House prices have fallen for the seventh consecutive month. But here at the Fool we go behind the headlines to see what the latest housing reports really suggest will happen to prices in the future.
Property pessimists predicting a dramatic fall in the housing market were fed further evidence today that the recent turbulent weather isn't just blowing up our brollies.
According to the latest report by the Royal Institution of Chartered Surveyors (RICS), house prices dropped for the seventh month in a row, with 64.1% more surveyors reporting a fall rather than a rise in prices in February.
This has led to more than half a year of house price downturn, with the report teetering close to its historical low of June 1990 when 64.5% more surveyors reported a fall, rather than a rise in prices.
Stocks of unsold property jumped by more than 8.5%, the fifth consecutive monthly increase of more than 8%. The level of unsold homes has now risen by 48.6% over the past 12 months, which is the steepest rise in unsold property since 1989.
The Property Waiting Game
RICS attributes the falls to weak demand, as opposed to panic by sellers wanting to get property off their hands. In February, 37% more surveyors reported a fall than a rise in new buyer enquiries, down from 35% in January.
This data is backed by figures released by the Council of Mortgage Lenders (CML) today which reported a continuing decline in the number of approved mortgages for house purchases. Just 50,300 mortgages were approved in January, as opposed to 62,000 in December.
It seems many potential buyers are now playing the waiting game, put off by the fact that they could be buying a house today that could be worth less tomorrow.
Also, as lenders tighten their belts and cut down on the amount of money they are willing to lend potential homeowners, fewer first time buyers are able to raise the money to get on the ladder.
What The Papers Didn't Say...
However, like me, you may think that reports about the current housing market are choosing sensationalism over substance. I say: it's time to look at all the facts.
True, figures do not lie, and a clear downturn in the housing market has already become evident. But at the same time positive news regarding the housing market is becoming almost like fine print at the bottom of a contract that no one bothers to read.
So, here's what many of the papers failed to mention:
While it may be doom and gloom across England and Wales, if you live in Scotland, you shouldn't get the violins out just yet.
According to RICS, the number of surveyors reporting price rises surged from 7% to 25% this month - an indication that Scotland is the most buoyant market in the UK at the moment.
In addition, sales expectations turned positive for the first time since last June and price expectations improved slightly for the second consecutive month. So although there is a weaker demand for housing at the moment, surveyors are more optimistic about the outlook for the housing market than in recent months, and believe that the pace of price falls will slow down.
It is also worth highlighting that homeowners are adapting to the current economic climate, as they look to get the best value out of their current property.
According to the CML, despite the decline of home loans, there was a rise in remortgaging activity, with 85,000 remortgages in January, up 43% from 59,000 in December.
In addition, more of us are opting for trackers when remortgaging, a sign that more and more of us are expecting further reductions in the Bank of England base rate in 2008. Fixed rate loans represented 57% of loans in January, down from 77% compared to June 2007.
Bargain Basement Property?
If you're really savvy, you may also be able to pick up a bargain if you know where to look and can drive a hard bargain.
RICS argues that, while it is unlikely that there will be significant price drops in the short term, the build up of unsold stocks will encourage buyers to negotiate lower asking prices.
So, we come to the end of our latest chapter in the housing market. RICS says not to panic, while the papers continue to report otherwise. Will it all balance out in the end? Who knows.
In the meantime, the saga continues...
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