House Prices Set For Muted Rises -nationwide

[Guest consa]

LONDON (Reuters) - House prices are set to continue rising in 2006 but gains will be small as buyers struggle to afford new homes after the property market boom of recent years, a major mortgage lender predicted on Friday.

The Nationwide Building Society said house prices would at worst stagnate and at best rise by 3 percent over the course of next year, following gains of 2.4 percent this year so far and 12.7 percent in 2004.

"We are also cautiously optimistic," said Nationwide's economist Fionnuala Earley. "Our expectation is that house price growth will remain firmly in low single digits in 2006 as the economy recovers."

"With rapid price increases over the last nine years it will take some time for affordability to recover," she said.

The first few months of 2006 could see some falls in year-on-year prices, Nationwide warned, because of comparisons with strong growth early this year.

http://today.reuters.co.uk/news/newsarticl...IN-PROPERTY.xml

[BuyingBear]

"With rapid price increases over the last nine years it will take some time for affordability to recover," she said.

The first few months of 2006 could see some falls in year-on-year prices, Nationwide warned, because of comparisons with strong growth early this year.

http://today.reuters.co.uk/news/newsarticl...IN-PROPERTY.xml

Obviously the shadow stats aren't looking good, with Hometrack already in that territory their propensity to out right fiddle the numbers obviously doesn't sit well with their legal department.

[Jason]

BBC: http://news.bbc.co.uk/1/hi/business/4512530.stm

So is this a different to the last Nationwide prediction? Or is it somehow being released again?

[Guest consa]

BBC: http://news.bbc.co.uk/1/hi/business/4512530.stm

So is this a different to the last Nationwide prediction? Or is it somehow being released again?

Good question

[Levy process]

Their overall prediction seems to be a rise of between 0% and 3% from what I heard.

I'm becoming deeply suspicious of this sort of thing, for the following reason: The price change is the result of an aggregation of economic forces, so what is the probability that the lower end of the range lies at exactly zero? I'd say that the probability of that is approximately zero. Why is the range not something like -1% to 3%, or -0.5% to 3%? I suspect the answer is that this is psychologically much worse, and that even to include the possibility of falls in one's prediction could make people very jittery.

I suspect the real situation is that the range of likely change is something very different, and may very well include the possibility of small or even large falls. But the fact that when predictions are stated that they just manage to come right up to but not into the territory of falls makes me laugh. The idea that any gloomy prediction has it's doom factor limited by cutting off at 0% is just ridiculous. What are they saying: "O there could be absolutely no change in prices, but there's no way they could fall, not even a tiny bit" - STUPID!

[Jason]

Here's the old report: http://news.bbc.co.uk/1/hi/business/4444958.stm

Edit, I just e-mailed NWide to find out.

Edited December 9, 2005 by Jason

[Guest Riser]

...."With rapid price increases over the last nine years it will take some time for affordability to recover," she said.

The first few months of 2006 could see some falls in year-on-year prices, Nationwide warned, because of comparisons with strong growth early this year.

http://today.reuters.co.uk/news/newsarticl...IN-PROPERTY.xml

They are just trying to prepare the public and reduce the impact of negative YOY headlines. Changing sentiment takes time to filter through until it becomes the expectation of the majority, by then the crash will be in full effect. Someone once said you can only see a crash through the rear view mirror, the Nationwide and others are trying to stop people looking behind them and seeing the collapse in HPI from 20% down to 0% annual rises where we are now.

"Every time annual national House Price Inflation (HPI) reported by Nationwide has become negative, house prices have gone on to fall between 13 – 34%. In 1974 prices fell 25% over the next year, in 1980 prices fell 13% over eight months, and in 1989 prices fell 34% over two years."

Nationwide Inflation adjusted HPI went negative in September, trend looks set to continue

Edited December 9, 2005 by Riser

[RIP]

Nwide floozy R4 07.30: "First time buyers are getting older". Thank you so much for that deeply incisive deduction. I'm not FTB - great, I'm immortal!

You silly woman, they're getting older because they can't afford to buy, not the other way round.

Reg

[Sledgehead]

That article is chock full of thinly disguised shockers:

"As oil prices fall out of the equation, reducing the MPC's inflationary concerns, we expect there to be room for at least one further cut in interest rates in 2006," said Earley."

At least one further cut? Is that a bit like "one more waffa-thin mint"?

Is this code for, "maybe a couple and then back to tightening"? WAIT A COTTON PICKING MINUTE - wasn't it the general perception only a couple of months ago that the BoE had finished its tightening cycle - for good ( ). Were we not to expect vast vistas of interest-rate-cutting planes, stretching to the horizon and beyond? Now, according to this joker, we're all but at the end of the monetary loosening cycle!!!

Anyone witha large mortgage is gonna be wondering what the hell is going on.

Edited December 9, 2005 by Sledgehead

[Guest consa]

House prices may 'fall' in 2006

HOUSE prices are likely to remain flat or even fall slightly next year in real terms, Britain's biggest building society has predicted.

PROPERTY LADDER: Britain's biggest building society predicts house prices will remain flat in 2006, or may even fall in real terms

WANT TO KNOW MORE?REPORT: Interest rates held

DEAL FINDER: Best mortgage rates

POLL: Are we on the brink of a total collapse in the housing market?

In one of the most authoritative studies of the housing market's prospects over the next 12 months, Nationwide forecasts price increases of between zero and 3% for 2006, but that is set against inflation of just over 2%.

Should the economy not recover as Nationwide expects, there is a worst-case scenario of falls of up to 2%. The mortgage lender believes the probability of this occurring is 'very low' but inflation has already managed to turn headline house price rises over the summer into real price losses.

http://www.thisismoney.co.uk/mortgages/art...21&in_page_id=8

[El_Pirata]

"As oil prices fall out of the equation, reducing the MPC's inflationary concerns, we expect there to be room for at least one further cut in interest rates in 2006," said Earley."

Funny that. I've been compiling a week-by-week review of the year's oil markets, including looking back to Nov-Dec '04, and even though we all know what a cyclical market it it, doing something like this really drives the point home. At the end of last year and the beginning of this, prices were drifting steadily lower, people were saying that maybe the bull market had run out of steam, physical markets looked well supplied. Exactly what is happening now. Except that then $40 seemed like a big price, now we are floating around $60. So I don't see how that will drop out the equation. The fact is that this time of year is a shoulder period - gasoline demand is traditionally weak and we haven't had a long enough cold spell here or in the US to really get the heating oil demand going. I don't actually expect much of a problem with heating oil supplies this year, but wait until the Americans start needing gasoline again - and find that the Chinese are buying up all the light west African crudes they rely on...plenty more action to come on oil.

[Guest The_Oldie]

POLL: Are we on the brink of a total collapse in the housing market?

http://www.thisismoney.co.uk/tools-and-cal...0&in_page_id=88

Interesting, 68% think we are.

[Boom'n'Bust]

I'm sorry your gonna hate me for this as I've always been a bear...

....but just like the bears are saying the bulls got their predications wrong, the bulls could say the same about the bears too!

I mean we (the bears) were predicting a BIG SLOWDOWN and the inflation of house prices into negative territory by the end of year, but it never happened. Instead so far its showing STABILITY and slight drops with slight rises. Not only that, but mortgage applications are on the up again and prices are slowly but surely rising.

As I said, I've been on this site for a long time, but so far nothing much seems to be happening and people are still selling albeit at a slower pace.

I could be wrong, but I need more evidence to prove this.

[El_Pirata]

I'm sorry your gonna hate me for this as I've always been a bear...

....but just like the bears are saying the bulls got their predications wrong, the bulls could say the same about the bears too!

I mean we (the bears) were predicting a BIG SLOWDOWN and the inflation of house prices into negative territory by the end of year, but it never happened. Instead so far its showing STABILITY and slight drops with slight rises. Not only that, but mortgage applications are on the up again and prices are slowly but surely rising.

As I said, I've been on this site for a long time, but so far nothing much seems to be happening and people are still selling albeit at a slower pace.

I could be wrong, but I need more evidence to prove this.

Show me a market that has ever plateaud for seven years (time needed for wages to catch up)

[Prude]

The first few months of 2006 could see some falls in year-on-year prices, Nationwide warned, because of comparisons with strong growth early this year.

http://today.reuters.co.uk/news/newsarticl...IN-PROPERTY.xml

Dont get this statement from Nationwide.

If we forecast at the 3% annual growth they are predicting and compare these figures to this years actual values then we get the following;

Date Ave Hprice Date Ave Hprice YoY%

Nov-05 £157,139 Nov-04 £153,439 2.4% - Current position

Dec-05 £157,526 Dec-04 £152,623 3.2%

Jan-06 £157,915 Jan-05 £151,757 4.1%

Feb-06 £158,304 Feb-05 £152,879 3.5%

Mar-06 £158,695 Mar-05 £153,876 3.1%

Apr-06 £159,086 Apr-05 £156,128 1.9%

May-06 £159,479 May-05 £157,272 1.4%

Jun-06 £159,872 Jun-05 £157,791 1.3%

Jul-06 £160,266 Jul-05 £158,348 1.2%

Aug-06 £160,661 Aug-05 £157,310 2.1%

Sep-06 £161,058 Sep-05 £156,517 2.9%

Oct-06 £161,455 Oct-05 £157,107 2.8%

Nov-06 £161,853 Nov-05 £157,139 3.0%

At no point do we see YoY% becoming negative. The only way we would see -ve YoY is if we got actual MoM falls. Even if prices stood still we wouldn't get -ve YoY until summer 2006

[Boom'n'Bust]

Show me a market that has ever plateaud for seven years (time needed for wages to catch up)

I know what your saying El_Pirata m8, but don't forget, that we both are on the same side. But my mind at the moment is everywhere and I can't seem to find a good enough argument to change my family's mind not to buy. We've seen a few properties which were reduced slightly in price and were sound in condition. Nevertheless, I persuaded my missus not to buy as due to the slowdown, its unlikely they'll get sold. Next thing I knew was that their sold within weeks of going on market. Now I know that house market is slow, but houses are selling, just at a much slower pace and prices haven't exactly crashed, have they?

[teddyboy]

I'm sorry your gonna hate me for this as I've always been a bear...

....but just like the bears are saying the bulls got their predications wrong, the bulls could say the same about the bears too!

I mean we (the bears) were predicting a BIG SLOWDOWN and the inflation of house prices into negative territory by the end of year, but it never happened. Instead so far its showing STABILITY and slight drops with slight rises. Not only that, but mortgage applications are on the up again and prices are slowly but surely rising.

As I said, I've been on this site for a long time, but so far nothing much seems to be happening and people are still selling albeit at a slower pace.

I could be wrong, but I need more evidence to prove this.

Its nice to see someone who is NOT jumping the gun on this. I have no doubt whatsoever that there is gonna be a crash! When is dependent of a lot of factors. The fallacy that during a crash properties dont sell is b0llox. Houses will ALWAYS sell. The issue we have is the prices.

There are few reasons why prices rise and fall. Demand, Economy, Sentiment, Outside factors.

The SIPPS anouncement (laffing me ass off over that one) was the last SAVING GRACE to show the market will get stronger. Now that has gone - they realise they can ******** NO-MORE. They have to report a little negativity and HOPE that they only fall 2% or so. If they all predicted that prices are gonna drop 10-15% the majority of the DICKHEAD population we live with, would feel that they are getting a bad deal.

Common sense, economic climate, debt and graphs aint worth a toss to the STUPID, SHEEPISH populus we have. Now I know that I am being harsh and basically saying that the UK people are KNOBS, but anyone who pays a CEILING PRICE in a declining market, and gets into debt thats 7-10 times their salary WITHOUT any research is a 'knobhead' in my book. These 'knobhead' have continued to believe the b0llox for too long.

UNTIL NOW!

I have seen a massive change in sentiment in the last 3 months. You only have to look at the 'READERS' comments on all the forums and homepages of columnists. The majority that write in, or type in, are very bearish. The fact that the BBC are now (amongst others) questioning some of the inconsistencies in HPI reporting indicates that the legal eagles are being very careful what they are reporting.

Martin Ellis, the lender's chief economist, said: "The slowdown in UK economic growth over the past year and the historically high level of house prices relative to average earnings are, however, expected to curb the recent improvement in housing demand and prevent another sustained period of sharply rising property values."

Earlier this week, the country's biggest building society, the Nationwide, said UK house prices were unchanged in November.

When all the sellers start to believe it, when the EA's start giving valuations BELOW what the others on the street are selling for. We will see change. I think Summer next year is DEFFO the point that it goes tits up.

Add an interest rate rise and it could be as soon as April.

As people are aware, I am putting in an offer on a house that is ASKING £165,000 and my offer is £117,000. I have made it clear to the seller that I have 'factored-in' continual drops in the market and am prepared to wait if he says NO. I have said that if it is still available before I make a purchase elsewhere then my offer will be substancially lower than this one. In essence I am offering you a SUMMER 2006 price now - take it or leave it.

The EA's valued the proerty at £165,000 with a lot of modernisation required. At the time another property in the same street was £225,000 (reduced from £269,950). It eventualy sold with an asking price of £199,950 (dont know sale price as LR figures are lagging).

I said at the time of seeing the house that the asking price is a joke! The fact that they were £70,000 out in 12 months shows they are complete assholes who are greedy scumbags and that they are giving you FALSE hope. I think my point has been proved. Let's see what happens, but I can assure you that sellers are getting rather pissed off with the b0llox that EA's are feeding them, and when its REPORTED that they are dropping (even though we know they are) there will be a lot more sellers prepared to bargain.

CONVERT THE STUPID BUYERS and EDUCATE THE 'MIS-INFORMED' SELLERS and there is phuck all that can stop this decline. If anything it can only get quicker.

TB

[MarkG]

I mean we (the bears) were predicting a BIG SLOWDOWN and the inflation of house prices into negative territory by the end of year

And, as far as I can see from the houses for sale around where I live, we were right. Very little is selling, much of what does 'sell' is back on the market a month or two later after the sale falls through, and prices are being reduced to try to find a buyer...

[Bobble]

That graph is beautiful

If you were to take that graph out to the high street, and ask Joe Public where the red line was going, like some kind of economics spot the ball competition, I bet they would all continue to draw it beneath the 0% line and down. It just has too much momentum behind it.

But the moment you tell them it reflects houseprices they would swiftly change their 'prediction', to swell and never go through 0%?

I showed it to a very bullish friend under the guise of something else, he did not enjoy my glee when he took it down to about -15% before he levelled it off. Of course.. when he knew what the graph was about he changed his mind drastically.

I guess my point doesn't prove anything about if/when the crash will come or by how much, just that a lot of people have blurred their vision of these figures with emotion, and when the emotion is detatched they are just as keen to see the red line go under the 0%.. even if it is just for aesthetics

[teddyboy]

Dont get this statement from Nationwide.

If we forecast at the 3% annual growth they are predicting and compare these figures to this years actual values then we get the following;

Date Ave Hprice Date Ave Hprice YoY%

Nov-05 £157,139 Nov-04 £153,439 2.4% - Current position

Dec-05 £157,526 Dec-04 £152,623 3.2%

Jan-06 £157,915 Jan-05 £151,757 4.1%

Feb-06 £158,304 Feb-05 £152,879 3.5%

Mar-06 £158,695 Mar-05 £153,876 3.1%

Apr-06 £159,086 Apr-05 £156,128 1.9%

May-06 £159,479 May-05 £157,272 1.4%

Jun-06 £159,872 Jun-05 £157,791 1.3%

Jul-06 £160,266 Jul-05 £158,348 1.2%

Aug-06 £160,661 Aug-05 £157,310 2.1%

Sep-06 £161,058 Sep-05 £156,517 2.9%

Oct-06 £161,455 Oct-05 £157,107 2.8%

Nov-06 £161,853 Nov-05 £157,139 3.0%

At no point do we see YoY% becoming negative. The only way we would see -ve YoY is if we got actual MoM falls. Even if prices stood still we wouldn't get -ve YoY until summer 2006

I think you have miss-interpreted their article. If there is 3% increases then naturally there will never be a negative coz the price will always go up. What they are saying is maybe drops of 1% per month for 5 months i.e. -5% therefore negative for JAN to MAY then rises of 1.2% for the other 7 months +8.4%.

Therefore a yearly plus of 3.4%

I think its all me @rse to be honest. They know that the prices are dropping and when the get momentum they drop even more.

They are trying to 'polish a turd' - it may look better, but its still a turd!

TB

[London Landlady]

I think you have miss-interpreted their article. If there is 3% increases then naturally there will never be a negative coz the price will always go up. What they are saying is maybe drops of 1% per month for 5 months i.e. -5% therefore negative for JAN to MAY then rises of 1.2% for the other 7 months +8.4%.

Therefore a yearly plus of 3.4%

I think its all me @rse to be honest. They know that the prices are dropping and when the get momentum they drop even more.

They are trying to 'polish a turd' - it may look better, but its still a turd!

TB

A rise is a rise.

It looks a bit like the situation with annual pay rises - I can remember 20% rises in the 80's.

They dropped and now are (?1-5%?? I don't know as I'm not an employee)

So if your boss gives you a 2% pay rise - Is that a reduction? No.

Is it a net reduction - YES if you have inflation of more than 2% - but it is still an increase.

Talking about a 50% cut in house prices is about as sane as talking about a 50% cut in salary.

[Casual Observer]

A rise is a rise.

It looks a bit like the situation with annual pay rises - I can remember 20% rises in the 80's.

They dropped and now are (?1-5%?? I don't know as I'm not an employee)

So if your boss gives you a 2% pay rise - Is that a reduction? No.

Is it a net reduction - YES if you have inflation of more than 2% - but it is still an increase.

Talking about a 50% cut in house prices is about as sane as talking about a 50% cut in salary.

Are you saying that a real cut in your salary is as likely as a real fall in the price of a house ? That's patently wrong!

[DEMO]

A little bit of history might help here.

This time last year Nationwide prodicted that prices would increase by 2% in 2005

http://www.nationwide.co.uk/hpi/historical/2005Forecast.pdf

As at November 05 annual growth was 2.4%

http://www.nationwide.co.uk/hpi/historical/MPR0511.pdf

For 2004 the prediction was a 9% increase.

http://www.nationwide.co.uk/hpi/historical/2004Forecast.pdf

Annual house price inflation for 2004 was 12.7%

http://www.nationwide.co.uk/hpi/historical/CMQPRQ404.pdf

To me it looks like Nationwide have a recent history of being slightly pessimistic in their forecasting.

[BuyingBear]

Dont get this statement from Nationwide.

At no point do we see YoY% becoming negative. The only way we would see -ve YoY is if we got actual MoM falls. Even if prices stood still we wouldn't get -ve YoY until summer 2006

Remember the lag, they may already be YoY negative right now but we can't tell until sales are compiled and published by the Land Registry in Q1 2006.

[Jason]

Here's the old report: http://news.bbc.co.uk/1/hi/business/4444958.stm

Edit, I just e-mailed NWide to find out.

I got a reply:

The earlier report was about 2005 and this mornings was about

2006.

Hope this helps

Fionnuala Earley

Group Economist

Nationwide Building Society

Tel: +44 (0)1793 656370

Mobile: +44 (0)7985 928029

fionnuala.earley@nationwide.co.uk

From the first report: "The head of Britain's biggest building society, Philip Williamson, said he expected little growth in prices "to continue for the next 12 months"."

So the original prediction 12 months ahead was really about 2005??? I'm confused.

I would argue this with Fionnuala, but I can't be arsed. All I really wanted to know, is was this report a re-release of the original, a modified report, or a totally brand new one?

The VIs are getting desperate and stupid in my opinion. Silly woman.