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.
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