The housing market is edging closer to normality
The fear of negative equity for new owner occupiers is fading. For some parts of the housing market the recent fall in prices has ended. Not all parts of the housing market are enjoying a recovery but there is now some stability in large segments of the market place.
Two contrasting statements can be made. First, the sharp fall in house prices has slowed. Second, most parts of the local housing market have now come back to more sustainable prices after the housing bubble of 2005-7.
Compared to traditional relativities over many years before 2004, prices have now come back nearly into line with what would normally have been expected.
The nature of the change in house prices is well illustrated by the results of the University of Ulster survey.
In the final quarter of 2010, the average realised price for detached houses stopped falling. Compared with the experience in 2009, detached houses were attracting, on average, just over 7% more in 2010. Interestingly, a similar but slightly weaker trend can be found in the realised prices for detached bungalows where the average price in 2010 was up by 2%.
Two caveats are merited. First, the number of house sales was still much lower than would have been normal five years ago. This may mean that the sample of transactions is distorted. More expensive houses bought by people with less need to find new mortgage funds may attract buyers with higher incomes. Then the house price comparisons may be showing a stronger recovery than a balanced sample would produce.
The main caveat is that the market for detached dwellings is only part of the story.
Semi-detached houses and semi-detached bungalows are still changing hands (where sales are agreed) at falling prices. In the last quarter of 2010, prices for semi-detached houses fell a further 10% as part of a 35% fall in 3 years.
From the University of Ulster survey results, the value of the fall in turnover from house sales can be estimated. Using the average recorded prices, along with the number of houses entering the survey, total turnover value in 2007 was over £1.72bn. In 2010, the turnover was only £0.52bn: a fall of 70%. Not the best of times to be an estate agent!