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If you’re trying to figure out what’s likely to happen to the U.S. housing market, check out what’s going on elsewhere.
Britain’s housing market surged more than America’s and stopped rising sooner. But prices haven’t plummeted. In fact, one survey by a group called Rightmove says that asking prices are actually up 4% from last November.
Britain has at least three widely followed measures of housing prices. Rightmove says that the housing market is healthy this fall, with prices up 0.8% in November from October, after a 0.5% rise in October. The Halifax House Price Index doesn’t have November yet, but says prices were flat in October from the previous month. And the Nationwide Building Society says prices were up 1.3% in October, bringing the year-over-year increase to 3.3%.
Whatever the details, it’s clear that Britain’s housing market hasn’t exactly crashed. So the debate now is over what comes next. Pessimists argue that prices are still way too high. Here’s a note from Fathom Financial Consulting that was forwarded to me by BusinessWeek’s London bureau chief, Stanley Reed. (Thanks, Stanley.)
Regular readers will know that we at Fathom are concerned about the downside risks posed to the UK economy by the housing market. We remain unconvinced by arguments that suggest house price/income ratios are sustainable at current levels. As a result our central forecast is that we are in for a long period of weak house prices, with a significant risk of prolonged falls. Moreover, we continue to believe that housing is important for consumption prospects, and that a persistently weak housing market will reflect itself in weak consumer spending.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.