying and selling which is desperately needed to boost the market.

Inflation and Interest Rates
With inflation at 4.8%, many people are struggling to afford the properties they are in or reticent about buying another property. Although we have seen a slight improvement (inflation has fallen from 5.2% to 4.8% over the last few months), the Government are still a long way from achieving their 2% inflation target and don’t seem to have provided an effective strategy for meeting their aims. Banks have tried to control inflation by increasing interest rates but a recent poll showed that the number of people dissatisfied with this strategy has risen to 25%. More and more people are losing confidence in the economy, the Government and the banks and a lot more will have to be done in order to rescue the country from the prospect of another recession.

The Economy and the Cost of Living
Problems in Europe and within the UK have created difficulties in the economy which many homeowners have struggled to avoid. While wages are stagnating, the cost of living is increasing which places homeowners and potential buyers in a troublesome predicament.  In 2011, we experienced increased fuel costs, higher food bills and inflated travel fares. For example, the average increase in rail fare was 5.9% with some commuters facing 11% increases on ticket prices and some season tickets costing £300 more then before. If the cost of living continues to be disproportionate to wages and the economy cannot be given a new lease of life, less and less people will be able to afford property: the number of repossessions would increase, first time buyer levels would drop and there would be less opportunity to move up the property ladder.

Mortgage Lending
2011 was a difficult year for borrowers and 2012 is set to bring even more uncertainty as lenders forecast that less will be lent to home buyers this year compared to last. Lending criteria will almost certainly become even stricter which will mean that less potential buyers will be able to secure funding to purchase.

The Financial Services Authority’s (FSA’S) Mortgage Market Review states that lenders should be tougher when assessing potential borrowers: loans will only be granted if the lender is sure that the customer can repay the loan, the financial situation of potential borrowers will be studied in even more depth, income will have to be verified, greater emphasis will be placed on other regular outgoings, “fast-tracked” mortgages and self-certification mortgages will be abandoned and borrowers hoping to obtain mortgage lending which stretches past retirement age will be subject to extra “prudent and proportionate” checks.

The FSA's proposals intend to block any return to the risky mortgage lending of previous years; the block may prevent recovery within the property market and reduce the already diminishing number of buyers able to proceed with sales. Without buyers stoking the market, stagnation and a market in decline will still be on the agenda as we move through 2012.

About Quick Move Now
Quick Move Now is  the UK's leading home purchase specialist, purchasing houses for cash, often with 7 days, for those people needing a quick and certain house sale.

posted by Quick Move at 14:49 Comments

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Wednesday, 16 November 2011

Housing Market Indicators: Difficult Housing Market Continues

2011 has been and continues to be a difficult year for home buyers and sellers across the board with high levels of uncertainty and instability within the housing market and the economy in general. As this year comes to a close, the predictions for the beginning of the New Year do not inspire confidence and belief in the market and the worry that 2012 will bring continuing troubles is ever-present.

Quick Move Now's summary of the housing market looks to key institutions and market indicators within the finance and house sectors to gain an insight into where the market is and where it is heading.

House Price Index Halifax 1.2% (monthly change) -16.26% (fall since peak)
House Price Index Nationwide 0.4% (monthly change) -11.345 (fall since peak)
CML-Mortgage Lending £12.9bn +4% (annual change)
Interest Rates 0.7%
Quick Move FTI 29.58%
Inflation 5.2%
Economic Growth +0.5%
Unemployment 2.57million

*Information compiled from various sources. Quick Move Now takes no responsibility for its accuracy. Last updated 07/11/2011.

House Prices

House price changes are becoming increasingly more unpredictable with the prices themselves creating a mixed picture, fluctuating month-on-month and often altering a number of times within one month alone. Last month’s slight increase of 1.2% according to Halifax and 0.4% according to Nationwide masks the actual state of affairs within the market. In reality, there has been little change in house prices overall, fluctuations give an inaccurate picture and prices remain consistently low with the danger of further slumps in the coming months.

Repossessions

The number of properties taken into possession by mortgage lenders in the third quarter of 2011 was 9,200 compared to 9,100 in the second quarter. The worst affected areas include South Wales, Birmingham, Coventry, Peterborough, Canterbury, Luton and Northampton where some repossession claims are as high as 8 per 1000 householders. In addition to the higher cases of actual repossession, the volume of properties under threat and facing repossession in the near future has also increased which means that we could see even higher levels as we move towards the winter months and 2012.

Unemployment

Levels of unemployment have continued to rise over the last few months and are currently 2.57 million (up from 2.51 million in August 2011). More and more people face redundancy or are concerned about the future of their jobs which naturally influences conditions on the market. Buyers face a losing battle and are caught in an endless cycle because as it is becoming harder and harder to raise deposit funds, the level of deposit needed is increasing. Job uncertainty results in a lack of buyers and higher fall through rates once buyers have been found. Buyers can be reticent to follow through with offers or even to make offers in the current climate.

Fall Through Rates

October saw a Quick Move fall through rate of 29.58% with a variety of reasons causing the abortions from funding issues to chain collapses. Not only have Quick Move Now’s sale abortion rates increased since August 2011, the amount of sales agreed has decreased which shows that, as the year end approaches, less and less people are able to find buyers. Within a business, a fall through rate nearing 30% is difficult to manage; for a homeowner trying to sell, the impact is magnified and can cause even more worry, stress and delay. It can become increasingly more difficult to sell over the winter period so lots of homeowners may find themselves trapped on the market well into the New Year, unable to find a buyer and make the move or fresh start they desire. As homeowners experience fall through after fall through, they feel as if they are not in control of their future and are subject to the buyers and the market.

Mortgage Lending

Since August 2011, mortgage lending has fallen from £13.4bn to £12.9bn and thus more and more buyers find themselves unable to secure funding. Higher deposits are often required, lending levels are lower and, in general, wages are stagnating which means that less buyers are in a position to proceed, properties are on the market long periods of time and the number of sellers greatly outweighs the number of buyers. The situation has worsened over the last month as Santander, ING Direct and Northern Rock have all pushed up the interest rates on tracker mortgage deals for new customers. Barclays’ Woolwich subsidiary has increased the cost of its tracker deals by as much as 1.5%. CML chief economist Bob Pannell states that “Short-term economic prospects for the UK are not favourable. The housing market is very sensitive to wider household confidence, and this seems likely to weaken over the coming months in response to the latest spike in consumer prices and headline unemployment figures.”

The Economy

Many of the problems surrounding mortgage finance and economic unrest have been attributed to the ongoing Euro zone crisis: we are already experiencing some of the affects which include children remaining in their parents’ homes far longer and higher pension ages. The average age of first time buyers without parental assistance is predicted to hit 43 in the not-too-distant future! Interest rates have increased to 0.7% from 0.5% (August 2011) and, as a double blow, inflation is up from 4.5% to 5.2%. Consequently, the cost of living overall has rocketed and home sellers are finding themselves without buyers for ever increasing periods of time. A stalemate in the housing market is caused when hardly any buyers are able to proceed and, with problems in the economy set to worsen, the housing market is unlikely to pick up as we move into 2012.

Buyers’ market

The aforementioned unemployment rates, fall through levels, mortgage and deposit problems and economic troubles combine to create a buyers’ market. With so few people able to afford property and proceed with sales, cash buyers, or mortgage buyers in a strong position, are able to manipulate the situation to their advantage. We are seeing increasing cases of heavy negotiations and buyers pushing down the price of property with low offers. In addition, people tend to be offering on multiple properties, stringing sellers along and then choosing one property to buy before negotiating heavily again and leaving homeowners in an impossible position. Currently, there is no sign of recovery or improvement within the housing market or economy and homeowners are left to wait and see what next year brings.

Quick Move Now is  the UK's leading home purchase specialist, purchasing houses for cash, often with 7 days, for those people needing a quick and certain house sale.

posted by Quick Move at 11:10 Comments

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Thursday, 29 September 2011

Housing Market Indicators: Uncertain Housing Market, Uncertain Economy

In 2011, the market place and the economy in general have been unpredictable and inconsistent. There have been no real signs of tangible improvement and predictions for the latter part of the year are equally as bleak, especially as the traditionally most productive season of the year is behind us.

Quick Move Now's summary of the housing market looks to key institutions and market indicators within the finance and house sectors to gain an insight into where the market is and where it is heading.

House Price Index Halifax -1.2% (monthly change) -17.46% (fall since peak)
House Price Index Nationwide -0.6% (monthly change) -11.74% (fall since peak)
CML-Mortgage Lending £13.4bn +10% (annual change)
Interest Rates 0.5%
Quick Move FTI 28.6%
Inflation 4.5%
Economic Growth +1.1%
Unemployment 2.51 million

*Information compiled from various sources. Quick Move Now takes no responsibility for its accuracy. Last updated 07/09/2011.

House Prices

Halifax report that the average cost of a home has slipped by 2.6% over the past year and house prices fell by 1.2% in August 2011 alone which shows that we are not over the worst of the problems within the housing market and steeper decreases are on the cards. It was also reported that the 2.6% fall in prices does not take inflation into account so, in actual terms, the average property is worth nearly 8% less than 12 months ago.

Unemployment

Unemployment levels have risen over the last 10 months from 2.45 million in the latter part of 2010 to 2.51 million. This increase has had a knock on effect on the property market. More and more people face repossession, less and less people can afford to move up the property ladder and getting on to the property ladder in the first place proves increasingly more difficult. Consequently, properties remain on the market for longer periods of time without buyers and sellers face falling house prices.
Fall Through Rates
Those lucky enough to find buyers in the current climate face high fall through rates. Sales are reliant on so many factors which are out of the control of the sellers. As a result, abortions during the selling process are unavoidable and, in a falling market, cause extra worry and stress for all parties involved. Fall through rates were hovering at around 30% so we have seen a slight improvement to 28.6%. However, the number of sales was lower and it took extra time on the market to try and find a buyer in a position to proceed. An abortion rate of 28.6% is still very difficult to manage and would be higher for an independent seller.

Mortgage Lending

The CML’s mortgage lending figures seem positive and appear to show an increase in levels of lending, especially over the last month and compared to the figures last August. Despite this outward positivity, CML Chief Economist Bob Pannell reports that “the August figure more or less offset weaker than expected lending in July. Taken together, July and August saw a level of lending broadly unchanged from the same months in 2009 and 2010. Overall, the data is generally consistent with our view that the lending market remains flat.” With mortgage lending difficult (and at times impossible) to obtain, the majority of sales will be directed towards cash buyers or those with high deposits. With too many properties on the market and not enough buyers able to proceed, even longer periods trying to sell and drastic asking price reductions are highly likely. Before 2008 over one-fifth of all lending was to borrowers with a deposit of below 15%, now it is less than a tenth which prices many buyers out and creates a standstill in the market. Lending levels are not set to increase in the near future which would cause the escalation of an existing problem. Bob Pannell anticipates that levels of activity will “remain subdued and may be vulnerable to bad economic news”.

The Government

The economy remains unstable and this is reflected in all aspects of life. On Tuesday 20th September, the International Monetary Fund cut its UK growth forecast for this year and on Wednesday 21st, latest data showed that public sector net borrowing during August was a higher-than-expected £15.9bn which means a third of the way into the fiscal year, cumulative borrowing at £52bn is only 7% less than a year ago despite the government's programme of budget cuts. As a result further budget cuts are expected and this could lead to more redundancies within the public sector and potentially higher taxation as well. Job uncertainty, economic imbalance and increasing money concerns all translate into disquiet in the housing market. A lack of buyer confidence leads to more sale abortions and extra anxiety all round.

Inflation

The Minutes from a recent Monetary Policy Committee meeting show that members discussed a raft of deteriorating economic signs including slowing retail sales growth, lower output, falling exports and a flagging housing market. It was noted that inflation was still likely to rise from its current 4.5% to 5%, well above its target of 2%. With stagnating wages and rising unemployment, a further rise in inflation spells higher living costs and trouble and anxiety for many people across the UK. Deposits are difficult to raise, mortgage repayments and house bills are tougher to keep up with and thus the housing market remains stagnant.

posted by Quick Move at 16:11 Comments

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Friday, 5 November 2010

Housing Market Indicators: Are house prices falling again?

House prices are never far from the headlines and recent months have seen a lot of bad news. So are we witnessing another prolonged fall in house prices? Well prices have definitely been falling over recent months but there is a lot of debate as to whether we’ll see a true double dip.

However it would be difficult to argue that the housing market is healthy!

• Sales volumes remain very low
• Mortgages are difficult or impossible to secure
• Prices are very unstable
• Large scale redundancies
• Confidence is low
• House building is at a record low

All this means that the short to mid term housing market is likely to remain a difficult place for all home buyers and sellers.

Quick Move Now's summary of the housing market looks to key institutions and market indicators within the finance and house sectors to gain an insight into where the market is and where it is heading.

House Price Index Halifax -3.6% (monthly change) -18.86% (fall since peak)
House Price Index Nationwide -0.7% (monthly change) -11.64% (fall since peak)
CML-Mortgage Lending £12bn -7% (annual change)
Interest Rates 0.5%
Quick Move FTI 29%
Inflation 3.1%
Economic Growth +1.2%
Unemployment 2.45 million

*Information compiled from various sources. Quick Move Now takes no responsibility for its accuracy. Last updated 03/11/2010

House Prices
All the major house price indexes have shown falling house prices over recent months. Halifax in particular recorded a fall of 3.6% in September alone. Although monthly stats need to be taken with a pinch of salt it is now undeniable that there is a downward trend in house price’s.

Sale Volumes
One of the reasons that houses prices seem so volatile is that the number of sales is very low. The most recent transaction figures from Land Registry show that in July there were 64,411 transactions compared to 115,920 in the same month of 2007. Land Registry stats always lag a few months behind and looking at the other indicators the sales volumes after July are likely to be much worse.

Mortgages
Total mortgage lending is falling and is at a fraction of previous levels. Both the Council of Mortgage Lenders and the BBA figures have shown that monthly mortgage volumes have fallen drastically. Net mortgage lending in September was just £1.6bn, which is the lowest figure since October 2000. Considering what the economy and banking sector has been through in the last 2 years it is shocking that a low should be reached now.

The truth is that banks are more than happy not to lend as they try and repair their balance sheets. Lenders are therefore implementing rigorous lending criteria and underwriting. Some of these measures are relevant attempts to avoid fraudulent/bad loans but many are ill thought out and are impacting every potential home buyer requiring lending.

The result is that mortgage lending has become a slower and much more difficult process for everyone. And for thousands of potential home buyers mortgage finance is now impossible or terribly expensive.

Not only does the lack of lending mean there are fewer housing transactions taking place it also means that the level of aborted sales is increasing. To read more visit our fall through index.

Regional Differences
Regional economic conditions and local demand and supply influences mean that the housing market will differ across the country. Every town, village and area will be different but to demonstrate we have provided a couple of generic examples:

London:
London area is still likely to see short term price falls but is better placed to recover.
• Supply is extremely constricted-not enough houses increases competition and therefore prices.
• Better job prospects-more people in a financial position to buy.
• More buyers have cash or high deposit and so market isn’t wholly dependent on mortgage finance.
• However house prices are higher so deposits will need to be larger. This will limit demand so the number of transactions is likely to remain low.

North East:
Market has recovered very little since the last drop and so re-newed falls could have dramatic impact.
• Greater supply of property and low demand so less price pressure.
• Dependence of public sector jobs means that redundancies will lead to further drops in demand and increase supply as those made redundant try and sell.
• Although house prices are lower all these factors will mean that people are still not able to fund purchases. So prices and sale volumes are likely to fall.

Government
The government has recently announced massive spending cuts. The economic conditions and unemployment caused by these decisions could well have a dramatic effect on the housing market. However the government has tools to influence the housing market more directly.

For example the housing market is fed by mortgage finance, which as we know is currently very constrained. If the market is to function properly mortgage lending needs to be freely available. At the moment banks are more interested in lining their own pockets and repairing balance sheets than lending. Obviously the government has powers to influence the lenders especially the huge banks which are state owned.

There has been little noise from the government on house building and planning. Building targets have been scrapped and it seems that decisions on local planning applications will be made by locally. Surely NIMBY’ism will go crazy. With all this uncertainty it is likely we’ll continue to see very low levels of building and therefore supply will remain significantly restricted.

If inflation is not kept under control the BOE may have to increase interest rates. Resulting higher mortgage rates would make house purchases even more unaffordable. It would also put pressure on homeowners who are just about meeting their current mortgage repayments, any increase in rates could well push thousands over the edge and into repossession.

Unemployment
After the recently announced huge public sector cutbacks we are likely to see at least 500,000 direct job losses. Many other jobs will also be at risk at the many private businesses which rely on the public sector e.g. suppliers, construction etc.

The government is betting on the private sector picking up the slack but the problem is that the job creation is unlikely to be in the same place as the redundancies. This will mean the impact will differ across the country.

For example an area like Middlesbrough where 43% of people are employed by the public sector could see huge job losses but not a corresponding increase in private sector jobs . This would reduce demand for property even more while at the same time those made redundant will need to sell so swelling supply, this would almost definitely lead to downward pressure on house prices.

Many areas will experience a double dip in house prices
We will have to wait to see whether the UK as a whole see’s a double dip in house prices!
However it looks like many local areas are already experiencing a double dip. Many areas did not experience the well publicised price increases earlier this year and instead saw falling or stagnant prices. Even if the current dip in prices is only short-lived it is likely we’ll see a double dip as no real recovery was ever witnessed.

posted by Quick Move at 09:35 Comments

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Tuesday, 27 April 2010

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Tuesday, 26 January 2010

What will happen in 2010?

2009 was a difficult year for home buyers and sellers. The first half of the year saw prices continue to fall while the second half saw increasing prices in some areas. So what does 2010 have in store for us?

Quick Move Now's summary of the housing market looks to key institutions and market indicators within the finance and house sectors to gain an insight into where the market is and where it is heading.

House Price Index Halifax +1% (monthly change) -15.38% (fall since peak)
House Price Index Nationwide +5.9% (monthly change) -12.87% (fall since peak)
Interest Rates 0.5%
Quick Move FTI 37%
Inflation 2.9%
Economic Growth +0.1%
Unemployment 2.46 million

*Information compiled from various sources. Quick Move Now takes no responsibility for its accuracy. Last updated 20/01/2010
Prospects for the housing market remain very uncertain and 2010 is likely to prove a difficult year for many home buyers and sellers.

Mortgages
In recent days we have seen the UK’s 4th largest building society increase their standard variable rate by 1.45% despite no change to base rate. This makes mortgages more expensive for both current and prospective clients. Many more lenders are expected to follow this move which could add £1000’s to homeowners annual mortgage costs.

At the same time inflation has increased rapidly and now stands at 2.9% well over target of 2%. If this trend continues it could well lead to increasing base rates which would make mortgage repayments even more expensive.

This could lead to mortgages become more expensive as it will stifle demand as people cannot afford to take on larger mortgages. Also after the economic woes of the last 2 years many people are very close to the red line, even a small increase in interest costs could see them slip into arrears. Should there be a big increase in cut-price repossessed properties hitting the market we could see a corresponding market dip.

Election
With a general election widely tipped for May this year we could easily see a new government in power. The housing market is important to millions of voters and is the driving force behind economic growth and stability so housing will have to be a central part of policy for whoever is in government. Some of the policies could have a major impact on the market for instance the Conservatives have already said they will abolish Home Information Packs within weeks of coming into power. Without the prohibitive cost of a HIP many more homeowners will go on the market. Unless attractive mortgage deals become available there may not be enough demand for these houses. If the market becomes flooded with property it may lead to another fall in prices.Over coming weeks and months the parties will launch their manifestoes and we will keep a keen eye on the various plans for the housing market.

Unemployment
Although unemployment figures seem to have a hit a plateau this situation could change rapidly. Global market conditions could easily take a turn for the worse which may finish off many companies who are just hanging on. Huge cutbacks are also expected in the public sector soon after the general election. In many areas the main employer is the public sector and any large redundancies would have a huge impact on the local economy and housing market.

Potential for a double dip in house prices. Well the jury is still out! But I don’t think any sensible industry commentator would rule out a double dip in prices. The more likely scenario is fluctuating prices with little or no annual growth in prices. However as usual the London market is likely to be the powerhouse and many regions will experience very difficult market conditions.

posted by Quick Move at 16:59 Comments

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Tuesday, 6 October 2009

Are House Prices Stabilising?

Some life has been breathed into the housing market lately. However the picture is extremely mixed across the country and the future remains very uncertain.

Quick Move Now's summary of the housing market looks to key institutions and market indicators within the finance and house sectors to gain an insight into where the market is and where it is heading.

House Price Index Halifax 1.6% (monthly change) -18.14% (fall since peak)
House Price Index Nationwide +0.9% (monthly change) -13.02% (fall since peak)
Interest Rates 0.5%
Quick Move FTI 31%
Inflation 1.6%
Economic Growth -0.8%
Unemployment 2.47 million

*Information compiled from various sources. Quick Move Now takes no responsibility for its accuracy. Last updated 06/10/2009

House price increases have been in the headlines constantly in recent months. However local market conditions vary greatly depending on area, house type, value. We have identified a number of trends which may explain the current market and give us an insight into what may happen in coming months.

What is happening to house prices?

Supply and demand
There is a lot of pent up demand, some people need to buy a house whatever the market conditions (e.g. growing family, job move). At the same time a lack of supply has been caused by most home owners not looking sell their home because of the market conditions. This combination is currently driving prices, however this won’t last forever.

Fluctuating House Prices
House prices always fluctuate and as the market responds to the rapid collapse in prices you would expect significant fluctuations. Indeed analysis of the last house price crash in early 1990’s shows that although there was a prolonged overall trend of falling prices there were occasional months of fairly dramatic price increases as the market tried to stutter to life.

Regional Variation
When the dust settles on this recession the North South divide could be bigger than ever and may stay that way. In many area’s of the country house prices are still falling and could do so for a prolonged period. In the south east there is generally a housing shortage while in a lot of the rest of the country there is an oversupply.

What will happen to future house prices?
A number of factors will cause continued house price instability in coming months/years.

Limited Pool of Home Buyers:
• Few home buyers have 15-30% deposit to put down.
• Most buyers have to sell a house in order to buy. It is often still difficult to sell and therefore many house sales stall before they even get going.
• Unlike in previous years buyers with a poor credit rating just won’t get a mortgage now.
• A lot of potential buyers are still not confident that the market has settled down and don’t want to risk seeing their asset lose value in the future.

Number of house sales
The number of home owners selling their houses is still well below healthy, long-term levels. Indeed house sale transactions in June this year were 60% down on same month in 2007. The constrained volume of house sales is leading to a temporary skew in demand/supply which will not last.

Mortgage lending
As lenders try to re-coup losses and limit further exposure to housing market fluctuations, mortgages remain difficult and expensive to secure.

• Amount of mortgage finance available is below historic levels as banks try to limit exposure to housing market.
• After getting their fingers burned with sub-prime, banks are now unlikely to give lending to those with poor credit.
• In an attempt to balance the books, the banks are charging higher fees and interest margins.
• Should interest rates increase over coming months it will severely impact affordability.

Unemployment
UK unemployment is nearing 2.5 million and is expected to keep increasing. Latest unemployment figures from the USA are running at a 26 yr high which may indicate what is to come this side of the pond.

Unemployment is not uniform and in areas that are worst effected house prices may fall as demand dries up.

Dramatic cuts in government spending are also expected and public sector jobs will go. Many area’s of England and Wales are very reliant on government jobs and in these area’s the impact could be drastic.

Repossessions
Huge numbers of home owners are in mortgage arrears. In normal circumstances they would have been repossessed but due mostly to government pressure and concern over results/share prices a lot of this “bad news” has been deferred. An influx of a large number of repo’s will further depress prices. Repossessions are normally listed very competitively to ensure the house sells. Normal house sellers then try to compete and the whole market is dragged down.

posted by Quick Move at 17:34 Comments

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