What goes up, must come down. What everybody fears with respect to home sales and home prices, has now been confirmed: low sales levels and lower prices accros the board.
According to RICS, the housing sales have bottomed to lowest levels since over 30 years. RICS spokesman Jeremy Leaf comments on the UK housing sales:
“The lengthy process of obtaining mortgage finance, even for those with large deposits, is contributing towards the blockage in the market place. Without further intervention, the housing market will continue to stagnate and the opportunity to take advantage of this renewed interest could be lost, which will inevitably have serious implications for the wider economy.”
So much for the UK. Similar situations apply for the rest of Europe, and the US is even quite a bit worse. How about Asia? Take China:
Chinese home prices fell by a record last month, paced by a 15 percent plunge in the southern export hub of Shenzhen, where factories closed as growth in the world’s third-biggest economy slowed. Chinese home prices fell by a record last month [Feb 2009], paced by a 15 percent plunge in the southern export hub of Shenzhen, where factories closed as growth in the world’s third-biggest economy slowed.
How long will this continue? I have always learnt: “Nobody rings a bell at the bottom of a bear market…” However, Berkeley Group boss Tony Pidgley has called the bottom of the market yesterday:
Pidgley, who made a fortune and his reputation for calling the 1990s housing crash correctly, told The Independent on Sunday: ‘We all accept that, give or take 5%, the market is somewhere along the bottom [of its economic cycle].’
Just to end on a positive note: In the US the housing affordability is record-high:
[In Jan 2009,] housing affordability index rose 13.6 percentage points to 166.8, a new record high.
A value of 100 means that a family with the country’s median income has exactly enough income to qualify for a mortgage on a median-priced existing single-family home. The higher the index, the better housing affordability is for buyers.
The reading shows the relationship between home prices, mortgage interest rates and family income is the most favorable since tracking began in 1970.
The falling house prices is not something unusual and should be taken in stride. If the house prices are falling because the banking is not in fine health than the problem is there not in falling house prices. Since banking is no more under threat , the house prices will stabilise too.
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