Mortgage News House Prices Rise 1.2percent And Could Continue If Mortgage Rates Remain Low 3371

House prices rise 1.2% and could continue if mortgage rates remain low

29 May 2009 / by Rebecca Sargent
House prices have risen for the second time in three months, increasing by 1.2 per cent in May, the latest Nationwide House Price Index has revealed.

And, “the recent moderation in price falls may continue” if low house prices and low mortgage rates translate an increased buyer interest into an increase in actual sales.

However, according to Nationwide’s chief economist, Martin Gahbauer, “it is still too early to say that the market is turning definitively.”

According to Mr Gahbauer, the market could still fall again, as: “During the downturn of the early 1990s, there were many months during which prices rose, only to fall back down again in subsequent periods.”

And, as the current downturn imposes unemployment and tight access to credit on increasing numbers of consumers, it is, according to Gahbauer, likely that house prices will fall again.

But one thing is clear, and that is that the decline in house prices has slowed significantly – the three month on three month rate of change, which is a smooth indicator of short-term price trends – increased from -3 per cent in April to -0.5 per cent in May, and is now at its highest level since January 2008.

Other positive indicators include the supply-demand balance measured by the sales to stock ratio, published monthly by the Royal Institution of Chartered Surveyors (RICS), which has started to stabilise, putting an end to its declining trend sparked as sellers withdrew properties from the markets and buyers struggled to secure mortgage credit.

Commenting, Mr Gahbauer added: “While supply dynamics in the market have all been exerting downward pressure on stock levels, there are reasons to believe that the trend is unlikely to continue in the long run.

“Potential sellers of existing homes who had previously delayed the listing of their property may not be able to wait indefinitely, particularly if they have seen a loss of income due to the deteriorating labour market situation.”

Liquidity in the rental markets also means that potential sellers may be finding it harder than they thought to let their properties.

However, as the market stands, “it is unclear how the balance between supply and demand will ultimately work through the coming months,” he concluded.

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Written by Editorial Team