Thursday, January 28, 2010
“House prices will soon fall again” by David Blanchflower
My mind turned to house prices in the UK after looking at the astonishing rate at which they have fallen in parts of Florida, where prices are down by two thirds. I continue to puzzle over how house prices could possibly have increased in the UK last year. The peak-to-trough fall on the Halifax index was around 22%, before the supposed rise of 6% in 2009. Given the fragile state of the economy, prices really should still be falling. Or, at least, they would fall sharply if interest rates start rising any time soon. There remains a glut of houses on the market. The availability of credit is also way down. Lower demand with higher supply tends to lower price. I still remain fairly pessimistic for the UK housing market . I fully expect a peak-to-trough fall of at least a third.