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A ray of hope?

There’s good news in the housing market, at least for the moment. This article by the BBC shows that for the fifth month in a row, The Nationwide have reported an increase in house prices compared to the previous month. House prices are still lower than they were this time last year, but are on their way back up.

A couple of notes of caution, however, before we start celebrating the recovery of the housing market and the economy as a whole. Firstly, as you can see from the chart in the BBC article, house prices are also tracked by The Halifax and they have yet to release their results for July. Their June figures were noticeably less positive than those from The Nationwide and so perhaps they will not show the same improvement in July. Secondly, it is unlikely that this rate of growth can continue. Although the housing market is recovering, the economy is much worse than it was 2 years ago, the last time we had growth like this – there are fewer people working and less money available for house purchases. After the initial “correction”, we should see the prices increase at a lower rate.

And this could be no bad thing – after all, one of the largest causes of the current economic climate was the “house price bubble”, hopefully we have all learned our lesson (I’m including lenders and borrowers in that statement) and will take things slower from now on. Lenders are reticent to lend their money to high-risk borrowers, having been stung recently, and if they are properly regulated it should help stop people from being tempted into buying something they can’t afford. These two further articles from the BBC tell us that lenders are relaxing a bit and allowing more mortgages to be taken out – which means more house sales, which increases demand and therefore the price of houses. When we get the right balance between lending to no one and lending to everyone, we should see stable growth in the housing market (which is a good foundation stone for economic recovery).

We may get out of this mess yet.

Tags: Economy, house prices, houses, Loans, Mortgages, recession, recovery

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