Thursday, 27 December 2007

The end of complacency

There was a widespread belief in the US that house prices never fell. For many years, there was some evidence to support that view. The aggregate US housing index had not fallen since the dark days of the great depression.

However, recent US housing data has shattered that complacent view. US house prices are falling at an unprecendented rate. The Standard & Poor's/Case-Shiller index of 10 metropolitan areas fell 6.7 percent compared to October 2006. The index fell every month during 2007.

That same complacency about house prices exists in the UK. How many times have you heard that house prices never fall? If 2007 was the year of the US housing crash; 2008 belongs to the UK.


Josh said...

In some US cities, prices have come down 15 percent. Could you imagine such a thing here in Britain.

speedtheplow said...

Parts of California and Florida are definitely in crash mode, but certain cities--Portland, Charlotte, Seattle, for example--are still registering increases. Maybe they will follow, maybe not. Manhattan is also still a very strong market. Until these, these bubble bastions are breached we cannot call it a housing crash. As for the UK...Central London has yet to actually start falling on a consistent basis. We must face the possibility that it never will and that housing prices may remain permanently and absurdly overvalued.