Are We Near The Bottom Yet ?

[Bearfacts]

From today's times :

http://business.timesonline.co.uk/tol/busi...icle5778765.ece

There’s still a long way to goHome economics: Richard Donnell

Some years ago, I prepared a detailed chronology of “who said what” about the housing market between 1988 and 1994, during the last downturn. While there are a lot of fundamental differences between then and now, there are some important similarities when it comes to the factors needed for an eventual recovery.

Unlike this time, there were few warnings about a potential fall in property prices. Yet as the downturn unfolded, one theme began to recur: despite an economy on the slide, most commentators talked of a pickup in the housing market being “just around the corner”. The reality was, of course, to prove very different.

For this reason, we should treat with caution recent claims that pent-up demand is feeding back into the market. Such reports give hope to struggling sellers and desperate agents, but with levels of activity at rock bottom, we should not read too much into what is, in effect, no more than a small pickup in interest. True, some opportunistic cash buyers are snapping up deals, but the number of transactions this year is still expected to be 10% down on 2008 levels.

Property has certainly become more affordable for those in employment and with access to mortgage finance. Indeed, by the end of this year, the proportion of income needed to service an average mortgage will be back to the lows last seen in 1993. This is an important milestone, but largely academic given falling economic output, rising unemployment and the restricted availability of credit.

These factors all had an impact on the timing of the recovery in the last cycle; it took three years from the point when affordability hit a record low before prices and activity began a sustained national recovery in 1996. This was how long it took for consumer confidence to improve and the flow of credit to resume. The same factors will be crucial this time, too.

An important difference from the 1990s is the fall in the number of new homes, which means a shortage of supply will become a real issue – perhaps sooner rather than later. When demand finally stirs, prices could firm quite rapidly, but the timing will depend on the severity and length of the global and domestic economic downturn.

GO FIGURE

-The increase in the number of inquiries and viewings has yet to translate into an equivalent increase in the number of sales, says the National Association of Estate Agents. The monthly market survey found that, in January, the number of househunters on an average estate agent’s books had risen to 242 from 200 in December, but sales remained at six per agent.

- Rightmove, the property website, says asking prices for homes on sale in Britain rose by 1.2% last month – but attributes the increase to a burst of “false optimism” among vendors rather than a genuine market revival. Its findings show that for properties to sell, they must have at least 25% knocked off their peak asking price.

Richard Donnell is director of research at Hometrack. David Smith returns next week

Think we shall be seeing at least one set of figures showing falling prices this week .......

[rockhopper]

there was an interesting thread earlier today on the same topic

http://www.housepricecrash.co.uk/forum/ind...howtopic=105615

by confounded

edit - get right name

Edited February 22, 2009 by rockhopper

[sleepless]

An important difference from the 1990s is the fall in the number of new homes, which means a shortage of supply will become a real issue – perhaps sooner rather than later. When demand finally stirs, prices could firm quite rapidly, but the timing will depend on the severity and length of the global and domestic economic downturn.

Still can't resist a ramp.