Fool News: House Prices Still Falling

As house prices continue to fall, we reckon that homeowners who bought a house after spring 2004 may be sitting on a capital loss by the end of the year.

House prices fell the most in more than three years this month, the latest research indicates.

The average cost of a home in England and Wales dropped 0.6% in April (the most since December 2004), according to Hometrack.

Although there were some regional variations, prices fell in all ten of the regions Hometrack monitors. The biggest price drops were found in East Anglia and the West Midlands, with slides of 0.8%.

The research is the latest of several industry reports indicating that the housing market is grinding to a halt. HBOS recently reported a month-on-month price fall of 2.5% in March, and in April, the RICS house price balance dropped for the eighth month in a row.

And as the effects of the credit crunch are felt, many lenders have been quick to withdraw some of their most competitive mortgage offers.

Here at The Fool, David Kuo recently predicted that house prices would fall 20% this year, slashing the average price of a British home from £196,000 to £153,400.

Our financial expert is still standing by his prediction - which would mean average prices falling to spring 2004 levels.

So that means if you bought your house after spring 2004, you could be sitting on a capital loss by the end of the year, assuming that David's prediction is right. Of course, that needn't be a problem. Sooner or later house prices will pick up again, so the value of your home should still rise in the long-term.

And in the short-term, lower house prices could help more first-time buyers get on the ladder. What's more, even current home owners could find that a property slump has a silver lining.

As David Kuo says: "A 20% fall in house prices across the board will narrow the gap between the value of your home and a property further up the housing ladder. It will make up-sizing more affordable."

"Fool.co.uk urges the Government to stop meddling in the housing market, and allow property prices to find their own levels. In its attempts to help homeowners, it is killing with kindness. It is holding back a dynamic market that needs to fall as well as rise to move forward."

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