Annual Decline of UK House Prices Slowing - No Optimism Here

The decline of UK house prices slowed in April, according to the latest figures from Hometrack. This is being viewed with yet more optimism, by people who surely must be getting fed up of being wrong when these stats prove to be blips.

As one new hope riser was announced, a former major riser of hopes was shown to have displayed nothing more than people's desperation for a little bit of hope: earlier this month, report after report said that the consecutive rises in mortgage lending three months running was a sign that we were on the road to recovery. It was often tied in with Halifax index recording a monthly rise in UK house prices for March. Today the British Bankers Association revealed that mortgage lending saw a 6.8% month-on-month fall for March.

As I have said before Hometrack is an excellent source of information on how the UK housing market is doing, because it provides easily accessible statistics on a wide range of indicators, including the average length of time taken to sell homes. They are also realistic, even when their reports are hailed as signs for optimism by other parties, their head of research Richard Donnel is saying things like:

[Currently, any signs of good] news should be tempered with caution. In this particular case, the increase in sales is off an almost non-existent base and overall volumes remain well down on what one would expect in a normal market. The current run rate over the last 3 months equates to an annual average of just 476,000 sales, compared to a normal market of 1-1.5m sales a year.

"Prices continue to fall but some lead indicators, such as the average time to sell and the proportion of the asking price being achieved, have started to turn for the first time in many months. This implies a growing number of vendors are becoming more realistic over pricing levels and volumes are responding."

Hometrack's figures showed that the annual rate of decline slowed to 10.6% in April, which saw just a 0.3% fall in UK house prices. Hometrack is a good index, and so this is good news if you don't want house prices to be falling as quickly anyway. The average time taken to sell a house is now 11 weeks, down from 13 weeks a fortnight ago.

I have previously said that monthly and short-term figures from indexes should currently be ignored this isn't necessarily the case with an index from Hometrack and similar companies. These indexes can be factored into decisions, but only if taken in the context provided by the realistic analysts behind the results like Richard Donnel.

That said, Hometrack's results showing slowing decline for April does not mean that the next months index will show the slowdown continuing, because the economic situation in the UK and around the world is still far too unpredictable.

In any case, who says that a slowing rate of house price decline must be a good thing? Our own Liam Bailey wrote an article yesterday on how house prices have fallen until average mortgage repayments are under half of average first time buyers wages in previous crashes. That is still a long way off in this crisis. So, if that analysis is true and past crashes are a trend that the present and future must follow, then the slowing rate of decline is doing nothing more than prolong the agony.