Sep 17th 2009 >From The Economist print edition
*House prices are creeping up again. That may not last* <http://www.economist.com/businessfinance/PrinterFriendly.cfm?story_id=14462419> ** THE latest survey of global house prices conducted by *The Economist* still makes for gloomy reading. Among the 19 countries we survey each quarter only Switzerland and China had housing markets that registered any increases in the 12 months to June. But the figures mask a modest recovery. In eight of the 16 surveyed countries for which quarterly data are available, house prices rose in the three months to June. Hong Kong and Australia led the charge, with prices rising by more than 4%. In America the picture is murkier. The Case/Shiller national index of house prices rose by 2.9% in the second quarter, which was the first quarterly increase in three years. But other figures from the Federal Housing Finance Agency (FHFA), the regulator of Fannie Mae and Freddie Mac, two mortgage-financing agencies, showed a price decline of 2.4%. Why the divergence? The FHFA index does not cover properties that have been financed by subprime loans or deals above the price cap for regulated mortgages. That excludes the bottom end of the market, where price falls have been much steeper and bottom-fishers have been lured back into the property game. The FHFA numbers also strip out the top end of the market, where there are reasons to think that prices will stabilise more quickly. Banks are insisting on higher deposits from would-be homeowners, for instance, but such hurdles are less of an impediment for those with lots of cash on hand. Foreign buyers provide an extra source of demand for swanky properties. Stockmarkets roared back to life in the second quarter, too, which may have increased investors’ risk appetite. Rising prices in higher-value properties, coupled with higher volumes in lower-priced ones, may be disguising stodginess in the middle of the market. There are other caveats about the strength of a recovery. Governments are offering some short-term props to the market: first-time buyers in America are eligible for tax credits on deals that close before the end of November, for example. There are also fears of a new supply glut as owners are tempted by stabilising prices to put their homes back on to the market. Mortgage rates are at historically low levels, which is helping buoy transactions, but if central banks begin to withdraw unconventional programmes to support the housing market, such as the Federal Reserve’s purchases of mortgage-backed securities, the recovery may slow. That is in part because houses are still badly out of historical kilter with incomes, despite the price falls of the past two years. In Britain house prices remain 170% higher than they were in 1997, but average earnings have risen by only 55% in the same period. Steep declines in affordability have also taken place in Ireland, Spain and Australia. -- Best Regards, Jay Shah, FRM "Expect The Unexpected" Blog: http://fuzylogix.blogspot.com/ --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en -~----------~----~----~----~------~----~------~--~---
