House Price Fall

This graph shows the sharp fall in house prices which have occured in the past few months. Most analysts expect further house price falls.

Mortgage lending still frozen. The number of new mortgage approvals is very low. The number of new mortgage loans is 52% lower than October 2007. (already by Oct 2007, mortgage approvals had fallen). WIth banks unwilling to lend mortgages, it is hard for potential homeowners to get into a position to buy.[Times article]

Cumulative Pessimism. The housing market is volatile and prone to speculative changes. (see why housing market is volatile) With prices falling, there is a strong incentive to delay purchasing. People are renting until the market shows signs of bottoming out. If the last housing bust is a guide, this might not be for another 2 years.

Rising Unemployment and Falling Growth. The economic slowdown has been much sharper than predicted. Mervyn King has said the economic slowdown in the UK will be very steep. With rising unemployment, repossession rise causing more houses to be put on market.