House price inflation may be slowing down but there is little sign yet of the second slump that many pundits expect and the market continues to defy the pattern seen in previous recessions.
Figures from Hometrack this morning showed a 0.2% rise in prices in October, taking the annual rate to -4.2%. On Friday the Nationwide reported a 0.4% rise in October and prices that were higher than a year ago for the first time since March 2008.
Over the last six months, prices on the Nationwide index are up 6.5%. At a time when prices generally are falling, that almost qualifies as a boom.
However, the rise in October was much smaller than September’s 0.9% and the building society highlighted signs of further moderation to come, including a slowdown in the recovery of mortgage approvals.
Hometrack director of research Richard Donnell noted a marked slowdown in the rate of growth in the number of new buyers registering with estate agents. Earlier in the year, new buyer registrations were rising by 7.5% a month but the last three months have seen an average monthly rise of 1.1%.
That slower growth in demand could counteract the continuing shortage of supply. However, with interest rates still at a record low and the number of forced sales reduced because owners can refinance their loans it is hard to see any short-term trigger for price falls.
That must be one big reason why house prices have not reacted in the same way as in previous recessions. Since 1975, according to the Nationwide, house prices have risen by 2.9% a year in real terms.
In the mid-1970s, early 1980s and early 1990s prices rose above that trend line in the boom and then fell below it in the bust. Prices peaked at 34% above trend in 1990 but fell to 30% below it by 1995.
This time around, prices were 31% above the trend at the peak of the boom in Autumn 2007. They fell rapidly until the start of the year and looked set on a similar course. Instead, they fell close to the trend at the start of this year but never below it - and then started to rise again.
For my money that says that once the stimulus of low interest rates, quantitative easing and public spending is replaced by higher taxes and spending cuts, house prices will resume their journey back to equilibrium with earnings and the long-term trend. For the moment, though, they continue to defy gravity.
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