Thursday, October 7, 2010
House prices fall off a cliff
"Despite the crash of 2008, house prices remain overvalued. In fact, they became more overvalued last year." "I have argued on this website - as have some others - that house prices remain dangerously overvalued, even after the crash of 2008. Last year was good for property because low rates held up the market by making mortgages more affordable. I thought that trend (with repayments at levels of affordability last seen in 2003) would roll into 2010 and keep the market temporarily suspended. I was wrong. September's shock fall of 3.6% suggests the factors we have been talking about are sinking in already: Not only are house prices overvalued against wages but the prospects for wage rises look bleak given the UK's woeful economic prospects."