U.K. and U.S. Housing Prices–and Markets–Echo Each Other
- Dec 26, 2007
Two separate studies published this week–one about U.K. house prices and another about prices in the U.S.–painted a bleaker seasonal picture of both markets than many economists would have liked.
In December, U.K. house prices dropped again–for the third month in a row–according to Hometrack, a residential research company based in London. Hometrack also said houses are now sitting on the market longer than ever: an average of eight weeks.
However, Hometrack’s monthly report did contain one good piece of year-end news: Overall in 2007, U.K. home prices were up 3 percent.
True, that’s because prices were hefty in the first half of the year, but at least the U.K.–while seeing a moderate rise in foreclosures, according to Morningstar–isn’t posting the highest foreclosure rate in six decades. (The U.S., according to The Financial Times, hasn’t seen its current foreclosure rate since the Depression.)
The Commerce Department reported in late November that the median new home sales price in October 2007 was $217,800–down 8.6 percent from September’s $238,400. The most recent Standard & Poor’s/Case-Shiller home price index,
released today, said U.S. home prices had dropped for the 10th
consecutive month in October.
Eleven of the 20 metropolitan areas measured in the index recorded their largest monthly
decline on record in October, according to S&P/Case-Shiller.
Housing demand appears to have dropped, too: The Commerce Department’s seasonally adjusted estimate of new houses for sale at the end of October was 516,000–an 8.5 month supply.
Does this mean both the U.K. and U.S. housing markets are in serious trouble in 2008–a week before the year even begins?
Maybe. Maybe not. Many are predicting that the U.K.–which has already been served the dangerous economic cocktail of rapidly rising home prices, low interest rates and increasing consumer debt–is starting to show a housing market slowdown similar to the early stages of the U.S. decline, Morningstar reports. People relying on the massive equity their homes have amassed during the boom may be in trouble as home prices and values taper off.
Some–such as Bloomberg News–are reporting the U.S. situation also looks grim. Economists Bloomberg surveyed felt soon-to-be-released November new home sales figures would show homes sold at an annual rate of 718,000 in November, a decline from October’s 728,000 rate.
And yet, that new home sale and price data –due from the Commerce Department on Friday–could show a slight improvement in the housing market. We’re also still waiting for the final results from the holiday shopping season to see how consumer spending fared.
Both spending and housing will have an unquestionable impact on the economy. Is a recession in our near future, as many have feared? Or are we on the road to recovery? What do you think?
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