With all this crazy stuff about rogue traders, sub-prime losses and manic interest rate cuts, the UK housing crash has drifted into the background. It is time to bring it out of the shadow; buried beneath today's shocking financial news, the British Bankers Association issued the latest data on mortgage approvals.
Now what is the right word to describe the latest data? The numbers were miles beyond "bad". They were well south of "appalling". In fact, there were found within the vicinity of catastrophic.
December mortgage approvals are down about 38 percent compared to 2006. Moreover, the actual number of approvals were the lowest since records began. Yes, that is right. Let us repeat that; mortgage approvals were the lowest since records began.
This brings us nicely to the golden rule of real estate; credit availability determines house price inflation. As today's data amply illustrates, credit availability has collapsed. As credit disappears, so does housing demand.
However, in one crucial respect the housing market is different from other markets. Normally, when demand falls, prices adjust downwards. With housing, people are notoriously reluctant to cut prices. Instead, volumes collapse. Don't look for the housing crash in estate agent's windows. It will take years before prices come down.
Instead, the crash will hit the financial services sector; no mortgages means a recession for building societies. Many estate agents will quickly downsize and disappear. While all that lovely lolly generated by stamp duty will evaporate. Yes, the chancellor will find slim pickings from housing.
As for home owners, they will suffer from an epidemic of denialitis. People may love their homes, but they love those inflated valuations even more. It will be hard to let go and recognize that house prices reached a high watermark in the early summer of 2007 and that those valuations will not return again for a generation.